Last year, I marveled at a discussion string in a popular LinkedIn HR Network Group that fetched hundreds of comments over several months. The topic: annual performance reviews. Again. It’s an age old debate that, for some inexplicable reason, persistently seems to strike nasty-nerve at the very core of the human resource management profession.
But I honestly haven’t a business-clue why a debate seethes at all. Thus, my own flair for high-performance management burns firmly against conventional systems stubbornly stuck in workplace double-dumb. This common workplace folly consists of two equally stupid parts:
2.) Incremental annual increases to base salary
Do people perform jobs better because these programs exist? No. Is worker productivity improved as a direct result of performance appraisals and infrequent incremental upticks to base salary? Of course not.
Folly # 1: Performance Appraisals
Forced structured appraisals, complete with detailed forms, carefully scripted meetings and performance measures—do not work. Meaning employee output or job satisfaction is not improved. There is no link at all between these feedback tools and sustained behavioral change for the better. Productivity, quality and profitability are completely unaffected. Managers and employees alike almost universally loathe the process. They don’t value it, never did. They are correct.
Employees and managers don’t value it, never did. They are correct.
Yet even best-of companies still deliberately mandate managers to use these systems to antagonize every employee. Leery supervisors are trained to fill out the surveys properly, document everything and carefully justify each employee’s raise. The results are nil every time. Every time, I shout!
Don’t take my word for it. Management experts and behavioral scientists have long studied and recorded the fact that it doesn’t work. Common sense tells us so too. Yet we dutifully follow detailed performance plan schemes and check each box as if it matters.
Folly #2: Incremental Annual Increases
Base salary increases in annual small increments do nothing to motivate good workers or retain them—this fact is also old news, well researched and widely documented. Yet so called “merit rewards” still serve as centerpiece to most pay systems. In actual practice, these little bump-ups are nothing more than cost of living increases to which many, many workers feel they are entitled. Entitlement–that’s what happens when you get something for nothing on a predetermined schedule and same date year after year.
Salary increases in annual small increments do nothing to motivate or retain good workers.
Here’s how: The company allocates a “pool” usually adding 2% to 4% annually to base payroll. That can be a lot of money for an employer of even modest size, especially compounded year after year. But to the average wage earner, his precisely unexplainable 2.3152% is unremarkable.
And, by the way, Joe Employee miffs, “How the hell did my supervisor come up with that number anyway?”She didn’t and that’s a problem too. And then the company wonders why, when raises are announced, that there is an immediate spike down in employee morale. Far from being grateful for the money, the vast majority of workers (including your best and brightest) are unhappy or indifferent about their dinky raise. They don’t understand how it was calculated or what it has to do with them. See what I mean? Double-dumb.
Astonishing Cash Waste
I remain amazed that smartly established employers have been throwing away dollars like this for decades. And still do it. It’s an astounding cash waste, budgeted, institutionalized and regularly scheduled year after year.
Switch HR Alternatives
So what about solutions? First, start by stopping. Sack the dreaded performance appraisals and purge the personnel files of them. And the merit increase thing needs to get reallocated entirely in favor of highest end job performers and redirected into innovative variable pay programs such as spot bonuses, project incentives, referral rewards and the like. These are topics of future posts* Stay tuned.