Performance appraisal models are changing, shedding their reputation for being top-down, demotivating influences on a company. Duncan Brown explores the new priorities of performance management

What are your five key personal objectives in your job? Did your last pay increase reflect your performance? And how did your last appraisal discussion with your boss go - how do they rate you?
Performance appraisal systems have traditionally been designed to answer questions like these. They have long held the reputation of being the Cinderella, the necessary evil of management methods, enforced on the organisation by the HR department.
Academic Keith Grint’s verdict on them 10 years ago was damning: “Rarely in the history of management has a system promised so much and delivered so little.” Last year in a Chartered Institute of Personnel and Development report, journalist Simon Caulkin claimed that the proliferation of “unforgiving centralised performance targets” and the associated bureaucracy was damaging morale and the delivery of world-class public services.
He echoed Douglas McGregor, who 50 years ago in The Harvard Business Review attacked the negative, top-down, backward-looking and demotivating impact of appraisal in organisations.
So is performance management surviving, and more importantly, is it improving? The CIPD’s latest study of the approaches of 500 organisations in the UK, Managing Performance, paints a guardedly positive picture. Nine out of 10 operate some type of formal process to review performance, though 48% were considering changes and improvements to it.
And the direction of change appears to have a number of common components. These are directed at addressing a somewhat different set of questions and priorities, through the same basic mechanism of employees and their managers sitting down to discuss performance.
It is an agenda more focused on business improvement, on two-way communications, on clarifying for staff how they contribute to the success of the organisation and empowering them to do so. As Jo Dugdale, HR Director at Centrica, told us: “We’re aligning everyone’s objectives with those of the organisation.” And for Dave Hays at the National Crime Squad, it is about “making clear to people how they impact on our goal of undermining organised crime, how they can help themselves by making effective use of our scheme”.
So how are they all doing this? One common feature is the introduction of broad performance scorecards, such as the performance ‘steering wheel’ developed by Tesco. Selfridges’ scorecard looks at the firm’s key goals in respect of each major set of stakeholders -
customers, investors, employees and suppliers. It helps to clarify people’s priorities and show how their personal goals and actions impact on the firm’s success.
Second, there is a strong focus on future development and growing people’s capability to perform well, rather than simply offering carrots and sticks for last year’s results. This is now the primary focus for 83% of schemes, with many using competency frameworks to help develop people’s skills and contribution in the future. There is a declining emphasis on school report-type ratings, now used by barely half, and a mechanistic link to pay (employed by 31%).
Training and helping line managers to, as one director put it, “coach and guide their staff, to help them unleash potential”, rather than burying them in paperwork to enforce compliance, is a third growth area. “Where it works well, it is built on high quality coaching relationships” was a sentiment repeated by many of our organisations. McGregor’s advice in 1958 was to make each employee “an active agent not a passive object” and managers “to coach, helping the subordinate to reach his own decisions” on how to achieve their goals.
The appraisal itself is at least two-way in bank First Direct’s 360 degree feedback method. As Jane Hanson explains: “In an informal approach, people can gain feedback on an ongoing basis.”
And that has to be the performance management nirvana, expressed in the objective of the system at HBOS, to “make the management of performance an organic part of everyday life, not a series of mechanical tasks”.
The paradox of performance management systems is that when they’re 100% effective, you don’t need them, nor probably most of the associated managers. But the research shows that their evolution is helping to avoid their extinction.
n Duncan Brown is assistant director general, Chartered Institute of Personnel and Development