Why Ranking Systems are Rank

How do you go about evaluating team members’ performance? At some level, doesn’t the leader have to judge the employee? If the team member is just not up to the job, that becomes a business issue. Of course, but this can escalate into a major headache with little promise of a useful outcome. Most large companies have some sort of performance review system and they all have their problems. Managers are often not very skilled at executing them. They have certain built-in inequities. They can be subject to manipulation. Frequently, they do not really reflect an accurate picture of the employee’s performance. And so on. To counter this, many companies have adopted ranking systems in which senior managers sit in a conference room and rank all of their employees from best to worst. This is making a bad situation worse. And if that isn’t bad enough, some allow anonymous input into the system. That way no one is accountable for anything they say. Wow! The consequences of this are too much to explore in depth in this article but I have yet to see such a system benefit the performance of an organization. And, in many cases, the resulting pain is highly destructive. Team member evaluation should, in any case, be about whether the employees are meeting their goals and objectives not about who is better than whom. Also, performance evaluation should be about behavior not about the individual. It should be done in the spirit of helping the team member improve and it should be done on a day-to-day basis, not “saved up” for the performance review. No surprises! Of all the things that you can do to ruin teamwork in your organization, short of outright criminal behavior or abuse of power, ranking systems top the list.

W. Edwards Deming takes the idea one step further. He says, “Evaluation of performance, merit rating, or annual review… The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise.” The premier quality guru of all time says don’t do performance reviews at all. In fact, he calls it one of the “seven deadly diseases” of organizations.

For the most part, formal employee evaluation systems just don’t work. “According to W. Edwards Deming, the performance review… should be eliminated immediately and completely. Many studies have tested his belief, and in a recent one, most managers called individual performance reviews a waste of time and said they do not improve productivity or quality.

Another study proved those managers right by demonstrating that in a traditional review system, the most reliable predictor of this year’s performance rating is last year’s rating. That project, conducted by Steve Armstrong, manager of manufacturing at Varian Ion Implant Systems in Gloucester, Mass., examined the ratings of 30 employees who had been with the company 10 years or longer. Their ratings showed virtually no variation over that period although indicators of company productivity varied greatly.” Weaver, W. Timothy. Linking performance reviews to productivity and quality. HR Magazine, Nov, 1996.

Eliminating evaluations completely may be extreme but the way most organizations do performance evaluation does more harm than good. In our overly litigious culture, it may be unrealistic to do away with systematic evaluation altogether but we sure can do a better job of it. Some of my thoughts on what to avoid and some alternatives follow.

Why Performance Reviews Don’t Work

These potential problems apply to most performance review processes but are exaggerated in any system that relies heavily on ranking.

  • Backstabbing. They often encourage team members to make themselves look good by making others look bad. People start looking for ways to stand out and that often becomes more important than helping the team meet its goals.
  • Cooking the books. They increase the temptation to “spin” the statistics in your favor. This makes it more difficult to get accurate information about how the organization is really performing.
  • Focus on short term results. Like any system that depends on fear for results, it will consistently produce short-term improvements in productivity. Any time you threaten people, they will increase their activity level. Unfortunately, these kinds of improvements are hard to sustain because, perversely, they discourage people from taking the time required to make systemic changes that will help the organization in the long term.
  • Destroys teamwork. No matter how much talk there is about teamwork, if my performance is pitted against my teammates, I will look out for myself. Not only does this make teamwork more difficult in the present, it also makes it even more difficult to develop good teamwork in the future. People have long memories when it comes to perceived inequities.
  • Reinforces servility. There is always a certain amount of “buttering up” the boss in organizations, but if pay and promotions are contingent on flawed evaluation systems, you can bet on lots of compliance, little disagreement, few constructive suggestions, and almost no creativity. The toadies will run wild. “…in jobs where work is difficult to assess objectively-in research and development, where outcomes can take a long time to appear, or in managerial positions where there is so much interdependence with others that one person’s contribution is tough to discern-performance reviews mostly reflect the ability of employees to ingratiate themselves with the boss. Not surprisingly, research shows that political skill-the ability to understand others and use that knowledge to influence them- helps individuals put a gloss on their performance that ensures a higher rating.” Pfeffer, Jeffrey. “Low Grades for Performance Reviews.” Bloomberg Businessweek, Outside Shot, July 23, 2009.
  • Allows managers to continue avoiding their job of giving feedback everyday. Probably the most destructive outcome is that it lets managers off the hook when it comes to giving day-to-day feedback. If it is the formal performance review that is important, why do the hard work of giving people constructive feedback every day.

What To Do Instead

feedback system leader leadership trainingEvery feedback system should include the following, whether it is a formal system or incorporated into the day-to-day job of the leader.

  • Make expectations clear. Many of the so-called performance problems are due to ambiguous or incorrect job descriptions or task assignments. Hold meetings with team members (or teams) during which you talk about what needs to be done, the function of the job, how performance is to be measured, and how and when feedback will be given. This should be a two-way conversation with a heavy emphasis on what the team leader needs to do to make sure the team member is clear on his or her assignments and what the leader needs to provide in the way of resources or support.
  • Feedback everyday. If leaders give their team members constructive feedback every single day, the need for formal performance reviews almost disappears. According to Deming and many others, 90% or more of the performance problems in any organization are due to the system – not the employee. In every company, there are some employees who just don’t do the work, but in most cases, they are so obvious that the only reason they are still employed is because the manager and HR don’t want to go through the hassle of firing them. On the other hand, there are many “problem employees” who are so labeled because they complain, don’t want to do things the way the boss wants, talk back, etc. Often, in the right circumstances these employees can be turned into effective team members. Oh, and did I remember to say, “The leader needs to do this EVERY DAY?”
  • Focus on behavior. People cannot change who or what they are. They can change their behavior. So, if something that a team member is doing (or not doing) interferes with productivity, help them change it or learn a new behavior. Focus on things that can be accomplished. What good does it do, really, to decide that someone is a “loser” or “unmotivated” or a “troublemaker,” etc.? People can work extra hours, take shorter breaks, sign up for a professional development class, submit expense reports on time, volunteer for overtime, etc. But, they cannot just stop being a “loser” because that idea resides only in the mind of the observer (the manager).
  • Focus on the future. Rather than dwell on the past, talk more about what is to come. What can we (Yes, both the team member and the leader) can do to improve performance next year and into the future. No one can change what has already happened. Past events are subject to interpretation and do little but provide some data to help us make better decisions about what needs to be done. We can make choices about how to proceed tomorrow, next week or next year.
  • Fire anyone who lies, cheats or steals. Astonishingly, many managers would rather endure a “little stealing” rather than go through the red tape needed to actually fire someone. Don’t try to “get them” in the next layoff. If you are the team leader, it is your job to address these issues as they come up. Don’t wait for the performance review, do it now.
  • Provide lots of development opportunities. Make sure that there are lots of opportunities to learn new skills. If you want people to improve their performance, it is your responsibility to see that the training, creative assignments, mentors and the like are readily available. And, that you encourage your people to take advantage of them.
  • Train your managers. Provide leadership training for your managers and supervisors. Make sure it is the kind that includes good communication skills that they can use when giving and receiving feedback as well as during formal performance review processes.

An excellent example of such a system is offered by Dr. Thomas Gordon in Leader Effectiveness Training (G. P. Putnam and Sons, New York, 1977, 2001). In chapter eleven, he outlines the Periodic Planning Conference that is intended as a substitute for formal performance review processes. He also notes, however, that this kind of process can be used as a supplement even when more traditional review systems are in place.

Formal performance review systems, especially those that include ranking, are seductive. They almost always produce short term, highly visible changes in behavior. The organization’s activity level increases, people put in more hours, they send more e-mails, etc. It is easy to look busy. But this activity level itself often masks other problems and in many cases makes things worse, particularly in the longer term. All systems that depend heavily on power are like this. The more power you use, the more you need to enforce your orders. The more vigilant you must be to catch cheaters. That requires more supervision, more management, etc. You add cost to your business. It is a spiral that consumes energy and time. Little of that time and energy will be directed toward meeting the organization’s goals, much less finding creative ways to improve performance in the future. Most of the creativity will be directed at pleasing the boss, looking busy, undermining teammates credibility, etc.

While it may be unrealistic to eliminate performance review processes completely, it is not so difficult to improve the systems you already have according to the principles outlined in this article. Seldom do I facilitate a leadership training workshop in which the performance review does not become a topic of conversation. Any leadership training that advocates better teamwork, clearer communication, more accountability, and fair play will require the facilitator to be prepared to lead such a discussion.

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