What do managers hate to give, do employees hate to get, and doesn't always work anyway, while costing a lot of money?
The answer is controversial in human resource departments, as companies as diverse as the Gap, Sears, and Eli Lilly take the radical step of eliminating formal performance reviews and rating systems.
"We're investing a lot in systems that don't give accurate data, and that's a problem," said Elaine Pulakos, an industrial psychologist who runs PDRI, a Washington-based consultancy in workplace behavioral sciences.
Thursday marked the opening of the three-day, 30th annual conference of the Society for Industrial and Organizational Psychology at the Philadelphia Marriott Downtown, drawing 4,280 attendees from the United States and around the world.
Hundreds of sessions fill packed calendars for three days. Typical sessions? "Bad Apples: Understanding the Multilevel Impact of Toxic Leadership" or "Exploring Organizational Concern for Employee Off-Duty Deviance."
Some sessions attracted a smattering of participants, but Thursday morning's panel discussion on "Getting Rid of Performance Ratings: Genius or Folly?" drew a standing-room-only crowd of more than 160.
Most performance systems "have absolutely no impact on performance," Pulakos, the moderator, said, citing research that showed most employees find the systems too bureaucratic and 77 percent of managers are either neutral or say they don't get accurate information from the systems.
Stop whining, said Amy Dawgert Grubb, a special assistant to the FBI's human resource director.
If a convention of industrial psychologists can't come up with a solution, why be in the profession? "Our business is measurement," she said. "Our clients need us to do a better job."
Kevin R. Murphy, an affiliate professor at Colorado State University, described formal performance appraisal systems as a "large-scale, carefully developed system for making people unhappy."
Managers "have a strong incentive to distort" in favor of positive reviews, he said.
Why? It reflects badly on them if their staff is mediocre. "Accurate ratings cause bad relationships with managers," he said.
Alan Colquitt, director of global assessment and workforce development for Lilly and its 40,000 workers, said companies don't need what amounts to bad information to make decisions on raises and promotions.
It doesn't even build a good track record for litigation defense. "Frequently, when you have numbers, they end up working against you," he said.
The Gap has eliminated ratings in favor of frequent conversations between employees and their supervisors, said Rob Ollander-Krane, a senior human resource director at the fashion retailer, which employs 135,000.
It was too much paperwork just to document issues with the 2 percent of the workforce that caused problems.
Ollander-Krane said that managers still evaluate for compensation and promotion, but don't tell the employees their rating.
"Every evaluation you make of a person is a rating," no matter what fancy name the company uses, countered Grubb from the FBI. A favorite at the bureau is a "hot wash," which is a postmortem group evaluation of behavior in a tough situation.
Seymour Adler, a partner at the consulting firm Aon Hewitt, said eliminating review systems encouraged weak performers to linger at firms while discouraging strong performers.
"Strong performers will leave organizations that do not reward performance," he said.
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