Performance appraisals have come in for some serious criticism recently.

And yet the books and articles written which criticise simply advocate performance appraisal by another name – or rather a collection of names.

There are two problems. One is that the standard performance appraisal tries to deal with requirements that are not always compatible– for example pay and motivation. The second problem is that performance appraisal as a process and management activity is often badly done. The result is that performance appraisal as an overarching title gets damned while critics propose that its component parts are something new to meet calls for “new thinking for a new environment”.

Misplaced criticism?

Perhaps the critics’ views suggest a point of departure for this brief analysis of performance appraisal. Are we indeed in a “new (management) environment” and is “new (management) thinking needed? Or is it simply that managers must get good at this old practice?

Some definition is essential. Traditionally, performance appraisal is as it sounds – the assessment of a person’s performance over a period. But it’s become so much more. Yes, it’s about performance, but it’s more about how improvement in performance is achieved in line with business goals. And it requires a host of psychology that extends well beyond the simple ‘measure and hope’ that the title suggests.

Modern performance appraisal spans the complete people-management task: determining the performance needed, assessing performance day-to-day and planning and delivering interventions to maintain and improve performance. It’s what managers do to achieve business outcomes – and will do, whatever we call it.

Hence it would be wrong to criticise those management efforts and the basket of activities that they comprise.

Changing environment

The environment in which each firm exists is changing, and always has been changing. Some commentators suggest these changes create a new employment paradigm. Whether there’s a seismic shift as commentators suggest, or just an evolution, is a moot point. But managers must in any case find ways of improving the performance of their people and it’s well established that simple criticism alone does little to effect change.

Perhaps that’s the issue – disappointed managers hoping that performance appraisal as criticism alone will achieve performance change.

As a single activity, rating people’s performance is known to have real problems, not least of which is that everyone’s idea of one person’s performance will differ.

The advent of computers and the Internet led to the often-dreaded 360 appraisal where subordinates, colleagues, clients and suppliers all have a say. Maybe 360 appraisal is indeed just conceptually wrong! Nonetheless, managers will rate – even if they don’t make the result public. Knowing where their team members are today is a fundamental part of a manager’s planning. Rating, as a measure of ability, is central to improvement.

Full-blown Performance Appraisal

To understand performance appraisal as an aid to comprehensive performance management, we need to look at the individual components of the activity.

• Providing feedback is central to performance control and performance maintenance. For control, the individual must internalise the assessment and drive to improve. Manager input to that in-person process is one input of many. How it’s done is a science all on its own. Generally feedback on performance should be given soon after performance events, and not left until the performance appraisal meeting. And then it’s for the person to internalise what’s said and effect corrective action – if of course they are so motivated.

Simply criticising has no effect. Managers must help staff to internalise the criticism.

• The most common application to which performance appraisal is put is personal development. After all, training and development is an obvious way of improving performance. Personal development of each team member is, for most managers, a key task. And what better way to make development plans than to sit with each team member in a performance appraisal meeting.

Personal development is a key instrument in motivation and commitment.

• Managers must manage pay. Pay is well known as a hygiene factor – it’s not a motivator, but if there’s not enough of it, or the method of arriving at how much to pay is unfair, it soon becomes a de-motivator. There are well-established methods of decoupling rating and pay so criticism of performance appraisal here would be unfounded too.

There’s nothing that mandates that performance appraisal links to pay.

• Goal setting (and goal management) is well established as one of the best methods of achieving performance improvement. Somehow humans are wired to respond to a challenge. Since goals and development often go together, talk of goals goes with assessment of past performance, hope for future performance and the personal development needed for achievement.

• Finally, many performance appraisal critics espouse coaching as a “new thinking for a new environment”. Those of us old enough to have done our initial management training in the 80s will remember our tutors heralding ‘manager as facilitator’ – or coach. Talk about ‘old wine in new bottles’!

Coaching’s an essential management tool but it’s certainly nothing new.

So, on the one hand some criticise performance appraisal – maybe they have unrealistic expectations that rating alone will cause change and they simply don’t engage with the necessary complexity of performance appraisal. On the other hand there’s no escaping the relevance and use of each of the components of ‘full-blown’ performance appraisal as elaborated here – such as development and goal setting.

Call the umbrella what you like; the component parts are essential in people-management for every manager.

Little to criticise

Whatever your views of performance appraisal, there’s little you can criticise about a manager and team member sitting together periodically. It’s difficult to criticise their discussion about the jobholder’s performance in the past, their joint hopes for the future and the help the manager needs to give to secure agreed goals.

So in short, let’s stop worrying about narrow criticism and concentrate on excellent application of an essential management practice.