What is the most common cause for the failure of performance appraisal systems?

Performance management is often seen as a bureaucratic process forced by HR, which adds little or no value to the business. If you don’t have performance management in place yet, or if you are looking to improve your current process, here are 7 challenges you want to address during your planning stage to ensure you get the highest return on your investment.

Challenge #1: Lack of strategic focus

The company’s overall strategy and goals must be integrated into your performance management process to deliver real business value. A well-designed process begins with focus. Having too many company goals and relying on a “cascade” process will likely leave your employees feeling confused, unaligned, and inefficient. Simplify and prioritize your company goals, and focus your performance management on a few critical goals that are key to your business growth. Then help your employees understand how their everyday work and individual goals will help achieve these objectives.

Challenge #2: Lack of timely, meaningful feedback

Don’t wait until the formal performance review to provide feedback. Employees may feel blindsided, and this can lead to disappointment, confusion, frustration, and disengagement. Disengaged employees are less productive and less motivated to improve their performance.

Train your managers to provide timely, meaningful feedback when positive behaviors or performance issues occur. Waiting too long to give feedback hurts your company’s employee morale, engagement, and ultimately your business performance.

Challenge #3: Lack of leadership support

Management and leadership team must support and help drive performance management. Your leaders have to be committed and actively engage their teams in performance management activates, and provide support and recognition to managers and employees who exhibit the expected behaviors and actions. Without leadership support, performance management will not be successful no matter how well-designed the process is.

Challenge #4: Lack of stakeholder review

When designing your performance management process, you should involve your major stakeholders early on in the planning phase since they are the future users of the system. Without proper consultation with your key stakeholders, your performance management process may not address all the needs of the business, and you risk losing time, resources, and buy-in implementing a system that no one wants or knows how to use.

Challenge #5: Lack of proper training and communication

Without proper training and development, leaders and managers may not fully understand what performance management is and what’s in it for them. In the implementation phase, it is crucial to have good, relevant communications to explain the benefits of performance management, and provide ongoing training to help leaders and managers obtain the appropriate knowledge, behaviors, and skills to properly engage their teams in performance management activities.

Challenge #6: Lack of appropriate recognition and rewards

Rewards are extremely important in recognizing and promoting top performance, and to keep your employees engaged, motivated, and inspired about their future with the company. An effective rewards and recognition program should have clear expectations and criteria around what types of behaviors and actions are rewarded that drive your company forward.

Challenge #7: Lack of simplicity

Whether you currently have performance management in place or not, the process you ultimately implement should be simple, easy to understand and use. Your managers and employees should not have to spend hours to learn your new processes and tools, or to look for the performance-related information and forms they need.

Bad performance management is costly and delivers very little value, and can actually lower your employee engagement level and harm your business growth. But when done right, the impact of effective performance management is significant. Not only will you see an increase in your revenue growth and bottom line, you will also stop your top performers from walking out the door.

Mention the words ‘It’s appraisal time’ to a work colleague and you’ll probably get an eye roll - so what happened and how can you fix what is going wrong?

A decade ago, performance management systems were all the rage. Customers were falling over themselves to buy systems like SuccessFactors, Taleo and Cornerstone on Demand. But the annual performance review has now fallen out of favour with more stories of failure than of success.

Mention the words ‘It’s appraisal time’ to a work colleague and you’ll probably get an eye roll.

Yet, today, talent acquisition and retention are still pressing matters for HR Leaders and the need to identify and coach your top talent is just as important as it’s ever been.

What went wrong and how can you fix it?

Problem 1: The once-a-year review

Conducted in isolation, the annual appraisal is ineffective at best and demotivating at worse. A year is a long time. Can you remember what you posted on Facebook or Instagram this time last year? Even the very best managers would struggle to remember work completed 11 months ago.

The annual appraisal often regresses to a checkpoint on the last 3 months with a bit of lip service review of work that happened earlier in the performance cycle. Employees get frustrated at past achievements getting forgotten or overlooked; managers hate the workload involved in having to remember 12 months of effort for each team member.

Fix: Continuous feedback and mid-year checkpoints

Introduce tools where colleagues can feedback on other colleagues and managers can praise good work. Crucially, this feedback must feed into the main reviews so both manager and employee have a clear reminder of all that’s happened since the last meeting.

Similarly, holding a mid-year or quarterly review breaks up the pressure of the final year review. If you supplement this with mandating your managers to have 15 minute monthly check-in sessions with your workers, you’ve got the basis of continuous performance feedback.

Sounds like a lot of work? That’s a problem…

Problem 2: Appraisal forms are too long

When HR is tasked with coming up with a performance management process, the instinct is to come up with some ‘mega-form’ full of wonderful questions to cover every aspect of performance. To look even more impressive, how about filling the form up with glossy diagrams of performance cycles, competence libraries and objective weighting. Such a mighty form shows how capable the HR Talent Team is!

Forms like this are bewildering to the average employee and an annoying time sink for managers that have to complete them for each team member. A long form is a barrier to multiple review periods per year – who wants to fill those out every three months?

A good review should, at its heart, be an honest and constructive conversation between two people. Your appraisal form should capture the key points for prosperity but it’s not a replacement for that manager / employee relationship.

Fix: Less is more

Strip that form back. You really don’t need that many questions to gauge if things are going well for that employee or if the manager wants them to improve. At Applaud, we have four simple conversation starters and optional room for 2-way feedback. You can download our template here.

That’s it. Simple. Then invest in an easy to use performance management system to avoid the completion and filing of multiple word documents. 

If you're looking to keep up-to-date with the latest thinking in HR, or take a deep-dive into specific topics, make sure you check out our recommended 12 best HR podcasts.

Problem 3: "I’m a 3 but my colleague’s been given a 2!"

The dreaded final rating. Was there ever such a divisive policy introduced by HR? Giving a number is bad; introducing normalization so each manager can only give out so many 1s, 2s or 3s is worse. I’m of the firm belief that the final rating has single-handedly destroyed many perfectly good performance processes by demoralizing the recipients.

Your great performers don’t need to be told they get your top rating. They know it.

Your under performers will get demoralized at getting a low rating to the point of performing worse.

Your average-good performers, which is probably most of your workforce (excellence and ineffectiveness should be margin cases) are either going to be ambivalent or annoyed that they haven’t got the next rating up.

Fix: Scrap it

A good performance review should be around coaching, feedback and improvement not placing someone into a numbered box. Put a ‘5 - Low’ on a performance review sheet and that’s all the worker sees and thinks about, not the wonderful constructive feedback their manager gave them.

Scrap the final rating. If you need to report on your top talent for retention planning and candidates for offboarding, then introduce a hidden ‘Top Talent’ flag and a ‘Underperformer’ flag and use those for your management reporting.

Problem 4: Your managers aren’t trained

You can have the best systems in the world and the best processes but if your managers don’t have a clue about how to hold a performance review, you’re doomed. Don’t assume that your managers know how to run one or are even comfortable doing so. So many companies promote good individual contributors into a management role and then believe they’re capable of running multiple feedback sessions in a short space of time.

My worse performance review was from a manager that simply said ‘Good’ against every question about my performance. My overall rating was ‘Good’.

It helped no-one.

Fix: Support, train and coach your managers

Performance reviews shouldn’t be complicated. They are a conversation not an interrogation. Create a ‘cheat sheet’ for managers to follow, even to the point of how to open up a review. Go further with ways to tackle poor performers (a real challenge even for the best of managers) as well as how to extract even more out of your best performers (giving constructive advice and growth plans to someone who really is Top Talent is surprisingly difficult).

You might not have the budget for expensive training, but your HR team should be able to put together some guidelines appropriate for your business. If you want an example, feel free to download the one we use at Applaud here.

And give your managers support. Your managers – of all levels - *will* have problem employees they don’t know how to deal with. Encourage a supportive environment where senior managers can help out the junior ones and HR get hands on where needed.

Problem 5: "Your goal is to write one blog per month"

Setting goals and objectives is a terrific way to clearly outline what a worker has to do to grow and improve. Sadly, they are terrifically difficult to write as well. Yes, we know they should be SMART. What they shouldn’t be is a simple job statement.

In my role, I should be blogging once a month. That’s not an objective that is going to make me a better worker for Applaud. It’s my job. It’s what I get paid for. 

Creating a set of objectives that simply masquerade as a job description aren’t helpful. What happens is the capable worker completes the objectives they’re paid to do, gets a mid-level rating at the end of the year and queries why they didn’t get top marks because “they completed all their objectives”. “Ah”, says the manager, “but I was looking for more”.

Fix: Think about promotions

When writing objectives, my rule of thumb was to consider if completing them indicated the employee was ready for promotion, or working above their grade. Sometimes that’s difficult, especially for someone that’s just been promoted. Taking that thought process, though, gets you scrapping lazy goals like ‘take more training’ or ‘complete project X by 31st July’. Those aren’t growth objectives, that’s a task list.

Worse, things like “Get to work on time” or “Take less sick days” (yes, I have seen these in my time) are basic things you should expect from any employee.

Good objectives should be moving people out of their comfort zones, doing things they aren’t currently. Try things like ‘present your project to the team’ or ‘contribute an article to our marketing team for publication’ or ‘mentor this new starter’. These are better examples of goals that will stretch your workers and make them more valuable to your business.

So, in summary, when it comes to reviews, reduce the complexity, increase the frequency, introduce tools for regular feedback and simplify the experience overall. Reviews may never be ‘easy’ but there are ways to make them less painful. Good luck!

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