Coens And Jenkins On Abolishing Appraisals

Finally, someone has really worked through how to abolish performance appraisals. David Creelman talks to Tom Coens and Mary Jenkins about their excellent book, ''Abolishing Performance Appraisals''.
THE MEETING MANAGER

Tom Coens is a labor lawyer with a wealth of HR experience.   Mary Jenkins is a consultant who worked extensively with W. Edward Deming.   Together they confronted the unthinkable: abolishing performance appraisals.

David Creelman spoke with Coens and Jenkins.


DC- Tell us a little bit about your book and how you came to confront the beast of performance appraisal.

TC- Mary and I have arrived along different paths to recognize the very deep problems with appraisals.   In my own case, I started out as a very young man with the U.S. Labor Department.   Part of my job was investigating people who had been fired for poor performance.   When I was given appraisals, I could just not accept them as is; I had to study the production records, interview people and so on, in order to find out if the appraisals were accurate.   In this work I found that appraisals were not reliable and that planted the seeds of doubt for me.

I received my Masters in Labor-Management Relations, and for a long time, I believed that the problem with appraisal was the way people were doing it.   Either the supervisors were not taking the appraisal seriously, the process was badly designed, or some other factor.   For the first twenty years of my career I believed that and even encouraged appraisals to some degree.   However, in 1990 it became clear to me that appraisals were hurting my business clients more often than they were helping.

MJ- My background is as an HR and organizational development practitioner.   I spent the better part of fifteen years designing and redesigning performance appraisals trying to make them more effective.   I truly thought it was the process.   Somehow I just needed to simplify the process or improve the training and skills of the supervisors but I never looked deeply enough at why the negative results always far outweighed the positive results.

Two events led to a breakthrough in my thinking.   One came from being a supervisor myself and having to use the processes that I was designing.   I found I was getting the same terrible results from appraisals that everybody else was getting.

The second thing was working with Dr. Deming.   I began to understand that appraisals weren´t going to generate organizational improvement.   If the goal is organizational improvement, we should be looking at process improvement and system improvement, not appraisal.

DC- What really strikes me is your comment about spending fifteen years designing and re-designing appraisal systems because a lot of our audience will have gone through that process.   I went through something like that myself.   You just think, "Well, I´ll just get it right the next time."   It does take an awfully long time before one finally hits the wall and has that recognition that it´s never ever going to work.

TC- I think it´s important to really understand what functions appraisals are supposed to serve.   They are used in coaching, development and growth, fair pay, limiting legal liability, and of course, the mega-purpose, which is organizational improvement.   However, those functions cannot be accomplished within a single process.

To move away from appraisals we have to change our assumptions and start with the belief that if any of these functions are going to be achieved, they have to be in separate corridors with separate paths.

There seems to be five assumptions we never let go of every time we redesign an appraisal system.   One is that we´re going to do several things at once.   A second one is that one size fits all.   The third one is that we´ve got to mandate this process or no change will come about.   A fourth one is that we are going to do this every year or once every six months: the calendar is the trigger point for invoking the process.   Finally, the fifth assumption is that we have to collect paper.   Whatever we do, we have to collect paper and put it in people´s personnel files.

MJ- I just want to add that every time we redesign, we also continue to think that it´s the supervisor´s job to make sure the process occurs.

DC- Let´s talk about the "one size fits all" assumption.

TC- This comes from the belief that there is no variation and that everyone needs to be coached the same way and every supervisor wants to coach using the same method.   However, what works for some people won´t work for others.   It depends on the person, it depends on the circumstances.   Appraisal processes don´t give supervisors any freedom.   One year, supervisors will be told, "We´re all going to use competency measures."   And whether a supervisor thinks this is helpful or not, they are forced to use it.

MJ- Another difference that is easy to see is the one between the feedback needs of people who are early in their careers contrasted with the needs of people late in their careers.   Yet, the process we apply for the two-year employee is the same as the one for the thirty-year employee.

DC- That´s one fact that I always felt was very odd-some young manager doing performance appraisal on an accounting clerk who had been in the same job for twenty years.

MJ - Yes, neither the clerk nor the manager see the value in it, and yet they´re forced to go through a career-planning piece of it or a performance improvement piece of it.   That´s the sort of thing that undermines the process.

DC- Your book is full of good content on the different functions of performance appraisal but let´s focus on what I consider the toughest nut to crack: the compensation issue.   You´ve got to pay people.   If we´re not going to have a performance appraisal system to base pay increments on, what on earth are we going to do?

MJ- We spend a considerable amount of time on that in the book because when we were talking about appraisal, we found that people really wanted to talk about compensation.

There are many alternatives to appraisal-based increments.   For example, you can do merit by exception without having a rigorous performance appraisal process.   Merit by exception is by definition very rare.   We´re looking for individuals who stand out from the crowd for an extended period of time.   They are readily identifiable and it´s easy to reach consensus on who they are.

At the other end of the spectrum, companies who have abolished appraisal may withhold an increase in exceptional cases where there´s clearly a performance problem.

TC- We are talking about a tiny percentage.   The percentage of people getting the raises under this method ranges from 0.5 % to about 2%.

MJ- In all companies we looked at-and this is really important-no one said, "We want you to identify the top 5%."   They didn´t predetermine what the percentage was.   Instead, they had a very rigorous consensus building process for identifying those people who clearly stand out.   What´s interesting is that companies don´t have trouble identifying who these people are.

TC- Normally, we mislead people when we talk about merit increments.   Eighty percent of people see themselves in the top quartile of all performers and ninety-eight percent see themselves in the top half, so when it comes out to doling out merit raises, we´re certainly going to have disappointment.

We cover for that by calling it merit, when we are really giving a cost of living adjustment.   Or we might give an adjustment that has to do with job maturity because a professional is worth a whole lot more in each of the first two years in a profession.

Rather than pretending that the increment is merit, we advocate being painstakingly clear about what it is that you are doing and not doing.   You need to create an open system which includes educating people around all of these pay myths.

Beyond the idea of merit by exception, there´s a whole host of other ways to give compensation increments.   For example, there is career advancement: an engineer may start as Engineer 1, then become Engineer 2, and at some point they become a senior engineer.   The criteria for advancement are not based on employment duration; it´s based on certain accomplishments, and completing certain types of projects.

We would advocate creating specific criteria for advancement up the career ladder and have a panel evaluate when a person moves up a step.   This gets the supervisor out of the role of being the coach, mentor and disciplinarian, cop, and everyone else.

Now even with this system, you still have bias and rating problems, but the research indicates that single purpose systems operate better than systems that have multiple purposes.

DC- Career ladders are a great tool, but they don´t work everywhere.

TC- Yes, they are only one example of career advancement.   Another one is reclassification.   For example, you have a group of ten professionals and one truly stands out.   After a couple of years, it´s clear she´s doing the most complex projects or she´s become a kind of lead worker and you can simply take a look at that person´s job.   If it´s not the same as others, it goes into a higher grade.

The point is there are many other ways that merit can be reflected outside of having the boss tell you that you´re a 2.7 on a scale of 1 to 4.

DC- I think it´s quite significant that when you abandon appraisals it´s not as simple as everybody getting the same increment.   You might have merit by exception, people moving up job ladders, job re-evaluation, and there may be cases where an individual´s market value has gone up, such as a rare kind of programmer-the kind of thing that Ed Lawler has talked to us about.

MJ- That´s such an important point, David, because the immediate reaction people have is, "You are advocating giving everyone the same amount."   That is not what we are talking about at all.

I can´t think of many places where they would do something like a 4% increment across the board.   For example, at GM-Powertrain, pay grades are tied to the external market and at the same time compensation moves along a maturity curve within that pay grade.   That was how increases were generated, so if you were further away from where you "should be" you would get a larger percentage increase than somebody who was at or above the market rate.

DC- I noticed that the different companies who have actually eliminated appraisals are all quite different.   It´s not like there is a pre-packaged approach that one uses to replace performance appraisals.

TC- Precisely.   It has to reflect the culture, and I think some people are frustrated that we don´t give a canned method.   However, giving a canned method would be a disservice because it would certainly fail.   It has to reflect the unique culture and circumstances of the organization.

Our book is really about values and what people believe about people at work, about their motivation.   We think that in abolishing appraisals, an organization has to believe that people want to do a good job.

DC- Let´s talk about values for a moment because many of the leading thinkers that we talk to-Ian Mitroff, Jeff Pfeffer, Charles O´Reilly-keep coming back to the issue of values.

TC- You know organizations say they value empowerment and then have an appraisal process that is mandated.   HR talks a lot about valuing diversity, and, yet, appraisal is based on "one size fits all".   Organizations say they want to encourage teams, but at the end of the year, it comes down to an individual rating.

MJ- ...who is better than someone else.

TC- It really sends a very strong contrary message.   If you take values like empowerment, diversity and teamwork seriously, you won´t do performance appraisals.

DC- What other criticisms do you have about appraisals processes?

TC- There´s an important idea from manufacturing, doing things just in time.   Yet, appraisal processes encourage supervisors to give bushels full of feedback once a year instead of at times when people most need it.

There is a belief underlying appraisal, that if you improve all of the parts, you can improve the whole.   Yet, we´ve probably had a hundred significant books that have come out in the last twenty years that have repeatedly emphasized the importance of improving systems, and that also say improving the parts does not improve the whole.

DC- Mary, you must have something to say about this having worked with Deming.

MJ- It´s very important to note that, without exception, where organizations walked away from appraisals, they did so after first understanding that improvement came from working on processes, not just focusing on individuals.

I spent a lot of time with Dr. Deming, and I argued with him on a lot of this stuff because, quite frankly, I had benefited from appraisals and my career was doing just fine, so I thought it worked.

I´d been working with him for about a year, when one day, I went with my four-year old daughter to our local zoo.   It was Halloween and there were little children from ages four to six parading in a circle wearing gorgeous costumes.   We watched for a while, and after a few minutes a local radio disc jockey stood up and proceeded to announce who the third place winner was, who the second place winner was, and who the first place winner was.

In an instant, I finally saw everything Deming had been trying to teach me, because I saw, not just the three faces of the children that won, but the 27 faces of the children that didn´t win.

Children who had been proud of what they were wearing went right back to their parents crying.

Furthermore, I saw that the people who won were not necessarily the people I would have picked to win.   I saw other costumes that were equally good or better.   So all the lessons about errors in judgment and the unintended negative impact of appraisal hit me.   All the results appraisal actually generated came screaming through for me and I finally understood it.

DC- That´s a great story.

TC- I think the value that has come out in the business books over the years is the importance of intrinsic motivation.   We read about how intrinsic factors are what really motivate people, and, yet, the act of appraisal works on the basis of carrots and sticks.

DC- I´ve met people who, when you get them aside, will say, "Yeah but in the end it´s all about money."   That´s their underlying belief and their theory-in-use.   Despite all this management literature on the flaws of extrinsic motivation, there are still a lot of people who, in their hearts, believe that it´s all about cash.   .

TC- That raises some interesting points.   Our feelings about money tell us one thing, but reality is far more complicated.   For example, there has yet to be a long-term controlled study that has demonstrated that you can get improvement in the quality of work from financial incentives.   And yet, think about how pervasively pay for performance is promoted.

Secondly, we know intuitively, even without research studies, that pay is a powerful demotivator.   When we work hard all year and we´re told we´re going to get 3% and someone next to us, who at times seems rather marginal, is getting 6% we know that our motivation immediately shuts down.   We assume that if pay de-motivates us so powerfully, then it must be what´s motivating us as well.

However, imagine the boss gets you to work very hard on a project and after several hours the boss says, "Oh, I made a mistake, that project was cancelled."   Now there won´t be a pay cut, there won´t be a black mark on your appraisal-would you be upset about the situation?   If money were such an important issue people wouldn´t be upset.   That´s just one more example I use to show how complex the issues of money and motivation are.

We know money cannot be used as a motivator, but you have to work very hard at education and helping people understand all of these issues.

DC- The other issue that people would be most concerned about in the U.S. is the legal issue.   They will tell you that no matter what else goes on we have to do appraisals for legal reasons.

TC- Actually, that´s pretty much a worldwide issue.   People must have documentation in almost every industrialized country to discharge someone.   The question is, does appraisal provide evidence?   The answer is that it may but there are some problems.   A big one is that the evidence backfires at least as often as it helps.   Supervisors are aware that their day-to-day relationship is very critical and they will not come down hard on a person in appraisal unless they really want that person to leave.   So consequently, you have people who get appraisals on paper which look pretty good, maybe a score of three "good" on a five point scale.   This might not compare well to some of the other performers in this department, but nonetheless the paper still says "good."   When you get before a jury, they are going to say a "good" means good.

Now a person will accumulate ten years of "good" appraisals and then maybe they will have a new supervisor enforcing stricter standards, and this person then is charged with non-performance.   This person will take their personnel file and say," I´ve got ten years of files saying ´good´.   Obviously the problem is you as a manager." or   "This is obviously age discrimination."  

So, performance appraisals tend to backfire when you attempt to use them to defend terminations.

DC- That´s a pretty strong point here.   If I´m telling the CEO that we are doing appraisals for legal defense purposes, he or she is not going to be very happy because the evidence seems to be that it hurts us more than it helps us.

TC- We did a survey of labor employment attorneys and found that 7 out of 10 attorneys said that appraisals were not offering management an advantage overall.

DC- Seven out of ten!  So now the CEO is really unhappy.

TC- Every organization that we´ve talked to that eliminated appraisals does have some sort of a system for dealing with truly poor performers.  

My opinion as a labor attorney is that just-in-time documentation about a performance problem will hold up far better than just appraisals.

DC- So we are recommending abolishing performance appraisal and, depending on your circumstances, putting in a variety of different systems to deal with the legal issues, compensation issues, development issues and the other things appraisal was meant to address.

How can you give courage to people who are beginning to understand this but are still scared of proceeding?

MJ- I believe that the very first thing any organization really has to comprehend: you don´t need appraisals to improve the organization.   This is based on working with Deming.   In our case studies, organizations learned that lesson first.   They had been successful in working on systems and processes and it gave them the comfort that they could lighten their grip on appraisal.

I don´t think you´d go cold turkey in abolishing appraisal.   You begin by proving to yourself that there are better ways to improve an organization.   I also think that there has to be enough dissatisfaction in your organization to be willing to step away from this, so I would start with exploring why appraisals are not working and then sharing your discoveries inside the organization.

TC- Some people say that what we are advocating, which is many systems where employees take more responsibility for the coaching, feedback, and development, is a little bit pollyannaish.   However, does it make any sense to continue with a process that has been implemented in eighty percent of work places for fifty years when we still don´t have any successes?   Thinking a system that has failed for so long in so many places is suddenly going to work is far more pollyannaish than our approach.

DC- These totally new approaches have, in fact, been proven to work in a fair number of companies that you´ve spoken to.

TC- Yes.   We mentioned approaches to compensation and legal matters, and we also know that there are other ways to give coaching and feedback.   For example, the United States Air Force realizes that feedback is not going to occur in the context of an evaluation.   They have not given up evaluation, but they do not do feedback with their evaluation.   They have a separate feedback system that does not go in the personnel file and it´s triggered more by events that are realistic, such as change in assignment or change in supervisor, rather than this once a year cycle.   That´s an example of an organization that hasn´t deliberately decided to eliminate appraisals, but is moving towards alternatives.

DC- Mary, the companies that have actually done this are still surrounded by a world of people who believe that performance appraisal is unavoidable.   How do you deal with the fact that you are continually inundated with old and new managers who want to go back to performance appraisal because that´s what they´ve always done?

MJ- You need to create a critical mass inside your organization that understands deeply why you walked away from it, what you´re doing instead, and how it connects deeply to what your firm wants to be.   That´s why this is really about learning and education inside your organization.

DC- Let me say what I really appreciated about the book.   I thought it was special because it keeps coming down to deep understanding and deep learning and deep culture.   This is not just some technical trick like putting in web-based self-service.   The book addresses the issue in quite a profound way.


Abolishing Performance Appraisals (Berrett-Koehler) is available from Amazon.com.   I strongly recommend it to anyone responsible for appraisals.


Sidebar
Thomas A. Coens, CQI member, Lansing Community College employee, teacher, author, attorney, husband, father and grandfather, died from cancer December 21, 2002. When Tom Coens passed, Capital Quality Initiative lost one of its most staunch supporters. Tom´s contributions to CQI started in the early years on the CQI Steering Committee. He wanted CQI to be a role model of a real "quality" organization. When he was president of the CQI Steering Committee he energized the organization to continue to stretch itself.

Tom believed in the mission and the people involved. He was an ardent disciple of Dr. W. Edwards Deming, but always encouraged us to welcome other views and theories in quality management. He encouraged us to have the conversations and discussions that come with differing views, because he saw that as a part of the learning process.

To honor Tom´s memory, and to celebrate the ideals he was passionate about, CQI is establishing a program and scholarship fund with the Lansing Community College Foundation. The Thomas A. Coens - Quality and Progressive Management Fund. This fund will provide program funding for eligible applicants to attend classes, seminars, programs, and conferences or to host guest speakers for the purpose of learning about or applying quality management or progressive management philosophies and practices. More importantly, it will keep alive Tom´s vision of making a difference in our world through service and leadership in the quality movement.

Members and friends of Capital Quality Initiative are invited to join in honoring Tom Coens, with your tax deductible contribution to this new fund. Contributions to the Thomas A. Coens fund can be sent to the LCC Foundation, Lansing Community College, 8021 - LCC Foundation, P. O. Box 40010, Lansing, MI 48901. If you would like additional information, contact CQI or the LCC Foundation. If you would like more information contact CQI or the LCC Foundation.

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