By the 1980s, the efficacy of MBO and performance appraisals was in question. Many organizations recognized that the MOB-driven appraisal had failed to deliver its promised success, despite years of trying to improve the process. The MBO appraisal failed as a motivator because people were resistant to and dissatisfied with the process and because both supervisors and employees commonly manipulated the data and the supposed objective evidence to ensure desired ratings and compensation outcomes By the 1990s, organizations had dropped the MBO, but didn't drop the performance appraisals. Believing that appraisal was useful or necessary, organizations continued the annual ritual, in most cases because they didn't know what to do instead. Performance appraisals send messages of distrust, and they suppress the human spirit. Instead of motivating people, they reduce employees to dependent, de-motivated people, who are treated as though they need to be prodded and psyched to put forth their best efforts.
While performance appraisals may have been intended to weed out poor performers, they actually insulted everyone across the board. More than a dozen leading business authors, scholars and consultants have condemned and discouraged the use of performance appraisals, including Peter Block, Philip Crosby, Steven Covey, and the late W. Edwards Deming. Covey calls performance appraisals the bloodletting of today's management. Instead, he urges managers to develop win-win agreements with their employees over performance issues. An unintended consequence of Covey's suggestion is that some employers have simply applied his suggestion to the performance model, placing elaborate performance agreement documents in the personnel file, rather than encouraging, on a personal level, the development of win-win understandings based on trust and communication within a relational context, as Covey counsels.
Deming encouraged all managers to have a spontaneous, unplanned and unhurried three-to-four-hour conversation with each of their employees at least once a year, with the primary goal of listening. These conversations would not be for criticism or performance feedback but to take a broader view of the work and for help and understanding on the part of everybody.
Alternatives to performance appraisal will include these ideas:
An organization, because it is a system, can't be significantly improved by focusing on individuals. Choices of commitment and responsibility must be left to individuals if they are to be meaningful and effective. Less structure and control over the individual employee often will result in greater motivation and productivity. Employees can't be motivated to perform their best, but conditions of openness and trust can unleash intrinsic motivation, spirit and heart-felt commitment to organizational goals. Improving the overall system of the organization yields better results than trying to get employees to improve their individual performance. Organizations can survive and grow only if they are freely evolving systems, where variation, differentiation and diversity are valued as pathways to innovation and improvement.
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