Sunday, September 15, 2013

Demotivating Employees One Performance Review At A Time

After all that's been written about the destructive effects of the traditional performance review, it's amazing how many business still do it. It's been proven in study after study that grading or assigning a number to a person's performance - especially when forced into a "normal" distribution - results in far greater demotivation than improvement. Companies that continue the practice, though, tend to feel that they're the exception rather than the rule.

Let's say, for example, that you have the best employees in your industry. After all, this is a goal of the hiring, leadership, and employee development processes, right? If we have a performance rating system that forces a normal distribution of ratings, we would have to find ways to separate the "top" performers from the "average" and "low" performers. By doing this, will we actually motivate the "lower" performers to improve by assigning them lower grades? Unfortunately, in most cases, the motivation this type system creates is to energize the worker to stop caring about the company or to find a job with another company.

Okay, in reality, you probably don't have the best employees in your industry. You probably have team members who do not perform as well as you would like. But is this the fault of the employee? Can we force the type of change we desire by rating and normally distributing people? Or should we study the situation to understand and correct the causes that interfere with everyone from performing well. These causes can usually be traced to one or more critical company systems, including:
  • The hiring process
  • The employee development process
  • The system and style of leadership
  • The rating system itself

It is interesting that some businesses feel that their systems for hiring and developing people are consistent and predictable enough to justify a normal distribution of ratings. Besides the fact that this is often driven more by gut feel than data, it assumes that the company has no effect on employee performance beyond assigning a rating to motivate the person to improve on his or her own.

A normal distribution doesn't just happen.  It results from consistency and tight control over a process and, in the case of performance reviews, normally distributing the ratings and tying to raises and bonuses is tampering, which is destructive and interferes with the system's ability to remain normal.

Understanding that there is no logical basis for normally distributing performance ratings will be a major step toward improving performance. Let's say, for example, that in your efforts to build the best workforce in the industry, you decide to rid the company of its below average performers. So you rank everyone, figure out through some means those who fall into the bottom half, and fire them. So you now only have above average workers, right? Not exactly.

You could actually continue this practice with the remaining workers because you will now have a new average and a new set of workers who are "below average." You could even keep ranking until you have two remaining workers and guess what? One of the two will perform below average. Even with only one worker, you would find that he or she will perform below average roughly half the time.


The fist step to improve employee morale and performance is to figure out whether or not the performance review system is actually achieving the results for which it's intended. Is performance actually improving or is there no discernible difference? If the system is not resulting in improvement (like most), stop doing it. It does not matter if you don't have a process with which to replace it. Like anything you do in a company, if it's causing harm or costing money and time with no return, you need to change it or stop doing it altogether.

Secondly, figure out what the real problem is and what's causing it to occur. If employees aren't performing, is it due to a poor hiring process, ineffective leadership, lack of attention to development, or some other cause? Is failure to consistently meet objectives due to poor planning, too many priorities, lack of teamwork? Whatever the cause (and its probably a combination of many), this is where efforts can result in real improvement. You can continue to spend time judging performance and ranking people, but without effective leadership, planning, and a host of other elements, frustration and employee turnover will occur, but improvement will not.


Effective leaders talk to those on their teams. They coach and develop on a continual basis, rather than wait for the once or twice per year performance review. Of course, leaders need to know how to coach and mentor, but those who resist the process and fail to make it happen are ignoring one of the most important responsibilities of leadership and should be in other jobs.

Everyone, regardless of position can benefit from coaching, and effective coaching requires continual feedback. It takes time and a lot of effort to be successful, but the process can lead to increased employee motivation, much better teamwork, and improved overall performance.


Unknown said...

I love this post. I like the "process" perspective here. Looking into how the company itself, and all the variables within it, contributes to poor employee performance is a unique idea.

I have been bit by the "normal distribution" bug in this space a few times.

It can take the wind out of the sail for a bit. The arbitrariness of it all can also be infuriating. There is the demotivation.

However, sometimes it can be motivating for the wrong reasons and end up compensating and rewarding for the wrong behaviors.

Someone can get really ticked about a low rating and then over achieve the following year.

In this pursuit they take on far more than they ever have. They may finish their goals early. Now they are going to find other work to do.

Sometimes this can amount to doing other people's jobs for them. They can even take on some process' inventory and effectively hide it--all because they have to improve their number.

There is only superficial business improvement. The employee was only playing hero to hopefully hit the magical number for his/her rating.

Additional complications to erroneous performance reviews are:


Whacky and confusing business planning proces

Changing software and system for managing employee reviews

Massive and widespread confusion about what should be on goals and objectives versus a business plan

Leaders who don't support employee development. In other words, leaders and employees clash over the employee's career objectives versus what the leader wants.

Try all of these in one year.

It's a journey, I guess.

Gregg Stocker said...

Kyle - Good points. The traditional performance review - especially when combined with normally distributed ratings - can easily create a "check the box" culture where deep, sustained improvements do not happen.

Thanks for the comment.

Unknown said...

As a supplement to your findings, I've also found out that in a wide variety of fields, the classical preformance appraisal is very destructive. Based on first hand observation, it does make good performance better, but bad performance even worse. Although the classic method has been built on the purpose of standardization and objectivity, as you've said, it's becoming obsolete if the end results are to be based. The "What To Do" section definitely helps adress this problem out and I totally agree with your conclusion. Constructive crticism is always a better motivator than ranking and putting anyone on tiers. Thank you for this very informative post!

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