The Hindu Business Line : Well done!

The HR profession now brands it a part of `performance management', but appraisals are still largely about evaluating people's work output for performance-related pay or periodic wage increment. While all textbooks warn us not to confuse evaluating performance with judging the person, there is still a strong element of sitting in judgement over another human being. Few actions of a manager cause as much discomfort as appraising the performance of colleagues. Of course, we all like to pronounce judgement on the performance of all and sundry. Yet it's quite a different matter when one has to put one's money where one's mouth is, and officially commit to a judgement on paper, which could affect the careers, if not jobs, of those being appraised. Perhaps in our heart of hearts we feel this is tantamount to playing God.

No wonder executives tend to postpone annual appraisal or confidential reports as long as feasible. Even if the forms call for nothing more than a tick mark against a number, typically in a 4, 5 or 7-point differential scale, no one wants to take extreme positions and hence most ratings cluster around the middle of the scale on quantifiable performance, as distinct from traits or skill levels.

Most, especially CEOs, resort to numerical measurements to get over the myriad problems and reservations associated with appraisals. First of all, it reduces the scope for subjectivity, which in turn causes much anxiety, heartburn, loss of morale, and wasted time and energies in resolving disputes arising from real or suspected lack of even-handedness.

Second, the process can be standardised and safeguarded against biases. Third, both sides can agree in advance to the parameters used in the appraisals. Fourth, in key functions such as sales, there could be continuous performance appraisals rather than a yearly appraisal.

Last, there can be some amount of self-assessment and the appraisal meeting can start with both sides agreeing on the actual numbers achieved, which would be a great way to break the ice.

Of course, this is most easily done where the key result or job output itself is a measurable number _ such as turnover, production, quality levels, costs and savings, ontime deliveries, average stock levels, unit or product profits and other accounting ratios.

The chief difficulties arise because such quantification is not always possible; and, even if it were, it refers to a number that does not necessarily reflect an individual's efforts rather than the group or department. Clearly, if warranty complaints have come down drastically it is a team effort; or if the on-time performance of an airline fleet has improved, it is thanks to a large number of people, from pilots to baggage handlers. One can use it only as part of a team member's appraisal.

The obvious answer is to find effective ways to reward the entire group. This is done, for example, by company-wide profit sharing bonuses.

What is the need to identify and appraise individual performance in all cases? Where there are several people performing similar tasks, some amount of comparative assessment is inevitable and probably useful too, if there's nothing else to establish an empirical basis for expectations.

However problems arise when making direct comparisons. Results seldom depend on a single variable _ the efforts and competence of an individual. Market conditions differ vastly in a huge country such as ours _ there is drought in one place while, simultaneously, there are floods in another _ both literally and metaphorically.

This throws up a conundrum where a successful performance in a territory or business unit/division is ascribed to some special capabilities of the people and strongly recommended for recognition. At the same time, a poor performance is attributed to extraneous factors beyond one's control. This leads to heated arguments between the assessors (usually Head Office or staff functionaries) and the operating line managers in the faraway plants.

Some appraisals are fashions of managerial behaviour, and driven by the power of the person or company that espouses them. While it would take a whole book to describe all of them, at least two deserve mention: the 360 degree appraisal; and the curve grading or forced distribution of employees into the top and bottom 10 per cent, the middle categories of 30-40 per cent each and so on.

The first is an idealistic attempt to reflect the true impact the person (especially a manager) has on the organisation, peers, seniors and juniors. An all-round evaluation will, in theory, cancel out biases of rank and power. It should also highlight the true state of organisational relationships, particularly across departmental walls, which are critical to doing a manager's job well.

For obvious reasons this device is still to catch on, but will probably grow over time given the current generation's greater egalitarian instincts and the tendency of at least the educated and urbanised classes to break away from the colonial or feudal mindset.

The second is more sticky, but eagerly embraced by cost-cutters and hard-driving CEOs in the face of rising competition and pressure on margins. The argument favoured by the legendary Jack Welch of GE runs as follows: Keep everyone competing for the higher ranges of performance rating and hold out huge bonuses for the top performers and shed the weaker or incompetent ones systematically _ and, by definition, the statistical average performance of your organisation, department or team is bound to improve.

So you achieve an increase in the numerator and a decrease in the denominator of the productivity equation, at one stroke! This will promote relentless internal competition, as all grading is strictly relative. And it should keep everyone on toes all the time, with the lure of making big money fast, which is the essence of the American way of life.

Clearly, these techniques might not be everyone's cup of tea and in the end, the CEOs must determine how they would affect the organisation before adopting them.

With increasing interest in quality improvement, lean organisations, and competitiveness, there is a stronger link with the goal setting process. Systems such as Total Quality Control (TQC) are fundamentally about setting goals and systematically working towards them, with checks at every stage for corrective action. The last part cannot be overemphasised.

It must however recognise that an appraisal is a management process and not merely an HR routine. The feedback to the individual is intended more for improvement and learning, and avoiding the same errors in future.

Punishment or reward takes much lower priority. TQC treats, at least in theory, a mistake as a feedback, first and last. Continuous improvement is the unwavering aim; endless analysis of `who did what wrong' is actively discouraged. The most appropriate question then becomes: `What must we do now'.

With such a mindset change in the organisation, one can sense freedom from fear of failure, greater attempts at innovation and a willingness to experiment. Such an atmosphere largely depends on the initiative, not to mention courage of the chief executive. In such a culture, what place would the annual increment-linked appraisal system have? Would it have a role at all?

When you couple this with a fairly low level of managerial control over the environment, and the team's contribution to performance, then one begins to see the futility of the annual appraisals or the closed CR system (to use a popular governmental phrase).

And yet few companies are bold enough to do away with performance appraisal linked payments. There are a few exceptions; I know a company that has appraisals right through, and the employee is given the opportunity to discuss progress in a formal way with a superior officer even four times a year.

When the increment season comes along, the data is so much richer and familiar, and not entirely subjective, so that the annual increment is not a matter of great dispute or agonising any more.

Picture by Shaju John

The author is an independent executive coach and advisor on strategy.

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