Performance Appraisals – Rating the person or the system?

One of the components of performance appraisals is the rating part. People are usually rated based on how well they performed their tasks. Companies usually forget the fact that in order for a person to be rated, the manager should understand how much the system influences the performance of the person. Can managers actually know this?

Let´s analyze the equation that W. Edwards Deming wrote for this purpose:

X + (YX) = individual performance outcome

The X represents the contribution of the individual and Y the effect of the system, we can define system as structures, methods, materials, tools, training, supervision, support for other workers, etc. The performance of the individual is the contribution of himself plus the impact of the system and the impact of the individual in that system. As we can see there are two unknowns and one single equation, this equation cannot be solved.

If we cannot solve the equation, how can we assess individual performance? We simply cannot! We need to look at this problem in different ways. In their book “Abolishing Performance Appraisals”, Mary Jenkins and Tom Coens present several companies that abolished performance appraisals, where performance is largely driven by the system.

Sometimes people perform better, sometimes worse. Let´s take an example of a sales guy who sells ten cars in 1 week, a week after he sells none. Is the sales man reading magazines and not caring with customers in the second week? I do not think so… Specialists of process improvement call this factor variation. This phenomenon is the random variation that occurs with everything in the universe.

Mary and Tom refer in their book:

“Typically people’s level of performance is scattered at varying points of the spectrum with the largest segment in the middle. Because the system and random variation to a great degree account for the particular placement of most of the individuals depicted, there is no benefit in trying to see or understand why one person is seemingly performing slightly above or below the performance of another. Because individual performance is so highly interdependent and occurs within the complex variables of the work environment, the performance differences of people inside the extremes of the spectrum are in large part attributable to factors unrelated to their individual efforts and skills.”

There will be differences between people, but most of these differences happen because of system conditions that will vary from one year to another. This does not mean that we will have extremely good or extremely poor performers, yet the percentage of both very poor or very good are quite low. Please observe the picture below.


Picture Taken from the book: Abolishing Performance Appraisals from Mary Jenkins and Tom Coens

We cannot rank people effectively, the system has a huge impact on people’s performance. Therefore, when you will have a Performance Appraisal session next time, think about this blog post.

This blog post is part of my new book that I am writing: Get Rid of Performance Reviews, if you are interested in the topic please subscribe as a Beta Reader and receive the 1st part for free right HERE.

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Leave a Comment

  1. Reply

    Hi Luis,

    You seem to be a few steps ahead of me on the topics that interest me greatly; first retros, now performance appraisals :)

    I too have grave doubts of the suitability of the typical annual appraisal system. I haven’t read yet in detail your book but please allow me to play devil’s advocate, based on the text above.

    “We cannot rank people effectively, the system has a huge impact on people’s performance.”

    Yes we can. We can rank people comparatively, if the people we are ranking are all part of the same system. We can rank people on how well they perform, *comparatively*, within that one system i.e. the “Y” in the equation

    X + (YX) = individual performance outcome

    is constant so can be removed.

    We cannot infer that someone who performs badly in this system would fail elsewhere, as elsewhere is almost certainly another system (“elsewhere” could even be another department in the same large organisation). But as a manager with a narrow view I don’t care about that, I care only for the context of my own system.

    Would you agree with this?


    • Reply

      No one is part of the same system :)

      You have relationships with bosses, with Senior Management with HR and all of them defer.

      You have personal problems, cultural problems and many other things :) You cannot rate people against each other… its simply not possible.


    • Andrew Binstead
    • December 17, 2014

    Totally agree the idea of an “appraisal” is totally useless as Deming illustrated time and time again. There are ways to judge how someone is doing but I don’t think it is the manager doing it once a year. It is a continuous thing all teams are doing all the time.

    Why do so many hang on to the idea of a once a year appraisal can tell you anything?

    • Johan Lange
    • April 20, 2014

    I believe it’ one of the most important meetings with your boss – and one with wasted opportunities. The employee can grow but so can their boss, team, and corporation.

      • Luis
      • April 20, 2014

      Thanks Johan, but did you read this post? Because if you did it and you still think that meeting is so important I guess I was not really successful in transmitting my idea.

      And sorry but I do not agree at all. That meeting is useless specially if you do it once per year… Pure waste of time :)


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