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A survey of human resources professionals recently found a surprisingly high number of them lacked confidence in the effectiveness of their company’s performance-management system. Though 91% of respondents said their organization evaluates performance, only 47% said the process is effective.

It gets worse. Only 47% of respondents said their appraisal system helps their organization achieve strategic objectives, while 30% said employees do not trust the system. An even smaller number – 28% – said their managers regarded the appraisal process primarily as an administrative headache.

Numbers like these from Sibson Consulting help explain why performance appraisal is at a train wreck at so many companies around the world. The study, conducted in mid-2010 with the HR association WorldatWork, queried executives at hundreds of companies of all sizes from every corner of the planet. No place on Earth is immune from performance-evaluation angst.

Let’s explore the reasons why and start at the top – with senior management. The survey found widespread support for performance evaluations from senior management. In fact, 74% said executives at their organization support the system. Still, that leaves 26% of all organizations with non-supportive top-level executives. Those, however, do not fully explain all the problems with performance-management systems today.

Something is getting in the way of the widespread support of senior management. The answer, it turns out, may very well be the performance-management system itself. According to the survey, a full third of senior executives “strongly” or “mostly consider” the evaluation system to be business-critical. And a third of the respondents reported their leadership viewed employee appraisals as an exercise in pencil-pushing.

We’re now at the heart of the problem. Executive support isn’t being converted into executive action. For example, senior management required completed appraisals for all employees at only 65% of responding organizations.

An even more dismal number: Only 40% of respondents said their senior leaders were models for the right behavior. They agreed with this statement: “Leaders model performance management through evaluation and coaching of the direct reports.” (30% disagreed with the statement.)

Senior executives who are outright avoiding or skimping on performance evaluations are probably facing the same challenges as lower-level managers. Only a little more than a third of managers complete thorough evaluations, according to the Sibson survey’s respondents. A third openly disagreed. And only 46% said the system was worth the time and effort required to conduct and write up the evaluations.

The HR survey respondents cited three primary challenges:

• Appraising managers lack the courage to have difficult performance conversations with their direct reports (63%).
• Appraising managers viewed evaluations as an administrative process not critical to business success (47%)
• Appraising managers do a poor job setting goals at the start of each appraisal cycle (36%).

These are big challenges that will require the support and the actions of senior executives to overcome.

But why bother?

The answer lies in an analysis that ran with the survey results. Sibson Consulting split the companies into quartiles based on return-to-shareholder value over three years. For 87% of respondents at companies working at the top companies, they felt that senior leadership publicly supported the performance-evaluation process. That compares with 66% at the bottom quartile of companies.

More telling is an examination of responses from companies where senior leadership did not support the appraisal process. Only 3% of respondents from the top quartile felt senior management was unsupportive. That compares with 14% at companies in the bottom quartile.

This analysis did not find a huge gap, but the numbers are significant enough to suggest support at the top for appraisals is making a difference. The challenge for HR managers is to figure out how to convert verbal support for the system into actions that not only drive thorough, fair and effective appraisals, but also overall organizational performance.

References:
Allan, Leslie, (2010) “Performance Management Survey Votes Down Employee Appraisals”, Business Performance Pty Ltd
http://www.businessperform.com/articles/performance-management/performance-management-survey.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