Two years ago I delivered the closing general session presentation at the Conference Board’s
annual Human Resources Conference at the Waldorf-Astoria in New York City. The audience: 600
VP’s of HR from Fortune 500 and similar organizations. My topic: “Performance Management —
Best practices, New Directions.”
Halfway through my speech I asked the group three questions. I told them to raise their hands
high and then look around the Waldorf’s ballroom to see how many of their colleagues responded
the same way they had.
First question: “How many of your companies have a formal performance appraisal system?” At
least 95 per cent of the 600 hands went up.
“Second question,” I said. “How many of your companies have a formal, written-down-on-paper,
vision and values or mission statement?” All but perhaps a dozen hands rose in the air.
“Final question,” I said. “How many of you can take your performance appraisal form your left
hand, and your mission statement in your right hand, and walk up to one of your employees and
say, ‘Harry, look! Do you see where the words in the performance appraisal and the words in the
mission statement are the same words?’ If you can, raise your hand!”
Maybe nine hands went up.
The point is obvious. If employees see no connection between what the organization trumpets as
its mission and what they’re held accountable for in their performance appraisal, they will
become cynical about the importance of the stated mission.
Executives expend enormous intellectual and emotional energy developing a sincere statement of
the company’s mission or values that fully captures and accurately expresses what these top dogs
consider to be truly important. But too often the only result is that these noble words are engraved on a
brass plaque that decorates the lobby. Employees then see the mission statement as merely
another feel-good corporate exercise with little impact on day-to-day business. But a good
performance appraisal system can tightly link corporate strategy — mission and vision and values
— with every individual’s day-to-day performance.
In America’s best-run and most-admired organizations, performance appraisal is a vital and
vigorous management tool. No other management process has as much influence over individuals’
careers and work lives. Used well, performance appraisal is the most powerful instrument that
organizations have to mobilize the energy of every employee of the enterprise toward the
achievement of strategic goals. Used well, performance appraisal can focus every person’s
attention on the company’s mission, vision and values. Used well, performance appraisal can
answer the fundamental questions that every single person in the organization wants the answers
to: How am I doing? Am I meeting expectations? Is my future bright?
But too often performance appraisal is done poorly. Forms are slipshod and inadequate; systems
are ill designed and toothless. The result? Employees are frustrated, managers see the whole
business as just another personnel department drill, and the whole procedure quickly becomes
the butt of jokes and the target of Dilbert lampoons.
Abolish performance appraisal? Well, that would be silly. Performance appraisals serve too many
crucial functions to merely respond, “Off with their heads!” Performance management systems
give us the data we need to provide feedback, to encourage performance improvement, to make
valid compensation decisions, to determine bench strength, to justify terminations, to identify
training and development needs, and to defend the appropriateness of personnel decisions if
we’re ever ensnared in a legal challenge.
The appropriate response is to create forms and systems that actually work effectively and
produce the results we need. And here’s some good news: there is an ideal system, and there is a
In organizations that take performance appraisal seriously and use the process well, it functions
as an on-going process and not merely as an annual event. In these companies, performance
appraisal follows a four-phase model:
At the beginning of the year, the manager meets with each employee for a performance planning
discussion. In this hour-long session they discuss the how and the what of the job: how the person
will do the job (the behaviors and competencies the organization expects of its members), and
what results the person will achieve over the next twelve months (the key responsibilities of the
person’s job and the goals and projects the person will work on). They also discuss the
individual’s development plans and how performance will be measured.
Over the course of the year the employee works to achieve the goals and objectives and key
responsibilities of the job. The manager provides coaching and
feedback to the individual to increase the probability of success. He creates the conditions that motivate
and resolves any performance problems that arise. Midway through the year — perhaps even more frequently —
they meet to review the individual’s performance thus far against the plans and goals that they
discussed in the performance-planning meeting.
As the time for the formal performance appraisal nears, the manager reflects on how well the
subordinate has performed over the course of the year, assembles the various forms and
paperwork that the organization provides to make this assessment, and fills them out. The
manager may also recommend a change in the individual’s compensation based on the quality of
the individual’s work. Best practice calls for the completed assessment form to be reviewed and
approved by the appraiser’s boss before it’s discussed with the individual.
The manager and the subordinate meet, usually for about an hour. They review the appraisal
form that the manager wrote and the self-appraisal that the individual created assessing her own
performance. They talk honestly about how well she performed over the past twelve months:
strengths and weaknesses; successes and improvement needs. At the end of the review meeting
they set a date to meet again to hold a performance planning discussion for the upcoming twelve
months, starting the performance management process anew.
This four-phase performance appraisal process not only transforms performance management
from an annual event to an on-going cycle, it tightly links the performance of each organization
member with the mission and values of the company as a whole. And that’s performance
appraisal’s real purpose in the organization. The real value of performance appraisal is to focus
everyone’s attention on what is genuinely important — the achievement of the organization’s
strategic goals; the demonstration of the company’s vision and values in each employee’s day to
But what about the form? Conventional wisdom says that there’s no perfect performance
appraisal form. And with so many sorry examples of appraisal forms around, conventional wisdom
might almost seem correct.
It’s not. There is an ideal model for a perfect appraisal form. And getting the form right is
essential, since the appraisal form is the lightning rod that not only attracts everyone’s
attention; it focuses organizational energy on the issues of highest priority.
An ideal form has five parts. The first two sections identify and assess competencies; the way the
person does the job. To start, top management should identify a small number, usually about a
half-dozen or so, of the competencies that they expect every member of the organization to
demonstrate, regardless of the individual’s job or level in the company. Since they apply to all,
these universal or organization-wide cultural competencies are likely to include such attributes
as Customer Focus, Communication Skills, Learning and Continuous Improvement, and Ethics and
The other type of competency a perfect form assesses is job-specific. The talents and skills
required for success as a professional individual contributor like a programmer or accountant or
engineer aren’t identical to those needed for success in a leadership job. In professionals’ jobs,
such skills as Analytical Thinking and Achievement Orientation might be indispensable, while in
the leadership jobs, greater emphasis might be placed on Developing and Retraining Talent and
People Management and Command Skills. Of course there will be overlaps — Technical Skills and
Decision Making are competencies important in both job families. But the ideal form will allow
for the identification of those competencies that have a high correlation with job success in
the specific position the employee holds. Safety is sure to be present on an appraisal form
for an operator position; Relationship Building better be assessed if the employee
works in the sales department.
Organizational competencies and job-specific competencies are the first two elements of an
exemplary form. Now let’s look at what the person actually accomplishes — the results
dimension. Again, there are two major components.
The third element of a great appraisal form focuses on key job responsibilities. Key job
responsibilities represent the major components of an individual's job; the big rocks of the
position that ideally would ideally be listed in a well written job description.
Got obsolete job descriptions? No problem. Just provide space in this part of the form for the
manager and employee to identify in simple verb/noun form the most important responsibilities
or accountabilities of the job incumbent: assess patients, assure customer satisfaction, train
operators, develop marketing plans, sell shoes, etc.
Few jobs have more than a half-dozen key job responsibilities. If you come up with more, you're
probably listing minor tasks and duties that are performed in order to accomplish a key
“Goals and major projects” represent the other half of those elements that make up the results
aspect of a job. Goals are big deals. They go well beyond the key job responsibilities listed in the
position description; well beyond the predictable cheaper/faster/better expectations. In truth,
real goals are transformational — visionary and long-term. They transform the nature of the
position itself. “Keeping the network up and running,” for example, is a well-stated key job
responsibility. “Developing a system that eliminates network failures,” is a formidable goal that
will totally alter the nature of a network administrator’s job.
Many people in an organization also take on special projects or assignments over the course of a
year in addition to their specific job description duties. Too often their contributions are
unheralded in their annual appraisal. This “Goals and Major Projects” part also provides for the
assessment and recognition of these contributions.
The final element of an ideal performance appraisal form is the one that research suggests is the
most important: a brief enumeration of the individual’s most important achievements and
accomplishments. Ever since the original GE studies in the early ‘fifties, researchers confirm that
growth and development result more from building on a person’s unique strengths than from
attempts to shore up deficiencies.
There’s your perfect form: two sections that deal with organizational and job-specific
competencies, two more that concentrate on key job responsibilities and goals, and a final
summary of the most important things the individual did to further the organization’s mission,
vision and values.
Performance appraisal serves many vital functions in an organization, but performance appraisal
is not an end in itself. Performance appraisal, used to its maximum benefit, is the means by
which everyone in the organization understands and is held accountable for meeting truly
Dick Grote is a management consultant in Dallas, Texas, who specializes in
helping organizations design effective performance management systems and build leadership excellence.
He is the author of the management classic, Discipline Without Punishment,
The Complete Guide to Performance Appraisal, and The Performance
Appraisal Question and Answer Book. His most recent book, Forced Ranking:
Making Performance Management Work, was published by the Harvard Business School Press.
Grote Consulting offers clients expertise in
employee performance appraisal,
employee performance improvement and
talent management. Dick is also the developer of the GroteApproachSM
web-based performance management system. He can be contacted at firstname.lastname@example.org.