Burning paper in the darkWhen companies, such as the software maker SAS Institute, and lesser known companies, like Glenroy Inc., get cheers from their staff for a bonfire celebration that burns their appraisal forms as a signal of them ditching their annual review process, one has to wonder whether there is a serious problem with appraisals hiding in all our corporate closets.

What we do know is that there is a general disquiet about performance appraisals from staff (and even managers). For example, this infographic from GloboForce shows us that 51 percent of employees believe appraisals are inaccurate, and 53 percent believe that they don’t motivate and that they create three strong negative emotions of anxiety, frustration and boredom. Another 63 percent think that appraisals are not a true indicator of performance.

Detractors might argue that just because employees don’t like something, it doesn’t mean it should be ditched, i.e. take your medicine and don’t worry about the bad taste. But, that’s a hollow argument as the medicine has massive side effects. For example, the GloboForce research showed that employees who believe that performance reviews are inaccurate are twice as likely to be looking for a new job; so, there is no question that a bad appraisal system is creating labor instability in your workforce. Another study by Kluger et al of 607 subjects has revealed that although appraisals improved performance on average, just over a third of the appraisals decreased performance.

What you also can’t be sure of is whether the negative side effects of performance appraisals in terms of lower performance and increased desire to quit are disproportionately affecting your mission critical staff or higher performers – magnifying the issues around appraisals.

Another fundamental flaw in the appraisal process, as uncovered by David Rock in his neurological analysis, is that appraisals put recipients in a threat state. His research shows that appraisals threaten one’s sense of: status, certainty, autonomy, relatedness and fairness, which quite understandably puts one in an automatic fight or flight mode. This translates to increasingly defensive behavior along with reduced high-level cognitive functioning, which means they become less able to think openly, creatively and to be able to honestly self evaluate their performance.

However, even though there is plenty of evidence pointing to the lack of effectiveness of appraisals, studies have shown that they can have a positive effect on performance. This means it’s too strong a statement to suggest burning your appraisals, but it’s also too strong a statement to suggest leaving them as is, as there are fundamental flaws in the typical appraisal process. So, what can be done?

It’s important to not take your appraisal process for granted, and assume it’s working as with most staff in the world being disengaged, it suggests it’s not working.  I’d start with asking your own staff members how they want to be appraised and what they want from the appraisal process. You might be lucky enough to find all the answers you need from this kind of customer feedback analysis, allowing you to design a more employee centered and palatable appraisal system.

But, if you don’t have the tools or inclination to do this primary research, why not rely on some of the off-the-shelf research? Data from Globoforce shows that 70 percent of employee want appraisals to help them develop and grow; 71 percent prefer to get feedback ASAP or even weekly (23%); and just 17 percent prefer annual/quarterly appraisals. And, unsurprisingly, 90 percent see positive feedback as more motivating as opposed to negative feedback.

So, if you are using a standard annual appraisals system set up in a high-tension, threatening environment, chances are your employees hate it and it’s having a negative effect on your organization – meaning it’s time to make a change.

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