We continue with our exploration of some of the foundational misconceptions underlying performance appraisal as it's widely practiced. Last time we sketched how a rhetorical fallacy known as the fallacy of composition, which lies at the heart of performance appraisal strategy, prevents performance management systems from attaining their stated goals. We also examined the reification error, and what I called the "myth of identifiable contributions" and the "myth of omniscient supervision."
Let's now take a look at the effects of uniform quotas. In some organizations, as part of the annual review process, supervisors receive quotas for each grade of performance appraisal — a so-called "vitality curve." For example, one quota system, known as the 20-70-10 rule, recommends quotas of 20% for Exceeds Expectations, 70% for Meets Expectations, and 10% for Needs Improvement. When a rule such as this is applied uniformly to all organizational units, madness results.
The problems with uniform quotas are many. Here are just four of them.
- The heterogeneity of capability
- Typically, there is little uniformity of capability across all organizational units. Most units have a mix of people performing at various levels, but some units consist almost exclusively of top performers, while others consist almost exclusively of mediocre performers. The system of uniform quotas compels a supervisor of mostly top performers to rate 10% of his or her supervisees as "Needs Improvement." And the system also compels a supervisor of mostly mediocre performers to rate 20% of them as "Exceeds Expectations."
- Because of the quota, someone who is a top performer relative to the entire organization might be rated as "Needs Improvement" relative to the group of which he or she is a member. And a performer who is actually in the "Meets Expectations" group relative to the entire organization might be rated as "Exceeds Expectations" relative to the group of which he or she is a member.
- Consequently, in some cases, relative to the organization as a whole, a top performer might be rated lower than a mediocre performer. The obvious injustice of this result can contribute to cynicism, toxic conflict, and elevated voluntary termination rates.
- The heterogeneity of the need for capability
- Most enterprises don't need top performers in every role. To recruit and retain top performers when they aren't needed constitutes a waste of enterprise resources. Moreover, top performers need challenges and opportunities to demonstrate creativity. In some roles in some organizations, those desires are positively unhelpful. In some roles, the enterprise needs only reliable, routine levels of performance.
- Despite this, uniform application of the 20-70-10 rule, for example, assumes implicitly that it is desirable to have 20% of the people in each and every unit assessed as top performers. For many roles, this assumption is in contradiction to enterprise needs.
- Serial attrition of talent
- Some units perform work for which there is only a limited pool of capable potential hires. Because of the quota system, when the organization mis-appraises top performers as "Meets Expectations," or worse, those affected might voluntarily terminate if they believe they are being treated unfairly. They do so because the elevated demand for people with their skills means they can readily find alternative employment.
- In this way, uniform quotas applied year after year eventually deplete any units that depend on people with rare and marketable skills and talent.
- A zero-sum game
- Finally, quota systems tend to create environments favorable to demoralization and inter-employee conflict, mainly because they create a zero-sum game. A zero-sum game is a mathematical construct that describes group processes in which the group members are pitted against each other. The total of gains of value summed across all participants is always equal to the total of losses of value summed across them.
- For example, if you're working in a group in which you have a clear sense of who the favored 20% are, and you know you won't be among them, why would you go to great lengths to deliver excellent performance? Indeed, why would you even stay in that position? And inversely, if you were certain that you were among the favored 20%, why would you deliver excellent performance? After all, you know that your supervisor needs to report not less than 20% of his or her supervisees as Exceeds Expectations. Moreover, if you aren't among the favored 20%, and if you try to gain a place among the favored 20%, and they learn of your intentions, they might be motivated to try to prevent you from succeeding. The whole mess is just a nightmare for teamwork.
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More articles on Critical Thinking at Work:
- Nine Project Management Fallacies: III
- Some of what we "know" about managing projects just isn't so. Identifying the fallacies of
project management reduces risk and enhances your ability to complete projects successfully.
- A Review of Performance Reviews: The Checkoff
- As practiced in most organizations, performance reviews, especially annual performance reviews, are
toxic both to the organization and its people. A commonly used tool, the checkoff, is especially deceptive.
- On Noticing
- What we fail to notice about any situation — and what we do notice that isn't really there —
can be the difference between the outcomes we fear, the outcomes we seek, and the outcomes that exceed
our dreams. How can we improve our ability to notice?
- Constancy Assumptions
- We necessarily make assumptions about our lives, including our work, because assumptions simplify things.
And usually, our assumptions are valid. But not always.
- Tackling Hard Problems: II
- In this Part II of our look at solving hard problems, we continue developing properties of the solution,
and look at how we get from the beginning to the end.
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- The Power Affect: How We Express Our Personal Power
Many people who possess real organizational power have a characteristic demeanor. It's the way they project their presence. I call this the power affect. Some people — call them power pretenders — adopt the power affect well before they attain significant organizational power. Unfortunately for their colleagues, and for their organizations, power pretenders can attain organizational power out of proportion to their merit or abilities. Understanding the power affect is therefore important for anyone who aims to attain power, or anyone who works with power pretenders. Read more about this program.