WORKPLACE The performance review: methods that may work

Good performance appraisals are often simple, experts say.
ORLANDO SENTINEL
In the past century, humans conquered powered flight, harnessed the energy of the atom, even played golf on the moon.
But the perfect performance appraisal is still nowhere in sight.
"This has been a heavily researched area for the past 30 to 40 years," said Ronald Gross, a Maitland, Fla., industrial psychologist and human-resources consultant. "Companies are struggling with the same issues they did 30 to 40 years ago. The state of the art hasn't advanced much."
Jay Jamrog, who heads the Human Resource Institute at the University of Tampa, said the pattern with performance appraisals is all too familiar. A company rolls out a new system and at first, "everybody is rah-rah. The second year there's less enthusiasm. The third year it's, 'We have to do it again?' The fourth year, it's old hat."
Many companies acknowledge this problem by changing their performance appraisals every three years or so, said Doug Grosclose, director of employee and organization development at Lockheed Martin Missile and Fire Control in Orlando, Fla.
Managers are key element
But Grosclose is quick to add that systems are far less critical than the people who carry them out. "What's not important is the [appraisal] form or the [measuring] scale. What's important is that managers can objectively observe people's performance and objectively give feedback on that performance."
Gross agrees. "I can't judge a performance-appraisal system just by looking at the paperwork. The back of an envelope can work just fine. I've seen many [performance-appraisal] systems fail miserably because they're too complex, too time-consuming, too burdensome. I've never seen a system fail because it was too simple."
In lieu of an envelope, Lockheed Martin's one-page performance-appraisal form is on a computer screen. The annual appraisal is part of an integrated system that begins a year earlier, when individual employees write up their own performance objectives, based on their company's and division's annual objectives.
Supervisors approve the objectives and are encouraged to give regular and frequent feedback during the year. "If there's a surprise in the [annual] performance-appraisal discussion, then the manager hasn't done the job," Grosclose said.
Ongoing process
Like most large companies and a growing number of smaller ones, Lockheed Martin employs a "performance-management system" that integrates the annual performance review into an ongoing process. That process is designed to involve employees in setting their own goals, to make those goals crystal clear and to provide regular feedback on their progress in achieving those goals.
When it comes to rating employees, Lockheed Martin uses a modified "forced distribution" system. It's a kinder, gentler variation of a forced ranking system credited to Jack Welch at General Electric, in which managers were forced to rank their employees against one another. In the GE model, supervisors had to rank 10 percent of their employees as top performers, 10 percent as low performers, with the rest in the middle.
Lockheed Martin uses guidelines rather than exact percentages, with five levels of performance: exceptional, high contributor, successful contributor, basic contributor and unsatisfactory. Few employees -- less than half a percent -- are rated unsatisfactory, Grosclose said, and less than 10 percent are rated basic. About 70 percent of Lockheed Martin employees are rated as successful contributors, with about 10 percent rated exceptional.
Grade inflation common
Forced rankings, whether strictly or loosely applied, counter a widely reported problem with appraisal systems: grade inflation.
"We find over and over that managers are hesitant to provide useful critical information to their subordinates, and as a result the subordinates become less and less effective," said Judy Callahan, professor of management at the University of Central Florida's College of Business.
Callahan thinks that increasing informality and "homogenizing of supervisors and subordinates" in the workplace has made supervisors less likely to be critical in their performance reviews. Among employees, she said, "there's a sense of entitlement. It's the 80-20 rule. Eighty percent of people think they're in the top 20 percent."
Don Rogers, a management professor and director of the master's program in human resources at Rollins College in Winter Park, Fla., has a different theory for why such grade inflation occurs: Virtually all annual performance appraisals include a determination of how much, if any, salary increase employees will receive.
Performance appraisals try to do three things, Rogers explains: measure performance, provide the basis for compensation and set goals for development.
"No performance-appraisal system can do all three equally well," he said.