by Leland Teschler, Executive Editor
I once worked at a company where the human resources department had run amuck and perfected a performance review process pretty much guaranteed to be discouraging. Every six months, we were ostensibly graded on a one-to-four scale on each of a laundry list of goals. But this grading scale was only in theory. For some reason, no one could earn the highest score. Managers who gave one of their reports a “four” got the evaluation bounced back for a redo, often accompanied by a back-handed reprimand.
Thus, no matter what you managed to accomplish, you could never be “outstanding.” To make matters slightly worse, the goal-evaluation process was such that even strong performers could end up, on paper, looking like bumbling fools. The reason: The computerized evaluations demanded numerous goals in numerous categories. So managers were forced to come up with inconsequential objectives just to make the evaluation look complete in the eyes of HR. Even superbly performing employees couldn’t meet them all. So there were always lots of unimportant things left uncompleted. The theory among employees was that managers used the uncompleted tasks as an excuse to keep salaries down.
The upshot of the evaluation process was that top management came across as two-faced: During company meetings, we were all part of a great team. During individual evaluations, we were all idiots.
I once thought my brush with this evaluation nightmare was just bad luck. But there is a lot of evidence that counterproductive employee evaluations are the norm in U.S. business rather than the exception. For a classic example, consider the evaluation process in place at Microsoft prior to 2012. Called stack ranking, it forced managers to declare a certain percentage of their reports as being poor performers, no matter how well they were actually performing.
As related by author Kurt Eichenwald in Vanity Fair magazine, “Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside Microsoft, something that drove out untold numbers of employees.” Stack ranking, he said, gave engineers incentives not to work with other engineers who were outstanding for fear of ending up on the bottom of the ranking scale.
Microsoft engineers also told Eichenwald that the politics around stack ranking slowed company decision making dramatically. “People planned their days and their years around the review, rather than around products. You really had to focus on the six-month performance, rather than on doing what was right for the company,” one engineer told him.
Indications are that Microsoft was embarrassed by Eichenwald’s portrayal of its review process. Though it never said why, the company scrapped its stack ranking scheme shortly after publication of the article.
And there is ample evidence that nobody likes performance reviews. Consider the findings of Texas A&M researchers. They hypothesized that people who thought their abilities developed mainly through effort and experience would take negative feedback better than others who mainly tried to avoid negative judgments.
Nah. In studies the researchers ran, nobody liked negative feedback.
Those researchers could have saved themselves some effort if they had simply referred to the works of quality guru W. Edwards Deming. As far back as the early 1950s, Deming was teaching Japanese manufacturers to evaluate groups rather than individuals. In so many words, he claimed that individual performance reviews create chaos rather than order.
A lot of companies every day prove that Deming was right.