If you’ve read the previous posts you deserve a medal, and as a reward you get a summary of my views.
Despite the current move to informal performance conversations, à la Adobe’s Check-In system, I think that a formal performance review process is still critical to organization effectiveness, but maybe not for everyone.
I do agree with Donna Morris however that a poorly done performance review is more unproductive than none. I also think that regularly conducted conversations between the manager and each of his employees is very important to employee success and engagement. How can the employee be successful if he/she does not know what is expected of him? And moreover he/she is entitled to have a say in those expectations. The employee also needs to have the opportunity to explain what she has accomplished, and experience psychological ‘evaluation’ (if not recognition) by key stakeholders, especially his/her boss. But these ongoing conversations need to be done just well just as any formal performance review does.
I also agree that for the vast bulk of employees who do not have direct involvement in the development and delivery of the organization’s strategic and operational plan, and no real accountability, it is much too abstract to try to construct an MBO type performance review process. So the annual formal performance reviews for these employees may indeed be “archaic and ineffective, irrelevant, and possibly even counterproductive”. (And firms like Halogen Software may have to move away from
So an informal review process may in fact be more effective, especially if there is no link between performance reviews and pay; however, in my view, there should still be some official record of these informal ‘check-in’ conversations, if only for the day when the employee gets a new boss and there is no history.
I used to be a great believer in linking performance appraisals with ‘performance pay’; annual MBO type performance reviews were supposed to drive the pay awards. Not any more. At least not for regular employees. Many working level employees cannot see how their ‘goals’ relate to the overall organization goals and so the performance bonus is often seen as arbitrary. Instead of ‘base salary plus performance pay’ employees’ salaries should equitably reflect the totality of their responsibilities and competencies, with perhaps some sort of progression pay for the first year or two in the job. Beyond that, performance rewards should reinforce intrinsic values – opportunity to utilize their best skills, have responsibility and authority for their own work, be recognized for accomplishment, given opportunity for training, career development and growth – not extrinsic bribes. So linking performance to rewards may be better done through ‘frequent evaluation and review’ rather than the annual performance review ritual.
All of this is also true for CEOs and anyone else in the organization who carries some responsibility for the achievement of the organization’s goals and objectives. But for these positions there should be a more structured appraisal system based on four elements: clear position responsibilities, relevant performance competencies, explicit performance goals that relate to the organizations objectives, and a career development goal. The performance process should follow the fiscal cycle and the senior leadership should take personal responsibility to ensure that it is done in a timely and appropriate fashion. In the case of a CEO the Chair of the Board should make it his or her practice to ensure he has adequate information to evaluate the actual performance of the CEO, even to the point of hiring an external consultant to conduct a 360o survey of key stakeholders.
Whether informal performance reviews or formal performance appraisal all this takes time, energy and effort. But this is Job One for every manager.