Performance Appraisal: New Data Reveals Why Employees And Managers Dislike Them
In this Leadership IQ study, we surveyed 48,012 employees, managers and CEOs to find out what they thought of their annual performance appraisal process (aka performance review, or annual performance ratings, etc.). Here are the results...
Performance Appraisal: The Data
Only 13% of employees and managers think their organization's performance appraisal system is useful. And only 6% of CEOs think their performance appraisal process is useful. And for human resources leaders, here’s a particularly bad finding: 88% of respondents said their current performance review negatively impacts their opinion of HR.
When we asked each employee whether their performance appraisal was open, honest and meaningful, we discovered that only 17% always thought that was the case.
The performance appraisal is the elephant in the room for human resources. As the appraisal process is currently designed, nobody thinks it adds much value, but we're afraid to admit it.
As soon as we admit that human resources and leaders have not been well-served by the design of the standard performance appraisal process, and we take steps to correct this, HR's reputation and credibility will increase exponentially.
This study also identified what causes dissatisfaction with the typical performance appraisal, and these were the two biggest problems...
PROBLEM #1: Undifferentiated Scores
96% of employees, managers and CEOs agree that a performance appraisal should differentiate high and low performers. But only 22% always think that their leader actually distinguishes between high and low performers.
While we often take it for granted that differentiating high and low performers is a good thing, we also discovered that it's a big driver of overall employee engagement. As you can see in the chart below, the more an employee agrees that their leader distinguishes between high and low performers, the more likely they are to be inspired at work.
It's a fundamental question for any performance appraisal or performance review process: If we do not effectively differentiate between high and low performers, then what is the point of conducting a performance appraisal in the first place?
PROBLEM #2: Not Enough Relevant And Positive Feedback
Only 14% of employees believe that their performance appraisal provides relevant and meaningful feedback. 95% of employees believe that performance appraisal comments should reference and cite specific events from throughout the year.
And of course, the performance appraisal should recognize employees' accomplishments. However, as you can see in the chart below, only 28% of people believe that their leader always recognizes their accomplishments. Perhaps more disturbing is that 54% believe that their leader never, rarely or occasionally recognizes their accomplishments.
When more people believe their performance appraisal provides relevant feedback about employee performance and differentiates high and low performers, the more likely they are to have positive opinions of both the performance appraisal and HR leaders.
Too often the performance appraisal program is a perfunctory and thoroughly-disliked exercise. We spend too much time designing the appraisal form, and too little time ensuring that performance ratings honestly reflect actual employee performance and that the feedback is unique and meaningful for each employee. If we're not going to provide honest or meaningful feedback, why even conduct a performance appraisal?
This study warns leaders and human resources departments of the challenges associated with annual performance appraisal, but it also provides the solution. If we create a performance review that differentiates high and low performers and places greater emphasis on giving each employee meaningful and, where warranted, positive feedback, then leaders' and human resources' credibility will skyrocket.
Now, there are other simple steps that organizations can take to immediately improve their performance evaluations. Here are 3 of the best and fastest ways to create a more effective performance management system.
On Your Next Performance Review, Do Not Give High Scores To These Employees
One of the primary jobs of a performance review is to accurately, fairly and honestly assess employees’ performance. Because if every employee gets a 5 or a 3 or whatever, what’s the point of conducting a performance review?
And yet, we know from the study Fewer Than Half Of Employees Know If They're Doing A Good Job that only 29% of employees know whether their job performance is where it should be. Clearly the message about making the appraisal process accurate, fair and honest isn’t getting through to everyone.
One of the biggest reasons why the annual review fails to differentiate and accurately assess employee performance is that there’s a group of people who consistently, and undeservedly, get a glowing evaluation and performance ratings: Talented Terrors.
Assume for a moment that employee performance has two dimensions: Skills and Attitude. If high performers are those employees with terrific skills and fantastic attitudes, then Talented Terrors are those employees who have terrific skills but lousy attitudes.
Talented Terrors typically have very high levels of technical skills and innate intelligence coupled with narcissism, drama, negativity, selfishness, or any number of other problematic attitudes. If you’ve ever used the expression “he/she is a high performer but with a bad attitude,” you’ve essentially described a Talented Terror.
It can take a little work to figure out if you’ve got Talented Terrors because they’re often masters at turning their problematic attitudes on and off. No matter how difficult they act on a given day, when the Chairman of the Board walks by their desk it’s all sunshine and buttercups: "Good morning, Sir! I just finished reading your interview in the local paper and it was inspiring as always, Sir!" Of course, as soon as the Chairman leaves, the sunshine turns to dark and threatening clouds and the Talented Terror returns to sucking the life out of you with their bad attitude.
When it comes to the performance review, Talented Terrors represent a serious threat because they generally receive glowing performance ratings on those reviews. And when they get a top evaluation, several bad things happens.
First, it sends a terrible message to your true high performing employees when they’re receiving the same performance appraisal scores as Talented Terrors. Your high performers deliver all of the great skills-based performance, but then they go above and beyond to deliver that great performance with a terrific attitude. And for that they’re receiving the same performance review as those who deliver that performance with a poor attitude? That’s a recipe for quickly decreasing the employee engagement of your high performers.
In our study Disengaged Employees Can Actually Be Highly Motivated, we discovered that one of the factors that causes employee engagement to drop is whether an employee believes that practicing the organization's values is critical to their success. In other words, if they see workers who ignore or disregard the organization’s values still achieve success (like getting high marks on their performance review), that will often turn highly engaged employees into disengaged employees.
If your headquarters has posters that tout corporate values like teamwork, customer service, integrity, positivity, etc. but Talented Terrors (who ignore those values) get top scores in the performance appraisal process, that’s a big sign that hypocrisy is afoot. And high performers will not tolerate that for long.
A second problem with giving Talented Terrors high scores on performance reviews is that it removes their incentive to change. The reason that so many Talented Terrors are unwilling to fix their bad attitude is that, for years, their fantastic technical skills have gotten them preferential treatment and a glowing performance review. And their poor attitudes get excused, ignored or rationalized away. Rarely does their performance appraisal meeting deliver any real feedback. So when this year’s performance appraisal further reinforces that narrative, the more intractable the problem becomes.
Here’s the bottom line: Talented Terrors are low performers. If their poor attitude is hurting your team, if they're destroying your culture, or if they're a nightmare to manage, then we have to acknowledge that attitude is a very real issue. You can’t just walk around and say, "You know what? They are a high performer with a terrible attitude." High performers with terrible attitudes (aka Talented Terrors) are low performers and their performance review should reflect that reality.
Skip Your Low Performers When Starting Your Performance Appraisal Process
The performance appraisal meeting is painful. But our high performers aren’t making these events strenuous; it’s our low performers that make us dread these conversations.
And while there’s a school of thought that says ‘take whatever is most painful and get it out of the way first,’ when it comes to the annual performance review, that’s a mistake.
If you have the opportunity, it’s best to start your annual performance appraisal with your best performers. Then, when you’ve finished with them, start on your middle performers. And then, when you’ve finished with them, you’re ready to start talking to your low performers.
Starting the employee performance appraisal process with high performers first, middle performers next and low performers last is a simple process change that makes performance appraisals a more effective and resonant experience for everyone.
Here are 3 good reasons why you should start your performance appraisal conversations with your high performers (and avoid your low performers until the end):
Reason #1: It stops low performers from spreading negativity
If you do employee evaluations correctly, your high and middle performers will leave your office feeling motivated and energized. After all, they’re your high and middle performers; by definition, they’re doing good or even great work and they should be recognized accordingly. And this positive energy is going to inoculate high and middle performers against any negativity that might emanate from low performers.
Some (maybe many) low performers leave their performance reviews angry and defensive. They’re filled with denial, blame, excuses, and a driving need to manipulate everyone around them into thinking negatively about the organization and its leaders—especially you.
Meeting with high performers first, middle performers next and low performers last takes that power away from low performers. Low performers may still vent post review, but high and middle performers will be insulated from low performer emotional toxicity. These good performers, who have already completed their reviews, will still be riding the emotional high of their positive review experience. They aren’t going to care what low performers have to say, let alone be influenced by it.
Reason #2: It differentiates high and low performers
Scheduling high performer reviews first, middle performers next and low performers last sends a clear message that says “this organization values high performers.” This means your best folks get to walk into their review proud to be an acknowledged high performer while low performers get to sweat it out waiting.
If you saw our recent study, you already know the shocking news that in 42% of organizations, high performers are less engaged than low performers. And one of the big reasons why high performers are suffering from such low engagement is that leaders don’t do enough to differentiate between high and low performance.
Anyone who’s had a real job for more than a few years knows the demoralization that comes from being a high performer surrounded by low performers-getting burned out by carrying their load, and resentful over a lack of recognition for your work. Give your good performers the differentiation they want by meeting with them first during review time. The added bonus is that there will be no more mistaking the low performers in your organization.
Reason #3: It builds momentum that makes low performer reviews more effective
Turning low performer reviews into deep and meaningful conversations that result in positive change is easier to do when you’ve built up some momentum that sets the tone for these difficult meetings. Talking to your best people about performance and goal setting and growth is fun, and it builds up your mojo and momentum. The same goes for middle performer reviews, which also tend to be mostly pleasant.
By the time you get to your low performers you’ll be mentally insulated, almost like you’ve had a vaccine against the challenges these folks are likely to present. Plus, by this time, your low performers have figured out the order you’re moving in. They know they are last for a reason, and this compartmentalizes them, softening them up emotionally, making them less defensive, and thus potentially more receptive to your appraisal of their performance.
Proudest Moments Keeps High Performer Reviews Objective
Employee performance reviews are notoriously painful, but they don’t have to be. The performance appraisal meeting can actually be a useful, productive, meaningful conversation that do what they’re intended to do: improve employee performance. And some of the changes leaders need to make to have a more effective review are pretty easy.
You might already do an employee self-appraisal, but there’s a big difference between proudest moments and a self-appraisal, and that difference is what makes proudest moments so motivating. When you ask for an employee self-appraisal you ask for the proudest moments, but you also ask for the biggest failures. And while it might not be a bad thing for your low performers to have to bring you an honest evaluation of their biggest failures, it’s actually quite harmful to your top performers.
There’s a different psychological dynamic that happens when high and low performers experience failure. Low performers might not know about the failure, they might not care, or they may even have intended for the failure to happen. But one of the reasons high performers are high performers is that they have a high degree of critical self-awareness. Which is wonderful because most of the time these valuable employees already know they messed up---even before you tell them. And they get right to work on fixing the problem and making self-corrections so they never mess up like that again. However, most high performers are also prone to beating themselves up pretty hard when they mess up. And that can quickly turn the focus of the review back onto stuff they’ve already corrected and moved past. Plus you might just get swayed listening to a high performer beat himself up and give lower marks than are deserved.
Keeping things focused and balanced for high performers is only one reason to ask about proudest moments. Starting reviews with this simple question also helps leaders avoid the biggest employee de-motivator: missing the greatest things your people did that year. Because what you learn by asking this question gives you all sorts of great information to work from during the review. Let’s face it, managers are human too. I can’t remember what every one of my employees did 12 months ago, and I have a pretty decent memory. The fact is, you’re not going to remember every single little thing, so have your people make the list and tell you their proudest moments. It makes a big difference to them if the two great things they did get remembered and talked about a bit.
Another benefit is asking about proudest moments also clues you in as to the kind of meeting you’re in for. If an employee tells you, “I am just so proud of myself because I made it on time for work 70% of the time this past year which is a huge improvement over the 50% I managed the year before,” it tells you what kind of conversation you’re in for. You’re going to go into that review with a very clear direction.
So before your next performance review period starts, simply ask your people to make a list of their proudest moments. If your organization conducts 12-month reviews, ask employees for their proudest moments from the past year. Or if you do six-month reviews, have them look back on the past six months and answer, in writing, the question: What were your proudest moments? And just like self-appraisals, always do your own evaluation first before you read employee proudest moments. This allows you to avoid neurological biases like the anchoring effect that can skew your evaluation and make the review less objective.