Some people believe that the only reason we do performance appraisal is for compensation purposes, to justify Sally’s 3% increase. Of course we use performance appraisal to make good decisions about compensation — if you believe in pay-for-performance, you have to have some way to evaluate that performance.
There are other reasons for doing performance appraisal. If it’s done right, performance appraisals tell us who’s a good candidate for promotion and who’s properly placed in their current job (and who’s in over his head…). They tell us where we need to intensify our development efforts. And the truth is, performance appraisal tells us who the people are who’d be better off working somewhere else. The standards and expectations of some companies are just too high for some people to meet, and performance appraisal identifies who those misplaced folks are.
But all those reasons are secondary. The real reason organizations have a performance appraisal system is to fulfill an ethical obligation.
Here’s what I mean. Every person who works for an organization wants the answer to two questions: (1) What do you expect of me? and (2) How am I doing at meeting your expectations?
We answer the first question, What do you expect of me, at the start of the year when we talk about goals and projects and key job responsibilities. We answer the second question, How am I doing, at performance appraisal time.
We’ve got an ethical obligation to let people know where they stand. Performance appraisal is the formal, structured process that allows us to meet that responsibility.
About the Author
Dick Grote is a management consultant in Dallas, Texas and the author of several books. His most recent book, How to Be Good at Performance Appraisals, was published by the Harvard Business Review Press in July 2011.
