National Learning Institute

Hardwired Humans and … Appraisals. By Andrew O'Keeffe

© Hardwired Humans

Most organisations install and persist with conventional performance systems. These same organisations experience frustration that the system doesn't deliver what they would like and are always redesigning their system one more time.

 

There must be deep-seated reasons as to why the conventional performance system was developed in the first place, and why its design is futile. The reasons go to the core of human nature.

The key message is that you have an either/or choice in your design: you can either have a performance system where people are rated or you can have a system that generates constructive conversations between a person and their manager. You cannot have both. Here's why.

Social systems signifying acceptance

Given that we are a social animal where leaders and followers have unequal power, it's not surprising that humans invented rating systems for signaling to a person their standing in their work group. Chimpanzees do the same thing in their communities.

Chimpanzees hunt meat. They appear to hunt for social rather than nutritional reasons. For the chimpanzees of Gombe the most common prey is a red colobus monkey. For the energy expended for the meagre 1kg of meat on a baby monkey, chimps would be better off foraging for nuts and fruit if the purpose was nutritional. But chimps appear to hunt for social reasons. A hunting party is most successful when the gang numbers between four and ten members. When a kill is made, the prey is appropriated by the alpha male. At Gombe, the alpha male shares the meat in a deliberate, consistent way - he gives a greater share to his allies and he ignores his rivals. Members of this social group get to know where they stand and the regard in which they are held by the boss.

Appraisal ratings is no more elaborate than meat sharing as a way for people to know how they are regarded in their social group. By "ratings" we mean numbers or words on a scale where people are scored and labelled.

Natural for humans to invent appraisal ratings

On the one hand we should not be surprised that humans invented ratings. There are six reasons why ratings are a natural invention for humans.

First, like any human group, power in organisations is distributed unevenly between leaders and followers. Leaders use their power. Ratings are based on the presumption of power: "I rate you a 3" is the statement of the power of one person over another.

Second, we have an instinct to classify other people (eg, "good/bad", "like me/not like me"). The labelling of people into high/medium/low performers is just one more classification.

Third, we are generally working in organisations much larger than our natural sized clan of up to 150. Consequently, leaders and followers in large, often global, organisations are strangers to each other. It's easy for leaders in large organisations to treat their staff as if they are not clan. This is partly why leaders require other managers in their organisation to conduct reviews yet often do not complete them with their own team (after all, we don't conduct ratings on our family).

Fourth, we gain confidence in social imitation, so a practice implemented by an influential individual or highly-regarded organisation quickly becomes fashion and spreads as common practice. Many organisations followed GE's lead with forced ratings and "A", "B" and "C" performers. While GE has reportedly rejected its own practice as unsustainable, other organisations continue to advocate the system.

Fifth, our instinct of confidence before realism means we are attracted to simple solutions. This attraction to simplicity allows us to convince ourselves that we can convert a year's performance of a person to a single score, allows us to ignore the complex behaviours and emotions that are triggered by ratings, and to believe that managers across the organisation have the ability to handle the sensitivities of the reviews and the dispensing of ratings.

Sixth, appraisals are not objective as advocates claim. Given the nature of humans, one cannot take subjectivity out of the process. In fact, the evidence is that a person is more likely to be rated highly if they were appointed to their role by the appraising manager. If your manager did not appoint you, you are less likely to receive a good rating (see Pfeffer and Sutton, Hard Facts, Dangerous Half-Truths & Total Nonsense, page 92).

If that's the case for why appraisal ratings were invented in the first place, why do they cause so much tension and frustration across organisations?

Why appraisal ratings are destructive

We can predict from instincts why ratings have a destructive impact on the energy of an organisation.

First, for staff the prospect of being rated triggers the instinct of loss aversion. Potential loss is not just in the form of pay and bonus. The greater fear is the possible negative impact on a person's social standing. Loss of social reputation is the greatest loss humans face after the loss of family. When faced with the threat of loss, people become guarded and defensive. This sets the tone for the review and the rating dominates the conversation between managers and their people. The possibility of an open, constructive, developmental conversation is all but destroyed.

Second, the rating raises the emotional stakes for both parties. We might design our system on the assumption that the reviews are rational, but for both managers and staff the reviews leading to a rating are primarily emotional. We are put in a position of judging and of being judged. In our executive programs we ask participants to list how employees might be feeling the morning of their appraisals, and to list how managers are feeling the morning of appraisals. Not surprisingly, the lists are similar and almost always include emotions of anxiety and defensiveness.

Third, with the bell-curve of ratings (where there are few high performers and few low performers with the bulk of people in the middle) the system is designed so that once a year the managers in your organisation are required to rate most of their people average. For most people, being average in their social group is demoralising. So, bizarrely, the system is designed so that most people in your organisation are deflated and sapped of their energy and less inclined to contribute discretionary effort. If you have a rating system at least design it to expect a bell-curve skewed to the right so that the damage is contained.

Fourth, employees quickly crack the code that their manager cannot rate all of their team as "high" performers. The best chance of a person receiving a high rating is that they look good compared to their peers. Hence competition within the family-sized work team is created. Most organisations prefer collaboration within teams.

Fifth, managers, being the leaders of the family-sized team, sense that they are dividing the team through ratings and causing angst to individuals. A possible response from managers is to diminish the value of the process and treat the system as a "tick the box" exercise. Managers are instinctively seeking to lead the group as if they are family, and ratings are contrary to this instinct. It's why managers generally refuse to undertake mid-year reviews (so that they at least contain the negative aspects to a single review) and why they often need to be forced to complete the annual reviews.

Sixth, the value of people doing routine work is diminished as employees in these roles are more exposed to an average rating. People doing the heroic work are more likely to receive the few morsels of high ratings.

Seventh, having completed the review meeting and obtained their rating, gossip can now work overtime. Staff will gossip with each other (which managers are intuitively sensitive about) and staff will gossip that night when they get home, starting with, "Guess what darling, today I had my appraisal." What do you want staff to then say? For organisations with rating systems, most employees will then say, "I got average - can you believe that that's all the thanks I get." You have successfully diminished their energy.

Solution

There is a preferred design - have a review system that does not include ratings.

Staff members know that their manager has views about them and their performance. Likewise, managers want to share their perspective if they can only find a way to do so that doesn't cause the employee to be defensive.

The review should cover the topics that an employee and their manager most want to talk about:

• What I did well this last year
• What I did not do so well and can learn from
• How I developed last year and development plans this coming year
• Career opportunities

Potential meaningful discussion on these topics will be derailed if ratings are attached.

Organisations we have assisted or that we know which use a system without ratings find that managers and staff say, often for the first time, that they are having the conversations they would like to have with each other. One staff member told us, "I told my wife how lucky we are to have a system without ratings, and she in her organisation is still struggling with the old punitive system." In another organisation the HR manager reported managers and staff are having meaningful conversations lasting two hours, unheard of before now.

Life without ratings

The question often arises as to how pay reviews, bonuses and promotions are handled without ratings. While this deserves a more comprehensive explanation, the brief answer is that there is life without ratings.

Pay reviews are more influenced by market rates and position in the salary range. Performance does play a part and the pay review message should still be consistent with the performance discussion. Bonuses relate mostly to measurable KPIs and team and company performance. Ratings purport to take judgment out of pay and bonus decisions which is not, or should not be, the case.

In terms of promotability and succession planning, you don't need a rating system to know who your future leaders whose development needs to be accelerated, or for that matter the freeloaders who need to be attended to.

In any event, it still comes down to the choice outlined at the beginning: we either want a system that delivers ratings so we can apply to pay and bonus, or we want a system that gives a greater chance of managers and staff having meaningful conversations.

Cultural choice

The choice in our performance system is cultural - just like meat sharing with chimpanzees. While the chimps of Gombe share meat based on the power of the boss, a different community of chimps in the Ivory Coast shares meat equally with whoever participated in the hunt.

---

Andrew O'Keeffe
5 March 2009
Principal, Hardwired Humans.

You can subscribe to Andrew's monthly newsletter at www.hardwiredhumans.com

He is contactable at This e-mail address is being protected from spambots. You need JavaScript enabled to view it