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Impediments of Performance Appraisals

Scour the world of business and you'll find few things as counterproductive as the employee performance appraisal. This is not opinion, it's fact.

The research on performance appraisals shows that they:

  1. Demotivate employees
  2. 70% of content is about the manager, not the employee, and the remainder often does not accurately reflect employee performance because the manager does not really know day to day what happens (the team does).
  3. They increase damage awards in the event of lawsuits
  4. Direct and immediate feedback is helpful (not performance appraisals)
  5. Perversely, employees want performance appraisals to use as an argument for salary increase even though they demotivate rather than motivate the employee

See for example, "Abolishing Performance Appraisals: Why They Backfire and What to Do Instead" by Tom Coens and Mary Jenkins.

This is why we advocate for the end of performance appraisals. But if your organization does not abolish them, here is an alternative solution

A. Objectify the appraisal

    1. On a scale of 1-10, a manager can give a 5 if the employee meets expectations, a 6 for exceeding expectations, and a 4 for not meeting expectations.
    2. A team can push a rating to 7 if the employee exceeds the team's expectations or to a 3 if the person fails to meet team expectations.
    3. The Senior Management can push a rating to an 8. Customer feedback (must be documented in writing) can push it to a 9. Only a journal article saying the employee's product is the best in the industry can push it to a 10.
    4. 25% of the rating is on meeting organizational goals so company-wide performance affects the rating.
    5. 25% of the rating is an average of team ratings. Each team member indicated whether the employee met, exceeded, or did not meet their expectation.
    6. 50% of the rating is on individual performance with respect to five questions that indicate how the individual helped the company, the product, the team, and how they meet their goals in the previous appraisal.

B. Make the evaluation a self-evaluation that generates several coaching sessions with the employee.

      1. The manager meets with the employee to outline the review process and asks the employee to do a self-evaluation.
      2. While the manager gets organizational performance data and team ratings, the individual writes a self-evaluation with scoring on the five individual questions.
      3. When all the data is in the manager and the employee meet a second time to review the data and discuss it. The manager provides feedback.
      4. The manager and employee agree on goals for the next review cycle, including professional development.
      5. The manager then prepares the review which will go on file. If the manager disagrees with the employees self-evaluation, comments can be added to the review (without changing anything the employee said).
      6. The manager then meets with the employee a third time with the formal review completed. The employee is told to take the review, write a rebuttal if appropriate and attach it to the review, sign it and give it to Human Resources for the file.

    C. Positive effects of this approach.

      1. Often the team rating, self-evaluation, and managers rating agree. This creates a high level of satisfaction with the rating process all around.
      2. Quite often the deverlopers self-evaluation is lower than either the team rating or the reviewers rating so the average rating goes up above the self-evaluation making the employee feel better.
      3. Sometimes the reviewers rating, the developer's self-evaluation, and the team's rating all disagree. Then a clear plan of action needs to be worked out to resolve the problem.
      4. The review provides a template for the next review which can be done twice as fast in half the time.

Below is documentation of the rating process used successfully in multiple Scrum companies and automated by a survey (less effective than face to face feedback) in some large Scrum companies.

MEMO – June 1996 (updated Mar 1997 for IDX RISD, Feb 2000 for PatientKeeper, Nov 2006 for Scrum Alliance)

To: All Development Staff

From: Jeff Sutherland
VP Engineering, Individual
SVP Engineering and CTO, IDX Systems
CTO, PatientKeeper
CEO, Scrum Inc.
Chairman, Scrum Training Institute

Subject: Performance Reviews

There are a lot of reasons not to do performance appraisals. Google doesn't do them. Instead, each person has a web page with a picture, bio, and three-month goals. Each person self-evaluates on the web page. See "Abolishing Performance Appraisals" for all the reasons why performance appraisals don't work.

If you have to do performance appraisals, the attached review process was evolved during the first implementation of Scrum at Easel Corporation in 1993 and enhanced in several leading software companies.

The Process Takes Three Meetings to Initialize

Meeting 1: The reviewer meets with the employee and goes over this document. The employee is then asked to write his own individual review after the meeting by responding to the key questions (see below) and giving him/herself a rating. The employee can write a little or a lot. This review is designed to minimize the amount of writing.
Meeting 2: The second meeting occurs when the employee returns the review (along with soft copy). The reviewer discussed the employee's perceptions to get a good understanding of them. After the meeting, the reviewer carefully edits the review to incorporate the reviewer's perception of performance.
Meeting 3: The third meeting occurs after the reviewer has finished editing the review and the ratings. The updated document is carefully discussed with the employee. Any difference in perceptions is noted. If there is any disagreement, the employee may convince the reviewer to change the review or, failing that, write a rebuttal that will be attached to the review. After changes are incorporated, the review is signed by both the reviewer and employee.

The Review Ratings

It is well known that employee performance ratings in all organizations are inflated. This process is designed to produce realistic, provably accurate, ratings. Ratings tend to reflect how well the employee sucks up to the reviewer, rather than whether or not the employee generated a great product that led to lots of sales and happy customers. We have to get away from motivating employees to please the reviewer and get them to please the customer.
The higher rating supersedes the lower. If the reviewer gives a 4 and the team gives a 7, it is a 7 and so forth. This review is a form of 360-degree feedback where the review process is designed to surface gross disparities between market perception, customer perception, company perception, team perception, reviewer perception, and individual employee perception of their performance. Gross disparities are rare and should be dealt with on an exception basis.

Ratings on the review are scaled from 1 to 10:
10 Trade journals are writing rave reviews about your work saying it is best in class
Historically, two teams scored a 10 with this system. The first was the original Scrum team at Easel Corporation for delivering Object Studio (ScrumMaster: John Scumniotales). The second was at IDX for delivering a new Enterprise Master Patient Index System (ScrumMaster: Mary Rettig).
9 Customers are writing rave reviews about you (must be documented in writing)
8 Exceeds expectation of the company senior management
7 Exceeds expectation of Product Owner and Team
6 Exceeds reviewers expectations
5 Meets reviewers expectations
4 Does not meet reviewers expectations
3 Does not meet development teams expectations
2 Does not meet Engineering group or company expectations
1 Customers are complaining about you
0 You are personally roasted in PC Week
Under this system, the reviewer can give a 4, 5, or 6. Any other rating requires outside input from the development team, the engineering group, senior management, customers, or the press. The employee can always write a rebuttal to any review and have it attached to the review as part of the human resources record.

Review Template

The attached document provides a review template.

Ongoing Reviews

One an initial review is written, it becomes the template for the next review. Subsequent reviews can be done easily and quickly with this template in place.

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