Dear Colleagues! This is Asrar Qureshi’s Blog Post #844 for Pharma Veterans. Pharma Veterans aims to share knowledge and wisdom from Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi on WordPress, the top blog site. Please email to email@example.com for publishing your contributions here.
I recently read an article by Mr. Benham Tabrizi, Stanford University Director of Executive Program/ Teaching Faculty. He is author of 10 books and an advisor to Boards and C-suite. The title of his article is ‘Why the performance review is dying out – including at companies like Apple and Microsoft’. Then I did more reading on the subject and reviewed what has already changed and what is still changing.
The topic resonates with me very well. Having worked in the corporate world for a long time and still working, I have been directly involved in various systems of performance appraisal, even their selection for the corporate, and working closely with HR to train other managers on these. While government organizations are still stuck with their historic ACR – Annual Confidential Reports, but the private organizations went from a single page report to MBO – Management by Objectives, to present KPI – Key Performance Indicators system. However, the common thread running between all appraisal systems is the ‘Grand Annual Review’. There may be quarterly reviews also, but the most important one is the annual one. The employee performance, increments, and promotions depend upon the annual review.
Performance appraisal system is based on both premises; that it will help the organization achieve its corporate objectives, and that it will help employees to develop and achieve their own professional objectives. The problem is that both are not achieving their stated objectives. These are the primary reasons why some major corporates have discarded and dumped annual appraisal system, and more are poised to do so.
Kathleen Doheny states that the trend started with Adobe, Deloitte, GE, and other companies that keep track of large workforces. Microsoft followed suit; Kelly Services, PwC and KPMG are in the same league now. It is pertinent to note that Deloitte, PwC, KPMG, and Kelly Services are in consulting business, and their own practices impact their clients also.
The annual appraisal system, often used by organizations to evaluate employees’ performance and provide feedback, has its share of negative aspects that can impact both employees and the organization. While this system has been widely used, its limitations have led to discussions about alternative performance management approaches.
Issues with Annual Appraisal System
Here are some negative aspects of the annual appraisal system:
Infrequency and Delayed Feedback – Annual appraisals provide feedback mostly once a year, which can lead to a lack of timely recognition or corrective action. This delay makes it challenging for employees to address issues promptly and for managers to observe consistent patterns of performance.
Subjectivity and Bias – The annual appraisal system is susceptible to bias, as evaluations are often influenced by managers’ personal opinions, perceptions, and biases. This can result in unfair assessments and affect employees’ morale and career growth. In our society, bias is rampant and though we tried to minimize it through counseling and training, but we could never eliminate it.
Stress and Anxiety – The anticipation of annual reviews creates stress and anxiety among employees. Most employees feel depressed after the appraisal for many days, potentially compromising their mental well-being, which will have further negative impact on their performance.
Focus on the Past – Annual appraisals tend to focus heavily on past performance, often overlooking recent accomplishments or improvements. This backward-looking approach can discourage employees from pursuing growth and development.
Overemphasis on Numeric Ratings – Numeric ratings used in annual appraisals can oversimplify performance evaluation and fail to capture the complexities of an employee’s contributions. This can lead to frustration and dissatisfaction among employees who believe their performance is reduced to a single number. Similarly, when recognition and feedback are tied solely to the annual appraisal cycle, employees may feel underappreciated or undervalued for their day-to-day efforts.
Negative Impact on Collaboration – When performance is evaluated and rewarded individually, it hinders collaboration and teamwork. Employees are reluctant to share information or help colleagues if it doesn’t directly contribute to their individual evaluations.
Administrative Burden – The annual appraisal process is time-consuming for managers and HR teams, diverting their focus from more strategic tasks. This administrative burden can lead to rushed or incomplete evaluations.
Disconnection from Organizational Goals – In some cases, employees might struggle to see a clear link between their individual annual goals and the organization’s broader strategic objectives. While they toil to achieve their goals set by them individually, they are not sure if they are making worthwhile contribution to their organizations.
These are commonly seen issues with the annual appraisal system currently in vogue.
Stanford University Professor of Management Science and Engineering, Robert Sutton says, “It is a bizarre, constrained conversation – The way human beings make progress is through small steps, not through a bizarre conversation once a year”.
Microsoft, when they were doing annual appraisal, made the problems worse with a stack ranking system, in which managers graded people on a bell curve, each grade going to a fixed number of people. An employee stated perfectly, “If you were a team of ten people, you walked in the first day knowing that no matter how good everyone was, two people were going to get a good review, seven were going to get mediocre reviews, and one was going to get a terrible review – it leads to employees focusing on competing with each other rather than competing with other companies”. Bell curve is very popular with our HR managers. Jack Welch went a step ahead and started firing the bottom 10% after annual performance review, disregarding what their actual contribution might have been.
Another dimension raised by Harvard Business Review article by Peter Cappelli and Anna Tavis is extremely important. Initially, the appraisals were focused solely on ‘accountability’; then the ‘development focus’ evolved, and thirdly a hybrid of both came into vogue.
Is your organization using annual appraisal review system? What is the focus of the appraisal system that you are using?
We shall talk about the alternatives in the next post.
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