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The future of the dreaded performance appraisal

Spears Business professor of management Tom Stone has studied changes in performance management systems for decades. He and colleagues have recently written about the latest approaches to the often dreaded performance appraisal.

Research shows shifting of boss as judge and jury to talent scout

For decades researchers have studied the impact of performance appraisals on employees and the organizations they work for. Much of that research shows that traditional approaches to judging a person’s work performance are perceived as less than helpful and often even counterproductive. Oklahoma State University professor Dr. Tom Stone is charting a shift away from the traditional boss as ‘judge and jury’ approach to evaluating performance in newer systems where talent development is the goal.

Stone, a Spears School of Business professor of management at OSU-Tulsa, has coauthored with Jim Jawahar, Illinois State University, Jeff Foster, Passkeys International, and Gary Johnsen, Deloitte, a study of a new generation of performance management systems in the WorldatWork Journal published by the nonprofit workforce management association of the same name. According to their article, recent studies indicate that 75 percent of managers believe performance appraisals are ineffective and inaccurate and another 88 percent of businesses plan to rethink their performance management systems.

“Managers and their employees often dread appraisals. Some research suggests that workers are less motivated to improve their performance if they feel ratings are unfair,” Stone said. “One of the first pieces of research I did in this area 50 years ago was about giving and receiving performance appraisals, so this is an issue businesses are still concerned about.”

Stone, who has more than five decades of human resources management research experience, and his colleagues wrote about three innovative approaches to performance management being tried in varying degrees by a growing number of companies that are moving away from the traditional review of past performance and toward a forward-looking, talent development focus.

“In the classic system you sit down with your boss at the end of the year and talk about how you’ve been doing and what the consequences are,” Stone said. “Now the pendulum is swinging from the kick butt and take names approach to one where the manager puts on his helper hat.”

The authors reviewed recent literature on three methods identified as cutting edge and growing in adoption: ongoing feedback, crowdsourced feedback and ratingless reviews. In ongoing feedback, structured annual or regular reviews are replaced by more frequent and informal meetings with managers where feedback is shared. With a crowdsourced approach, feedback comes from peers, subordinates, clients or from multiple sources. In a shift toward ratingless reviews, traditional detailed, formal ratings that have been used for more than a century are transitioning to a future-oriented performance focus.

“Most organizations haven’t dropped ratings all together but modified them toward this more professional development, future-oriented approach. We can’t necessarily eliminate ratings in some form because, as somebody once said, it’s like getting a report card with no grades,” Stone said. “People need to know where they stand, and organizations need some basis for deciding who’s promoted and how much of a raise somebody gets, or they could be accused of discrimination.”

Stone and his coauthors cite a 2018 Bersin-Deloitte survey of 1,000 managers that found 14 percent of companies now use ratingless systems while 56 percent of high-performing organizations provide multisource and peer feedback to employees. The pendulum has indeed swung to the other side, though most companies still rely on some form of performance appraisal based on ratings.

The study authors contend that more research is needed to better understand the pros and cons of nontraditional performance management systems, especially with the common “jump on the bandwagon” reaction to new HR management approaches that are labeled innovative but with little research backing them up, Stone said.

Stone’s takeaways:

  • Current research suggests that ongoing and crowdsourced feedback hold the most promise, especially in dynamic work contexts.
  • Future-oriented ratings appear superior to traditional past-focused ratings, while ratingless reviews are associated with negative employee and organi­zational outcomes.
  • Adopt one or more of these cutting-edge methods only if they fit your work flow and organizational culture.

For more information about the study or to request a copy of “Cutting-Edge Performance Management Innovations: What We Know?” published in the second quarter 2019 issue of WorldatWork Journal, contact Stone at tom.stone@okstate.edu.

Originally posted by OSU Spears School of Business

Tom Stone
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Media Contact: Jamie Edford | 918-594-8024 | jamie.m.edford@okstate.edu