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Performance Appraisals

A Unique HRM Process

One of the most unique and most controversial elements of HR Management found in almost every American Company and every employer is the process known as the Employee Annual Performance Review.

In almost every case it is universally disliked, feared, maligned and mistrusted; a process that despite all of these characteristics remains for now embedded in HR management process.

In almost every case and scenario, employees find this annual process painful, harmful, disrespected and fearful.. and yet it remains a cornerstone of HR Practices.

Compounding this process is another HR practice used in most public companies known as “Forced Ranking”..

This is where each year every employee is assigned a “number” for their performance on a metered weighed scale where only 10% of employees are to get the highest numbers and 10% must get the lowest

Examaple of American Forced Ranking

· 1. Outstanding 10%

· 2. Exceeds Expectations 10%

· 3. Meets Expectations 60%

· 4. Needs Improvement 10%

· 5. Fails to meet 10%

Pay Increases are then tied to Performance Appraisals

1. 4%

2. 3%

3. 2%

4. 1%

5. -0-

In most Larger American Comapies this is all done every year on line Electronically

First each employee is asked to grade and rank themselves. Then, in what is known as a 360 process each Subordinate, Peer and all relevant Supervisors will “grade” rank your performance on a 1-5 scale. (you will be asked to complete one for your Manager and your peers)

They may be asked to rank you on:

· Leadership

· Competency

· Strategic Thinking

· Tactical Skills

· Emotional Intelligence/Social Skills

Your “ranking ” will be included as a criterial component for measuring your overall appraisal performance score.

It has been my experience that this unique process has never been well received by anyone who has been subject to it and undergone its “rigor”

Point of fact, most American Companies that do execute this process in any way find rare exceptions to that fact that it is universally disliked.

It was started by consulting firms who created this “nightmare” to mitigate or offset any potential claims of “racial” or “age” discrimination but it has evolved as a defense against any type of discrimination claims..

Walmart for example uses its performance review system as a legal shield to keep in place lower pay increase for women and diversity employees.

The US Supreme Court in a 5-4 decision affirmed the company’s right to practice its annual review process even if the result was that women and minorities were not promoted as fast or as much as white males.

How do they do it ( how did they get away with it)

Walmart hires all employees into Grade levels, and provides raises by Grade.

All employees in Grade Level 1 may get a 2% raise

All employee in Grade level 2 may get a 3% raise

All employees in Grade level 3 may get a 4% raises.

90% of all woman employees at Walmart are in level 1.

90% of all level one employees are women..

90% of Local Truck drivers are in Level 2..

90% of Local Truck Drivers are African American or people of color

Long Haul Over the road truck drivers are placed a level 3

90% of Over the road drivers are white males.

Walmart in arguing its right to do this to the US Supreme court did not deny this system of Level raises ..in fact they acknowledged these statics..

Their argument however held up by the court (5-4) is that these statistics did not prove “discrimination” per se under the constitution.. the court agreed

So Walmart successfully used their annual performance appraisal system as a “shield” from charges of discrimination.

I also find it interesting that foreign corporations doing business in the US have not adapted this uniquely American HRM concept.

Toyota in the US for example takes a different approach.

Rather than judging individual performance each year, its review process revolves around the Team Concept in evaluating it’s employees..

It judges everyone on the same team, everyone works together and everyone is judged by the team’s performance.

Raises are handed out to an entire team.. there are no individual “stars” who receive extra attention extra or pay..

From an HRM perspective however, this Team approach is not always best suited for our American culture.

After all, should a Team Member who doesn’t pull their own weight get the same raise as everyone else.

Example: On the other hand at GE every individual employee every year is “force ranked”..

GE for over 20 years had a culture where every year anyone in the bottom 10% was eliminated from the company.

It made for very tense performance review and overall tension in the organization( especially during the last quarter of year)