Alternatives to Appraisals MANA 4328 Dr. Jeanne Michalski

Arguments Against Appraisals

Alternatives to Appraisals

How to Deal with Poor Performance  Appraisals seldom provide good support for termination.  Managers tend not to give poor reviews  Language in reviews is often ambiguous  Alternatives:  Document specific performance problems and incidents  Use a review system for only those ready to terminate.  Forced ranking systems?

Forced Ranking Systems  Gained popularity following GE  Up to 20% of companies  Used by:  Conoco  Capital One  Sun Microsystems  Cisco  EDS  Hallmark Cards  Used and abandoned by:  Ford  Goodyear  Microsoft  Hewlett-Packard  Intel  Texas Instruments  Enron

When managers have discretion: 1. They tend to give “Above average” ratings. 2. They prefer to give uniform ratings regardless of performance. 3. They tend not to use the ends of the rating scale. “Range Restriction” “Central-tendency Error”

What Expectations are Appropriate? Tom Peters on appraisal: “Employee evaluations should reflect perform-or-else principles...” Simply showing up and doing what you are told is not enough... Continuous improvement means doing more with less year after year...

How to Evaluate?  Absolute Measurement  Employees are all measured strictly by absolute performance requirements or standards of their jobs.  Performance compared to set goals  Avoids conflict among workers  May decrease differentiation  Relative Assessment  Employees are measured against other employees.  Ranking allows for comparison of employees but does not shed light on the distribution of employee performance.  Forces a distribution among workers  May create false distinctions and competition

“A company that bets its future on its people must remove the lower 10% and keep removing every year – always raising the bar of performance and increasing the quality of leadership.” Jack Welch, former GE CEO

“The bottom 10” “The top 20” “The Vital 70” The “Vitality Curve” Jack Welch “Jack: Straight From the Gut” 2001

Forced Ranking Systems Assume….

Why Conduct Forced Rakings?

Why NOT Conduct Forced Rankings?