What Is Wrong with Performance Appraisals?

By Leslie Allan

“Needs Improvement”
“Below Expectations”

As an employee, you would be mortified to see these ratings on your performance evaluation. Yet year after year, those are the words often used to describe performance reviews at organizations around the world. Any employee with such ratings would have “managed out” long ago.

How badly are employee performance evaluations failing? Take a look at the conclusions of a global survey conducted by Sibson Consulting:

– Less than 50% of HR professionals see performance reviews as helping their organizations achieve their strategic objectives. These are the people who are often driving the process.

– Only 46% of respondents see talent development as a goal of appraisals, while 54% identified greater “individual accountability.” Two-thirds (67%) identified the distribution of pay raises and other rewards as the goal of their appraisal system.

– Only half of the respondents say their companies use goal setting in their performance evaluations, and only half of those use quantitative metrics in evaluations.

– Only 56% of respondents said their organizations train managers to use the performance-management system.

– 55% reported delivering appraisals on time.

– More than a quarter of respondents (28%) felt that performance evaluations were an exercise in filling out forms rather than an opportunity to have quality conversations with employees.

These results aren’t limited to a single industry or a single country. The survey, conducted in mid-2010 with the HR association WorldatWork, drew more than 750 responses from a variety of industries and countries. Responding organizations ranged in size from fewer than 100 employees to more than 500,000.

Nine out of 10 respondents said their organization has a formal system in place to evaluate employees. They’re usually in place to rate each employee, reward excellence and motivate improvements. In theory, a performance-management system should help keep the workforce aligned with the overall strategies, goals and priorities of the organization. Such systems have been around for 40 years with continuous tinkering around the edges by HR professionals and consultants. By now, you’d expect perfection.

The Sibson study paints a completely different picture from a variety of perspectives:

– Employees are believed by respondents to largely distrust the appraisal process that is confrontational, subjective and too infrequently incorporates their input. Only a third of respondents said they believed employees trusted the process.

– Managers are often not trained in how to use the system and frequently turn in late or incomplete evaluations. Nearly two-thirds of HR professionals cite a lack of courage among managers to have difficult conversations as the primary roadblock to having an effective performance-management system.

– Senior leadership often supports the performance-management system, but words are not translated into actions. Only a third of respondents reported that their senior executives “strongly” or “mostly consider” the evaluation to be business-critical. Another third reported that top leadership viewed the process as “mostly” administrative.

In future articles, I will dive more deeply into the causes of the dissatisfaction and what can be done to improve the sorry state of performance management at organizations around the world.

The first step in every recovery program is to admit that you have a problem. Business owners, we have a problem. The Sibson results, along with feedback from employees and managers alike, paint a sobering picture. Now is the time to look more closely at the source of the problems. Only then, we can think about fixing it.


The Segal Group, (2010) Study on The State of Performance Management

The Segal Group, (2010) Information About the Respondents to the WorldatWork/Sibson 2010 Study on The State of Performance Management

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