Performance Evaluation Will Not Die, But It

Performance evaluation
will not die, but it should
by Kevin R. Murphy
PRESENTER: MISBAH SHAN
Introduction
•Organizations adopt performance appraisal systems to evaluate employee contributions and
guide talent management.
•Commonly used methods include annual reviews, formal feedback sessions, and appraisal
interviews.
•Objective: To align individual efforts with the strategic goals of the organization.
•Key Challenge: Subjectivity in evaluations undermines these objectives (Murphy et al., 2018).
• Example: Rating biases, such as leniency or central tendency, result in inconsistent evaluations.
Issues with Current Systems
•Ineffectiveness:
• Studies reveal widespread dissatisfaction across managers, employees, and HR teams.
• Example: Adobe's removal of traditional annual reviews saved time and increased employee
engagement.
•Cost Inefficiency:
• Example: Deloitte reported its performance management system required 2 million hours annually
across 65,000 employees.
•No Clear ROI:

• Despite significant investments, performance appraisals fail to improve overall productivity.
Persistent Failures
•Core Problems:
•Bias in evaluations leads to unfair outcomes.
•Example: Gender and racial biases affecting promotion decisions.
•Conflicting objectives—feedback vs. reward allocation—create mistrust among employees.
•Resistance to innovate traditional systems, even when they are proven to be ineffective.
•Limited Success of Innovations:
•Example: 360-degree feedback systems often yield overwhelming and conflicting input, which
can demotivate employees.
Should We Evaluate
Performance?
•Performance management assumes that:

• Employees' contributions vary significantly.
• Reliable tools exist to measure performance objectively.
•Research findings challenge these assumptions:

• Example: Pulakos et al. (2015) showed that subjective factors such as managerial relationships often
overshadow objective measures.
• Measuring some aspects (e.g., teamwork or creativity) is inherently unreliable.
Distribution of Job
Performance
•Employee performance often follows a power law distribution:

• A small group of "star performers" contributes disproportionately.
• The majority of employees exhibit homogeneous levels of performance (Aguinis & Bradley, 2015).
•Implications:
• Systems designed to evaluate all employees uniformly may fail to distinguish meaningful variations.
• Example: In sales teams, 10% of employees may generate 50% of total revenue.
Alternatives to Traditional
Systems
•Organizations can consider:
• Eliminating regular appraisals:
• Example: Accenture replaced annual reviews with real-time feedback.
• Focusing on high performers:
• Devote resources to identifying and supporting top contributors.
• Streamlining feedback:
• Frequent, informal check-ins to align on goals rather than complex formal reviews.
• Team-based evaluations:
• Prioritize team performance over individual appraisals for roles requiring collaboration.
Evaluating Performance: Reliability
Challenges
•Objective vs. Subjective Measures:

• Some roles (e.g., sales) have objective metrics, but most rely on subjective evaluations.
• Example: Piece-rate production metrics capture output but miss teamwork or creativity (Landy &
Farr, 1983).
•Reliability Concerns:
• Studies show interrater reliability for performance ratings is often poor.
• Example: Viswesvaran et al. found reliability at ~0.50, far below the 0.85–0.90 for well-developed tests.
• Ratings from diverse sources (e.g., peers vs. supervisors) often show even greater variability.
Sources of Variability in Ratings
•Key Findings:
• Only one-third of variability in performance ratings reflects actual employee performance (Scullen et
al., 2000).
• Major Influences:
• Rater biases (e.g., favoritism or stereotypes).
• Non-performance factors like attractiveness or timing of the evaluation.
•Conclusion:
• Subjective evaluations often fail to accurately reflect job performance.
Century-Long Struggle for
Reliable Measures
•Attempts to Improve Reliability:
• Interventions include rater training, improved scales, and additional rating levels.
• Results: No significant progress over the last century (Murphy & DeNisi, 2017).
•Proposal:
• Adler et al. (2016) suggest it might be time to move away from subjective evaluations entirely.
Performance Feedback:
Assumptions vs. Reality
•Assumption: Feedback enhances employee performance.
•Reality:
• Kluger and DeNisi (1996): Feedback improves performance in only 33% of cases, while it has no
impact or negative effects in the other 67%.
• Frequent feedback may cause stress or be perceived as nagging.
• Example: Employees may disengage if feedback feels repetitive or biased.
Feedback Acceptance Issues
•Challenges with Feedback Acceptance:
• Employees often view feedback as unfair or overly critical (Murphy et al., 2018).
• Self-perception bias: Employees typically rate their performance higher than external evaluators
(Harris & Schaubroeck, 1988).
•Result:
• Feedback is dismissed, distorted, or mistrusted, undermining its intended purpose.
Political and Systemic Biases
•Perceived Organizational Politics:

•Evaluations seen as influenced by favoritism or self-interest erode trust (Longenecker et
al., 1987).
•Impact:
•Employees attribute negative feedback to biases, reducing motivation and compliance
(Kinicki et al., 2004).
Alternative Feedback Models
•Feedforward Approach:
• Focuses on identifying and leveraging strengths rather than past mistakes (Kluger & Nir, 2010).
• Example: Discussing successful projects and applying lessons to future tasks.
•Strength-Based Appraisals:
• Builds on positive psychology principles to establish goal-oriented feedback (Seligman &
Csikszentmihalyi, 2000).
• Benefits: Reduces resistance and highlights areas of excellence.
Performance Evaluations in
Organizations
•Key Purposes (Cleveland et al., 1989):
• Distinguish between individuals (e.g., promotions, salary increases).
• Identify individual strengths and weaknesses (training needs).
• Validate HR systems (e.g., tests, training success).
• Maintain documentation (e.g., records for promotion/dismissal).
Limitations of Performance
Evaluations
•Conflicting purposes:
•Individual distinctions (promotions) vs. within-person distinctions (training needs).
•Common issues:
•Ratings lack variability; most employees are rated "above average" (Bretz et al., 1992).
•Halo effect: High intercorrelation among different performance aspects (Murphy et al., 1993).
Challenges with Merit-Based Pay
•Salary increases often insignificant (2-3%) compared to meaningful thresholds (~7%) (Mitra et
al., 1997).
•Merit-based systems may breed cynicism if perceived as ineffective.
•Average performers receive similar raises as high performers.
Managing Performance Without
Evaluation
•Key Issues:
• Performance ratings often unreliable and ignored.
• Evaluations fail to distinguish individual strengths or weaknesses.
• Traditional systems may demotivate employees.
Coaching-Centric Approach
•Focus on targeted coaching over broad evaluations:

•Provide developmental feedback to employees who benefit most (e.g., newcomers).
•Managers act as coaches, emphasizing guidance and support over judgment.
•Effective coaching characteristics:
•Clear communication of goals.
•Link individual performance to unit goals (Gregory & Levy, 2011).
Reforming Performance
Management
•Shift from judgment to leadership-focused systems:
• Inspire, guide, and assist employees (Bass & Bass, 2008).
• Address barriers to success (e.g., resource gaps, lack of clarity).
•Build systems around consideration and initiating structure:

• Show concern for employees' welfare.
• Define clear roles and strategies.
Conclusion
•Persistent flaws:
• Fails to differentiate or inspire.
• Sustains demotivation and disengagement.
•The alternative:
• Coaching and leadership-focused systems offer targeted development and alignment.
•Final thought: Organizations must evolve from outdated evaluations to empowering systems
that foster growth and trust.

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Performance evaluation

will not die, but it should

•No Clear ROI:

•Performance management assumes that:

•Research findings challenge these assumptions:

•Employee performance often follows a power law distribution:

•Objective vs. Subjective Measures:

•Perceived Organizational Politics:

•Focus on targeted coaching over broad evaluations:

•Build systems around consideration and initiating structure:

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