I seem to have developed a reputation in my Vistage CEO peer group for being somewhat averse to the concept of the annual appraisal and the subject has raised its ugly head yet again this week.
The prestigious Forbes business magazine as long ago as May 2013 ran an article headlined “Time To Stop Performance Appraisals?” and making the point as follows:
“Why the process must change.
Why do companies have annual reviews in the first place? They are an artifact from traditional top-down organizations where we had to “weed out” the bottom performers every year. By forcing managers to rate people once per year we can have annual talent reviews and decide who gets more money, who to promote, and who to let go.
Coupled with the performance rating is the “potential” rating, which tries to capture an individual’s potential to move up two levels in the organization (the traditional definition).
This approach is based on a philosophy that “ we cant totally trust managers” so we’re going to force them to fit people into these rating scales. And in many companies (around 20%) there are forced distributions, which mandate that some percent of employees are rated at the bottom and only a limited percent can be rated at the top”.
There is no question that many businesses are now looking seriously at the validity of the annual appraisal and especially if it is linked to remuneration. The optimum method is to shift the date of the appraisals to six months before or after the salary review so that they are not linked but try to explain that to the people.
If we only formally consider the performance of our people on an annual basis and make decisions based on that then it can be compared to running the business on the annual financial results only.
If we insist on checking the financial performance of the business on a monthly basis then why is it that we formally assess our major asset, the people, only annually?
Businesses are run using sensible monthly management accounts so that the leadership knows the present position ideally with some trend analysis. Doesn’t it seem sensible therefore to assess the performance our people in a comparable way?
Another point about the annual appraisal is that many bright people have evolved systems that are claimed to measure the performance of the individual.
In the majority of cases this “measurement” can be construed solely as the opinion of the appraiser and that can bring with it a raft of personal likes and dislikes that are not necessarily relevant. Indeed they can be biased.
The ideal solution is to have formal monthly one-to-ones with the team members. These one-to-one meetings should be scheduled for both parties so that they become a natural part of the working month. These meetings must be considered sacrosanct with no excuse accepted for missing them.
The agenda should be the individual’s call rather than the leader. At the same time the leader must try to achieve a level of trust that will encourage the team member to open up and say what is possibly being unsaid.
If that level of trust is attained then the likelihood is that much can be achieved with the team member beginning to accept that he/she is being listened to. Essentially if an idea is put forward and action is taken as a consequence it should be visible. There is nothing so demotivating as suggesting perhaps a solution to a problem and nothing being done about it.
Monthly one-to-ones take time and the results can amply justify the care being demonstrated to the team member. The system needs to be a stated part of the values of the business; that we listen to our people and involve them at all levels. We can’t achieve that only once a year.
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