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.
I would love to get a star rating for this post:
Performance Appraisals – Rating the person or the system?