The Challenges of Managing Performance

In this Entry: Do Performance Appraisals Work? / But That Won’t Stop Efforts to Improve Them / But Maybe Performance Doesn’t Tell Us Much / Questions for Discussion

One of the primary responsibilities of a manager is coordinating the performance planning, coaching, and evaluation process (the point that I’ll address at more length in this entry). Formal evaluation processes of one sort or another exist in a number of organizations. But do they work? And even if they do—how can they be made more effective? And does excellent performance in a current position really predict more of the same following a promotion?

Do Performance Appraisals Work? Not really, according to a survey conducted among managers in Sri Lanka (HR managers doubt accuracy of evaluation process – study, Sunday Times, December 20, 2009, http://www.sundaytimes.lk/091220/BusinessTimes/bt31.html). The survey, conducted by MTI Consulting, found that

“HR managers expressed doubts regarding the ability of evaluations to act as true performance indicators. As such, a lot of the time, evaluations are considered mere formalities, done for compliance sake or other superficial reasons, rather than with the intent to improve.”

On the more mundane matter of how frequently organizations assessed their employees, the survey found that 60 percent of organizations in that environment evaluated employees once a year, and 33 percent evaluated them twice a year.

But That Won’t Stop Efforts to Improve Them. On the other side of the globe, the U.S. civil service is trying to revamp its performance appraisal process to make it more transparent, to better link employee performance to organizational goals, and to upgrade pay practices so that civil servants are paid for performance (4 lessons on changing employee performance metrics, By Mary Mosquera, Federal Computer Week, March 27, 2009, http://fcw.com/articles/2009/03/30/agency-employee-performance.aspx).

That’s no small order, because an early effort to do so in the Department of Defense did was stalled in response to what appears to have been some confusion and pushback.

Part of the effort for revamping the process involves upgrading performance management software and making more effective use of it. But part of the effort involves changing the traditional performance appraisal process from “an ingrained yet sometimes uncomfortable meeting between supervisor and employee” to a “new approach with ongoing and regular dialogue between the two,” in which progress is tracked in the software, and all of the parties have access to the information.

(Maybe it’s me, but I always thought that the original design of these systems—once called management-by-objectives—included regular conversations between the two parties so that the end-of-year appraisal wouldn’t be a surprise.)

But Maybe Performance Doesn’t Tell Us Much. Wondering how to avoid the Peter Principle. According to the New York Times (Random Promotions, December 13, 2009, http://www.nytimes.com/projects/magazine/ideas/2009/?ex=1276059600&en=3315a37210ca3555&ei=5087&WT.mc_id=GN-D-I-NYT-MOD-MOD-M127-ROS-1209-HDR&WT.mc_ev=click#business-1):

Promot[e] people at random. That's what a trio of Italian scientists discovered this year. They created a computer model of a 160-person corporation and programmed it with Peter Principle-like logic: the best performers were promoted, but they had only a random likelihood of being good at their new jobs. Sure enough, the firm was soon cluttered with incompetents, and its efficiency plunged. But then the researchers tried something different: they reprogrammed the firm so that promoted people entirely randomly, and the overall efficiency of the firm improved.

They also tried alternately promoting the absolute best and absolute worst performers. That, too, worked out better than promoting on merit. The scientists say these strategies work because they harness "Parrondo's Paradox," a piece of game theory in which you win by alternating between two losing strategies. "In physics or game theory, this isn't new," says Andrea Rapisarda, a physicist at the University of Catania in Italy and a co-author of the study, which was recently published in the journal Physica A.

Questions for Discussion:

• What do you find effective about the idealized performance planning and evaluation process?
• What do you find most challenging about implementing it in practice?