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Performance-management systems are broken at the majority of companies in every corner in the world. By teasing apart results of a recent worldwide survey of HR professionals, we’ve seen how evaluations are viewed as a joke by employees, a waste of time by many managers and a non-actionable talking point by some senior executives.

Even HR managers, who in most companies lead the performance-review charge, see formidable roadblocks in the way of successful evaluations. Here are the top three, based on Sibson Consulting’s mid-2010 survey of HR professionals:

1. Managers are reluctant to have difficult conversations about performance with employees. (63%)
2. Evaluations are seen as an HR-driven process rather than something that’s critical to the business. (47%)
3. The appraisal cycle begins with little or no goal setting. (36%)

Let’s start at the beginning of the appraisal process. In order to make progress, an employee needs to know what his or her goals are. Yet only half the respondents to the survey said their organization uses any kind of goal setting in the appraisal process. And only half of those use quantitative measures. Is there any mystery as to why employees see the appraisal process as subjective and unpredictable? It’s also not too hard to figure out why respondents estimate only a third of employees actually trust the evaluation system.

In the 50% of companies where goals are part of the evaluation process, the connection between individual and organizational goals weakens with decreasing employee seniority. Senior managers, for instance, are “completely” or “largely” aligned 70% of the time. Middle managers? 45%. Frontline employees? 17%. It’s no surprise why the majority of the latter group sees appraisals as a waste of time.

Then there’s the issue of participation. Three-quarters of the survey respondents said employees at their organization are asked to complete a self-appraisal. Only 61% say the organization allows employees to have input into forming their goals. In other words, many organizations give employees a chance to chime in on their appraisals, but do not empower them.

Besides the lack of goals and a lack of input, little more than half of the respondents reported that they evaluated “goals based on performance against quantitative metrics.” Smaller numbers report that reviews are based on “demonstration of competencies” or “acquisition of new skills”.

It’s no wonder that employees see the review process as subjective. Nor should there be any mystery as to why the appraisal process generates confrontation. Appraisals are perceived as subjective because they are subjective; they’re perceived as confrontational because they are confrontational.

The bad feelings are further fueled by the nature of the appraisal. A five-point scale for ratings is used by more than half of the respondents’ organizations. At 37%, the HR department audits the results, 30% specify a ratings distribution and 29% require forced rankings. Managers at nearly half of the organizations receive rating distribution reports. As a result, individual employees must fight for a number, which they believe will equate to greater status and money. It’s not exactly the kind of environment that fosters collaboration and teamwork among employees.

The situation isn’t any better for managers responsible for checking the boxes. Only 56% of organizations conduct training sessions on using the performance-management system. And at two-thirds of the companies (68%), appraisals are tied to the annual budget and organizational goal-setting processes. In other words, managers are tasked with evaluating everyone at once. The old practice of evaluating employees on their anniversary dates has apparently fallen out of practice.

It should be no surprise, then, that only 55% of respondents said managers completed performance evaluations on time. And only 36 percent of HR professionals said managers completed thorough evaluations.

Some of the administrative work has shifted online, easing the burden somewhat on overworked managers. The entire process has shifted to online forms at a third of the respondents’ companies; the process is online and offline at about 40% of the organizations. (Paper forms are still the norm at smaller companies, however.)

Even with more companies introducing online components to performance evaluations, less than half of the survey respondents said they see the system helping the organization achieve its strategic objectives and less than a third (30%) report that employees trust the system. And the most dismal statistic of all: More than one in four respondents reported than their managers viewed the performance appraisal process as a paper-pushing exercise rather than an opportunity to have quality discussions with employees.

After reviewing the performance of employee evaluation systems, one conclusion is clear: It’s time to start over. No amount of tinkering around the edges – revamping forms, recombining processes or pontificating on our belief in the system – will make the problems go away. The first step is to understand what the Sibson Consulting study is telling us. Second, we need to understand what it is we hope to achieve by evaluating performance. Third, the system that emerges needs to be prove that it’s having an impact and is the result of a true collaboration among senior executives, management and employees. Finally, its impact has got to be measurable both by the employee and the overall organization. Such changes have got to start somewhere. Why not at your organization?

References:
Allan, Leslie, (2010) “Top Leadership Perspectives on Performance Management”, Business Performance Pty Ltd
http://www.businessperform.com/articles/performance-management/leadership-performance-management.html

The Segal Group, (2010) Study on The State of Performance Management
http://www.sibson.com/publications/surveysandstudies/2010SPM.pdf

The Segal Group, (2010) Information About the Respondents to the WorldatWork/Sibson 2010 Study on The State of Performance Management
http://www.sibson.com/publications/surveysandstudies/2010SPMsupp.pdf