I’ve heard a lot of sad and painful stories about performance appraisals, but this has to be the worst story I’ve heard yet. WARNING: This story is not for the faint-hearted.

Fundamental Flaws in Performance Management

About ten years ago, companies started questioning the concept of the performance review process. I wrote about it here. In short, formal performance reviews are based on the fundamental principle that people are motivated to earn a bonus based on their performance. However, this approach has significant flaws.

FACT 1: People aren’t motivated solely by money – but that is a whole other blog that you can read here.

FACT 2: It’s not your actual performance that is measured but your boss’s judgement of your performance. This subjective rater feedback often skews the results.

Rank and Yank at the Bank

Bankers are often a source of my juiciest stories, not surprisingly living in Zürich, a traditional banking city. They are conservative, competitive, and some of them corrupt. This bank, like most, uses what is called a forced ranking system. In case you’ve not experienced this flawed performance evaluation system, it means that the ratings must fit a distribution.

Only a small percentage of people can get the top rating, Exceeds Expectations. And at the bottom end of the scale, a small percentage score Below Expectations.

The forced ranking goes on year after year even if:

  • Every year people are assigned even higher targets.
  • It is a high-performing team.
  • Poor performers were laid off earlier in the year.

So, at a nameless bank, Will (not his real name) receives instructions that 12%, i.e., one person in his team, has to get Below Expectations. Last year he’d given it to Harry. To Harry’s credit, after his poor rating and no bonus, he dusted himself off, came to Will, and asked what he had to do to improve. So Will coached him, set new objectives, and Harry worked his butt off. Harry met all his targets.

The Annual Performance Review Conundrum

Now it’s time for the annual performance review. Will ranks his team and gives Harry a Met Expectations rating. This performance review conversation is crucial as it directly impacts employee engagement and future performance. But when Will’s boss sees this, he orders Harry to receive a Below Expectations rating. Will refuses, knowing it will demotivate Harry, who has worked hard to improve his performance. He doesn’t change the rating.

Will’s boss, decidedly annoyed at Will’s disobedience and also required to meet the 12% mandate, gives Will the Below Expectations rating. It’s the first time in his 20-year career that he’s ever had such a low rating, and it is a big financial hit for Will too – no banker bonus this year. This illustrates the fundamental flaws in their performance management practices.

Authoritarian Leaders Rule – OK!

What will Will do next? He is going to complain to Human Resources but doubts that will change anything. Stay tuned. I hope to update you next week.

So much for Will being an authentic leader, standing up for his values, and putting his team before himself. Will was the Leader who Eats Last, but instead, he is punished and so doesn’t eat at all (yes, I’m being overdramatic. He is, after all, a banker and gets paid a decent salary. He just won’t be able to afford a holiday or a new car).

I did say this story is not for the faint-hearted. With Will’s story doing the office rounds, I bet no one else is disobeying the boss’s orders in allocating Below Expectations. Mind-control is now firmly in place. Authoritarian, not authentic, leadership abounds.

The Impact on Employee Development and Engagement

If a conservative, competitive, or crazy culture is making you miserable in your career, then give me a call. Effective performance review processes should foster employee development and increase productivity, not destroy it. Constructive feedback should be part of every performance review conversation, helping employees develop and improve future performance.

The role of managers and supervisors in performance management cannot be overstated. They need to provide clear job descriptions, set achievable goals, and offer regular feedback to direct reports. This not only enhances employee motivation but also ensures alignment with the company’s objectives. When managers and employees engage in honest and constructive performance review conversations, it leads to a more motivated and effective workforce.

Moving Forward

If your current workplace culture is causing you distress, consider how you can regain control of your career. Whether it’s finding a more supportive environment or learning to navigate the current one, the right approach can make a significant difference in your job satisfaction and overall well-being.

If you’re struggling with motivation after your annual performance review rating or bonus then let’s have a call.

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