Thursday, 21 February 2008

Bad performance management costs £2.29 bn

Following my own post on the need to redesign performance management (music not measurement), TalentQ research suggesting that bad appraisals could be costing Britain's economy in the region of £2.29 billion a year.

Evidence based management campaigner Bob Sutton suggests that “the performance evaluation process is fundamentally flawed fundamentally flawed. That doing it well is like doing blood-letting well -- it is a bad practice that does more harm than good in all or nearly all cases.”

“When people get unfair negative evaluations, it can leave them ‘bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of the rating, unable to comprehend why they are inferior.’ "

He asks: “Do organization just do them because they have always done them, because there is excessive and irrational faith in them, and perhaps because a whole bunch of vendors, consultants, and HR professionals benefit financially (in fact, you could argue that because so many things go wrong with evaluations, that the amount of work they generate is nearly endless).”

The answer has got to be no – they do them because performance management is the central business management process in raising organisational performance. The two main reasons that appraisals are often so poor and that people leave them feeling bitter, crushed, bruised and battered, is that line managers don’t put sufficient emphasis on their people (and that sometimes they don’t have the skills required to support this emphasis), and that performance management processes aren’t designed in a way that’s appropriate for the organization, and the people it employs.

I’ve seen, and been involved in developing, very simple performance management systems (for example, two blank pages of A4), very complex ones (including matrices for calculating performance ratings) and technology based approaches. All of these have worked extremely well in some organizations and failed in others. The key is tailoring them appropriately.

Sutton describes a head of HR who introduced a performance management process “in a way that was consistent with ‘best practices’ suggested by leading HR professionals”. This is the problem. To be effective, HR needs to beyond best practice, and design performance management and other processes in a way that provides best fit.