The “2 Flat Tires” of the Typical Performance Appraisal

October 15, 2012 § Leave a comment

I use Google Alerts to search the web and send me articles about performance evaluations.   Nearly every day I receive an article or blog entitled something like “How to Conduct an Effective Appraisal Meeting.”   It usually starts out with a sentence explaining how everyone dislikes conducting an appraisal but if the reader will only follow the author’s advice everything will work great.  The author then typically goes on to describe his or her “secret solutions” for making the appraisal meeting effective.   These articles are a complete waste of time because the typical appraisal process has systemic flaws already built into it.

One could write an article about “how to effectively drive a car that has two flat tires” but no one would read it because why would anyone want to do that?  No one wants to conduct a typical performance appraisal meeting either mostly because it also has “two flat tires” (metaphorically speaking). These two flaws include the grade given to the employee by the manager about his or her performance and the pay-for-performance policy tied to that grade. Giving advice about how to conduct a meeting that is systemically flawed, like the typical performance appraisal, makes as much sense as learning how to drive a car with two flat tires.

It is one of my missions in life to teach every leader on earth how to replace the typical appraisal process with one consistent with systems thinking.   The typical appraisal is ineffectual and damaging.

The typical appraisal is inconsistent with systems thinking.  This makes it impossible for it to ever predictably improve organizational performance. The process itself must be completely re-designed removing the rating of the employee (flat tire #1) and separating pay decisions (flat tire #2).  Regardless of what professional managers like Jack Welch say, these two “flat tires” make the typical appraisal ineffectual.

A new client told me how he nearly quit his new job twice in the past month.  Furthermore, in that same time frame, he had talked two of his colleagues “off the quitting ledge” as well.   It seems his sales department is under tremendous pressure to perform by meeting a nearly impossible stretch sales goal.  The boss was referred to by the sales people as “Captain Bligh” behind his back.   “Captain Bligh” set a very high end-of-year performance goal for the entire team.  He translated this end-of-year goal into a weekly sales target for each sales person and then calculated the number of “weekly sales appointments with presentations” each salesperson needed to deliver to meet that revenue goal.

Each week “Captain Bligh” would swoop into the office, review the sales performance and the number of appointments for each sales person.  He would loudly remind everyone of the goal and chastise those who were behind (in either or both the number of presentations and sales closed). He would remind them all that their bonus would be determined by their total performance and their performance appraisal rating would be determined by their weekly performance and then swoop back out.

These sales people are extremely talented, had been recruited from a list of top talent from the competition, were all highly compensated (high six figures) and yet were treated like children who needed to be threatened and prodded to “clean their rooms” and “eat their vegetables” or go without dinner.  This management style makes performance worse because it creates negative anxiety which reduces creative problem solving and it takes the focus off the real issues which relate to how the overall sales and marketing process is working.   By focusing on the individual performance of each sales person “Captain Bligh” was actually making performance worse by damaging motivation and increasing variation in the sales process.  He was flattening two of the tires on the sales force but expecting them to go at higher speeds.

Managers who use pay for performance and performance appraisal ratings to motivate people are making serious mistakes.   These two techniques are an attempt to control behaviors and control techniques with educated talent slows them down.


Blame is Alive and Well While Systems Thinking Takes a Back Seat

September 27, 2012 § Leave a comment

A nurse, in an Ohio Hospital, accidentally discarded a kidney that was awaiting a transplant and had been provided by a living donor.  The nurse had been on break, had been replaced by a different nurse, and was therefore unaware the kidney was submerged in an ice filled sludge.  She purposely disposed of the contents into a disposal hopper thinking the kidney was still in the operating room because “that’s what usually happens.”

The hospital suspended the two nurses after the incident; one was later fired, and the other resigned.  Furthermore, a surgeon was stripped of his title as director of some surgical services.  What a tragedy on many levels.

The nurse who discarded the kidney had walked past a doctor and other nurses carrying the container.  Should someone have noticed?  Should someone have said something?  How was she to know?   She was fired!  Does that make sense?

In the light of our typical industrial age model of management that focuses on holding people accountable for results it makes total sense.  Why? Because, someone must be at fault!   That’s the philosophy with which we were raised.  That’s the philosophy that dominates our schools and our organizations, i.e. someone must be held accountable for the results.

In 1950 Dr. W. Edwards Deming explained his philosophy of systems thinking to the Japanese leadership.  The Japanese proceeded to implement Deming’s philosophy of Profound Knowledge.  By the late 1960’s Japan was dominating the manufacturing of electronics including televisions, radios, and stereos.  By the end of the 1970’s the gap in quality between Japan and the USA was reaching a crisis.  The philosophy of focusing on the improvement of the system was winning the competitive edge.  Costs were lower and quality was higher.  The age of blaming people for mistakes was dead.  At least it was in Japan.  Unfortunately it is still very much alive today in America.

Today we still tend to blame people for mistakes.  Unfortunately, according to Dr. Deming’s philosophy probably 94% of all mistakes come from the system and processes and only 6% from the people.  There were probably a dozen or more hand-offs that occurred in that operating room between the surgery preparation time and the time the nurse returned from her break.  Each of those hand-offs was an opportunity to have good quality or poor quality.  Information about the location of the kidney was a hand-off.  What to do with the slush was a hand-off.  Each of those hand-offs was a process that could be improved.  To blame her does nothing to improve those hand-offs and therefore, nothing to prevent a reoccurrence.

Today our children are failing to learn reading and math skills at their respective grade levels, yet we continue to embrace standardized testing and performance evaluations for teachers.  We continue to attempt to improve the individuals by judging, grading, blaming, and firing them.  We fail to fully recognize that our system of grading students destroys their passion for learning and steals their willingness to take responsibility for their own learning progress.  We continue with the same flawed processes and hand-offs that make up the entire dysfunctional system. We blame and then expect different results.

If we fired every nurse and every teacher in the country and replaced them all with highly trained substitutes would we improve anything?  Couldn’t we expect that the same number of students would fail and the same number of kidneys would be discarded?  Unless we embrace a systems view of the world and stop blaming we will continue to see these tragedies.  If blame is alive, improvement and systems thinking will take a back seat.

The Triple “A” Environment of Employee Engagement

September 22, 2012 § Leave a comment

Employee engagement levels have the attention of many C-Suite executives.  The latest research by Towers Watson (2012), a human resources consulting firm, confirms the wide acknowledgement that employee engagement is a critical element for high levels of financial and operational results.  Any executive who doesn’t pay attention to employee engagement might be accused incompetence and/or malpractice.  This is especially true in light of the Tower Watson research which shows the average percentage of employees who are highly engaged comes in at only 35%.   We need improvement.  Here are three good ideas that will help us.

There are multiple models about how to achieve engagement.  Many of them are very similar.  The one outlined here might make some uncomfortable because it requires employees to be trusted.  That need for trust will make some executives nervous.  It will seem too risky to some.

For purposes of simplicity I name these ideas the Triple “A” Engagement Model


The first “A” is for Anxiety.   Anxiety is often considered a negative force (emotion) that causes stress and stagnation.    Positive anxiety, on the other hand, is the urgent emotional need to act before an opportunity is lost.   Positive anxiety is useful for learning and development.  A balance between the challenge a person experiences doing a task and the skills he/she uses to perform those tasks will generate positive anxiety.  This positive anxiety is required for engagement and necessary for learning.

Unfortunately feeling comfortable (or satisfaction) usually does not create development.  Neither does negative stress.  Unfortunately the stress most employees feel today is negative and caused by pressure to perform using threats or bribes.  Pay for performance policies and/or performance appraisal ratings are substituted for the required positive stress and results in a reduction in engagement.  Positive anxiety is intrinsic (internal), self-imposed, and naturally healthy.

People can use positive anxiety to make positive change.  A great example of positive anxiety in practice is seen in the process of learning “speed reading.”  Many “speed reading” teaching techniques require the student to push themselves to reading speeds 5 or even 10 times faster than their normal pace.  This “push” creates positive anxiety and trains the eyes and the brain to adapt to a much higher speed.  The push creates positive change even though during this push causes an experience of anxiety.


The second “A” is   for Autonomy.  Autonomy is the freedom to determine actions and decisions.  Autonomy is a higher standard than just empowerment.  Empowerment is the act of giving power to someone.  Empowerment suggests there must be an authorization by management to perform a task or responsibility.  Autonomy is about freedom for self-government or self-management.  With autonomy the employee decides when and how to act to solve a problem.  No authorization by management is necessary.

Autonomy is best provided when employees understand the principles under which they can make decisions on their own.  This doesn’t mean specific processes and/or detailed steps are missing.  Toyota, for example, has four principles employees must follow to work toward improvement in their plants.

Principle 1 states that all hand-offs, between internal suppliers and internal customers, must have clear steps in a specific sequence and these steps are defined by the customer.  The second principle states that every supplier-to-customer hand-off is direct and unambiguous.  The third principle demands that the pathway for these hand-offs must be simple and direct.  The forth principle states that improvements can be made by anyone and at any time as long as those changes are done using the scientific method.  This final principle is the most influential for allowing employees to demonstrate autonomy.   In these principles the decisions are dependent upon what employees want and not on decisions from above.


The final “A” is for Advancement.  Employees need to see how their efforts truly make a difference.  This advancement must not just be progress for the sake of progress.  It must be in context of a higher purpose and vision.  In order for advancement to happen the progress seen by employees must be toward a vision and aligned with the values of the organization.

Three elements are needed to achieve advancement.  First, we must understand the aim of our actions. The aim is also often known as the mission or purpose.  We must be able to answer the question, “Why are we taking this action?  What’s the point?”  For example, if our task is to clean a table we must know for what purpose the table will be used.  Is it a table to clean fish or to do open heart surgery?  The purpose will determine the method we decide to use for our task.

Secondly, we must have feedback from our tasks and that feedback should be immediate (or as close to immediate as possible) and frequent.  Without immediate and frequent feedback we will lose motivation.  The delay between action and information must be as short as possible to optimize engagement and minimize frustration.  The other day I planted grass seed.  Although I know it takes about 10 days to germinate and to show little sprouts, every day after planting I watered the spots and looked for evidence of progress. It was frustrating for those first 10 days with no feedback.

Finally, we must see progress toward achieving our aim.  Without progress frustration will emerge and frustration will damage engagement.  The combination of taking action toward a clear compelling purpose, receiving feedback, and seeing credible progress will create the experience of advancement.

The Triple “A” experience generates powerful employee engagement.   The three A’s create a recipe for success and will help executive to achieve the organization results they seek.   All three elements work as a system.  They must all be present.  Too often leaders leave out one or more of these A’s.  When they do engagement and results suffer.

Does Your Team Have Gangrene?

September 17, 2012 § Leave a comment

When the blood supply is significantly reduced or even completely cut off for a period of time the body tissue can die.  This is a potentially life threatening condition.  Often the affected tissue needs to be removed to prevent death.  The condition requires immediate attention.

The Problem

Lack of communication in certain functions in organizations is similar to lack of circulation in a body part.  This lack of communication is also a life threatening condition for performance, employee loyalty, employee engagement, and productivity.  The presence of this “communication gangrene” can “kill” these results.   This is true for not only the select employees (body part) but for the entire system (the entire individual).  Just like the entire body can die if the gangrene goes untreated, the entire organization can die unless an organization has a way to treat any gangrene and has a process to prevent it in the first place.

Very often certain individuals are affected more than others when communication breakdowns occur.  What is your current process for managing communication breakdowns and for preventing them?  Do you ignore them until the body part begins to die and needs to be cut out?  This is the equivalent of waiting until an employee has an emotional outburst and then holding a performance review meeting or even a corrective action meeting to either punish or threaten that employee.   It is treating the symptom not the root cause.  Just as amputation is treating the symptom, performance management is treating the symptom by blaming the individual for the poor communication.  The problem is more complex in both the body and in the organization.  They are both complex systems and need to be cared for and treated as such.

In the organization, if these are your major options now, it is the equivalent of ignoring pain in your foot and waiting until it turns black before you take action. At that point usually the only option available is removal of the infected tissue or amputation of a portion of the limb.  The equivalent would be the removal of the “infected person” and the reprimand, or removal, of the management in the function.

The Symptoms

Gangrene in the body manifests with discoloration, a foul-smelling discharge, severe pain and then a loss of feeling in the area.  Other symptoms include confusion, fever, general ill feeling, low blood pressure and persistent or severe pain

Communication breakdowns in organizations manifest with lower employee engagement.  The employee stops participating and sharing information.  He/she will have confusion, general ill feelings, anxiety, emotional outbursts, poor attitude, lack of cooperation, others making an effort to avoid the infected employee and working around him/her.


Organizations that suffer from gangrene can, and must, take preventative action and it is not performance management.  Removing the infected areas will not work long-term to improve the health of the organization just as removing limbs will eventually results in a paralysis.  There are three steps leaders can take:

  1. Take a systems approach.  Let employees know that the problem is not them but in the system they work within.  Let them know you will help facilitate an improvement in circulation.  Ask them to look for opportunities to improve circulation and to speak up immediately when they begin to feel the symptoms.
  2. When they speak up take immediate action and listen to their concerns.  Work with them to identify the key communication hand offs that are not working.  Just as a patient with gangrene feels the pain and may not understand how it happened, employees feel the pain of poor communication but they don’t know the root cause without help from the physician.  You are the facilitator physician.  They need your help. Create and implement an improvement process to identify the poor hand offs and improve them. Make sure you encourage them to solve their own problems with their internal customers and internal suppliers by using the tools you provide.  Don’t solve their problems for them but instead facilitate them to take action.   Make them self-reliant.  Don’t allow them to become reliant on you.
  3. Insist they create checklists for improving communication hand offs.  Let the checklists begin to improve the circulation. Encourage them to refine the checklists until all circulation of communication is working.

Information is the blood the organization needs to feed its functions.  If the information slows or stops, the function can suffer and even die. If a function dies the life of the entire organization is threatened.  Don’t let the function get gangrene.  Have a process and facilitate action to prevent the infection.

2 Things Bloodletting and the Typical Performance Appraisal Have in Common

September 7, 2012 § Leave a comment

There are two things the typical appraisal and bloodletting have in common. First they both were developed and utilized with the very best of intentions and with the very best thinking of their time. Second, the evolution of professions has made both practices obsolete. But, why is one of them still being used?
One Hundred years ago, or so, the US economy adapted a set of strategies for leading people. The population at the time, lacked education, often did not speak or read English, and was often required to work in a manufacturing environment. The school system therefore had to be designed to help everyone to learn how to work in a factory environment. The leadership model and practices we adopted were based on Frederick Taylor Scientific Management. This was the best model at the time to address these issues. We applied this model with the best of intentions to structure the education process in our public schools and the manufacturing environment of our workplaces. We adopted a model with the knowledge and conditions we had at the time.
Conditions have changed. Workers are highly educated. They speak English. They don’t just work in factories. Issues that once dominated now don’t apply to today’s economy. The evolution to the knowledge economy (away from the industrial age) is in full swing. We have new knowledge and we have new needs. We need new tools to help us engage the passion of our students and the engagement of our workers. But our schools and workplaces still embrace the remnants of the Taylor industrial age strategies.
We still have an emphasis on grades in school to control student learning. We still rely on standardized tests to tell us if students are learning the same material at the same rate. Similarly, employee creativity and decision making was discouraged by the Taylor model and to a great extent that has not changed today. In the past it was assumed employees disliked work and so workers needed to be “motivated” or controlled to work hard. Similarly, a grade was needed for students to be motivated to do school work.
The typical appraisal uses a grade. We still see the need to use the typical performance appraisal in 80-90% of the work places in order to control worker performance. The typical performance appraisal process is dreaded by managers and employees alike. Furthermore, study after study confirms that the typical appraisal rarely if ever meets its intended purposes. It probably even makes things worse and it is difficult to measure its impact. It was adopted as a tool for the industrial age. This embrace of an obsolete tool reminds me of the evolution of the medical profession and the practice of bloodletting.
For more than 3,000 years bloodletting was a common practice to alleviate the common ills of mankind. The doctor would drain a portion of the blood the patient.  The practice was used with the very best of intentions because it was based on a theory that disease was caused by evil spirits that inhabited the body. The bloodletting was intended to relieve the body of these unclean spirits and thus allow good health to emerge naturally. The medical profession has evolved to embrace different thinking based on different research. The treatment of ills has therefore evolved beyond bloodletting.
Bloodletting is no longer a widely embraced practice because the “spirits in the blood” theory has been replaced with a more useful and predictable understanding of the root causes of illness (bacteria and viruses). This shift in thinking has lead medical practitioners to change their methods. The typical appraisal is still widely used because the Frederick Taylor model is still widely embraced.
Just like bloodletting doesn’t work with patients, the typical appraisal doesn’t work for managers and employees to manage the big issues in today’s knowledge economy. We therefore continue to be disappointed.

Don’t Worry It’s Not You: Why Performance Appraisals Will Never Work

August 25, 2012 § Leave a comment

Most managers and employee agree that performance appraisals don’t really work very well.  They don’t fulfill their intended purposes.  Even Human Resource professionals acknowledge they fail at least ½ the time.  Considering they are the most common management tool for improving organizational performance, if I was an HR professional I might have trouble sleeping knowing they fail half the time.  But, we all know HR professionals sleep just fine because when performance appraisals fail they conveniently put the blame on a manager’s inability to carry out the process.

There are three claims HR professionals make against the manager.   The first claim usually is the managers need more training.  They claim the process is being sabotaged because the manager is incompetent and therefore the process is often completed late not done or done poorly. Secondly they blame the manager for making result of the annual appraisal a surprise instead of delivering valuable feedback consistently and frequently all during the year.  If there is a problem then managers should discuss it immediately and not wait. Finally managers are accused of being too biased in their assessment of employee performance.  The employee can detect this bias and claims a lack of fairness.

Unfortunately blaming the manager for the failure of the performance appraisal process is like blaming a driver for the poor performance of a car with two flat tires. It’s not the driver.  HR professionals are unaware of the design flaws in performance appraisals and so they find it convenient to just blame the “driver.”  The irony is the design flaws are frequently built into the process by HR.  They design the flaws into the process.  They watch the managers fail.  They blame the managers.  If it wasn’t so tragic it might make a good Seinfeld episode.

There are two important design flaws (the flat tires) in the appraisal that make it impossible to “drive” performance. First, it assumes individual performance can be measured in a complex system.  It can’t.  Second, it creates a “judge and judged” relationship.  This relationship damages trust but trust is a key ingredient for performance and quality improvement.

Individual performance in a complex system cannot be measured.  Individual performance can be expressed in the following formula:

X + XY = Individual Performance Measured

If X is the individual contribution (job performance) and Y represents the factors that impact the individual in his/her job then XY is the measure of the impact the system has on the individual.   There is a problem.   We  have two variables but only one equation.  The equation is therefore not solvable yet managers are asked to solve it in preparation for a performance appraisal meeting.  Asking managers to solve this unsolvable problem causes frustration and psychosis.  This might be one reason why managers procrastinate or do a poor job justifying the grade they assign the employee.

The manager is the judge and the employee is the judged.  As long as the manager is judging performance there can’t be optimum trust.  One of the most important needs of employees is to be treated with respect and fairness.  When they are judged it increases the probability of disappointment.  It also puts tremendous pressure on the manager to pretend to be omniscient (all knowing).  This expectation of omniscience can also create a psychotic reaction.

Blaming the manager for the results that come from design flaws is not just incorrect; it creates a psychosis which manifests waste in ways that often cannot be measured.  The next time HR tells you your employee complained about his/her performance appraisal remind them of the design flaws.  Tell them it’s not you.  I am sure they will understand.

2 Reasons Why Your Performance Appraisal is NOT Really About You

August 14, 2012 § Leave a comment

My sister worked for a company that was about to be sold to an investor. She called me in a panic. Her performance appraisal was scheduled and she was nervous they were about to fire her right before the sale. I assured her the request to schedule a performance appraisal was to provide the new buyer with evidence about the performance of the current employees. I was sure the buyer merely wanted to have some evidence about how effective they were and if they could support the change in ownership.

The next day she called to tell me I was right. Her original fears were unfounded. Her performance review was excellent and met all her expectations. Clearly the seller (my sister’s current employer) wanted to convince the buyer the people were excellent.

Was that performance appraisal really about her or about the sale? Most performance appraisals are not really about the people but instead about some other motivation or intended outcome. This can include things such as a bias, a manipulation, poor leadership, justification for a raise or bonus, justification for a firing, and justification for a promotion or a demotion. Aren’t performance appraisals supposed to be about improving the performance of the individual? If so, why would leaders misuse the policy for their own selfish motivations?

The current performance appraisal process really doesn’t work well and there are two basic reasons why:

1. The basic assumptions behind the current appraisal are flawed

2. The appraisal process is most often manipulated to justify some motivation other than its original purpose e.g. justifying a raise (or bonus) to keep a high performer happy or justifying the firing of a poor performer.

The main assumption of the current appraisal process is that improving the quality of the people will improve the organizational performance. This describes our desire to analyze the parts of a whole in order to understand the whole. This is inconsistent consistent with systems thinking and leaders must embrace systems thinking in order to achieve predictable organization improvement.

Most leaders now assume that poor organizational performance is rooted in poor employee performance. Nearly ninety percent of organizations conduct performance appraisals and that is its main purpose. This is merely a dysfunctional yet sophisticated form of blame. Additional assumptions that follow from this are:

· Individuals have control over the results of their work and the factors that allow them to achieve their goals. This is false. There are always many factors that contribute to the success of a goal.

· Managers can evaluate individual performance separate from the contributions of others and the influence of the work tools, environment etc. This is false. Managers cannot separate their bias (either positive or negative) from their evaluation.

None of these are true because they are inconsistent with systems thinking. Instead, the correct assumption is: “the quality of the interactions between employees (and departments) is more important for improvement of the organization than improving the quality of the people.” In other words, you can’t separate the evaluation of the person from the quality of the interactions that person has with their co-workers and the working environment. If this is true one must conclude that the typical appraisal doesn’t evaluate the individual. It evaluates their interactions. It is not about the person it’s about the interactions of that person in that particular environment.

Leaders often manipulate the appraisal process to serve their own purposes. Just as with my sister, the owner manipulated the process to make all employees “look good” so the new buyer would be impressed. This compromised the opportunity to receive real feedback for improvement. It compromised the truth.

Leaders very often will compromise the process to achieve some short term goal. The appraisal then becomes more about achieving the goal and less about the person receiving the appraisal.

That performance appraisal with your name on it is really NOT about you. It is really about how you are able to interact with others and environmental factors outside of your control.

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