From the May 2001 issue of Entrepreneur

No one likes performance appraisals: Employers dread them, while employees fear them. According to Tom Coens and Mary Jenkins, co-authors of Abolishing Performance Appraisals: Why They Backfire and What to Do Instead (Berrett-Koehler), appraisals are flawed and inaccurate and don't motivate employees.

"Traditional appraisals have so many negative unintended things attached to them, like stress and fear, and they often put a chill on relationships," says Jenkins. However, don't go too far: Jenkins considers basic appraisal functions like feedback, coaching and career development important. But Jenkins and Coens say these functions should be "unbundled and assessed separately on a continuous, real-time basis."

Jenkins and Coens suggest sacking all annual appraisals. Instead, try ongoing, two-way feedback among employers, managers and employees on how well the company is doing as well as dialogue about individual careers. The authors say compensation should be a stand-alone issue and suggest gain sharing and performance awards, where all employees share in the company's success by receiving extra income based on a ratio of their annual salaries.

Glenroy Inc. of Menomonee Falls, Wisconsin-which manufactures packaging materials for the medical, food and personal care industries-gave up annual performance appraisals years ago. "We are more involved in [constant communication] instead of saving things up for a year and then springing it on them," says Jim Daugherty, Glenroy's vice president of finance and administration. After all, he says, you wouldn't do something like that in your personal life: "You wouldn't save things up and then spring them on your family members; this works the same way."


Ellen Paris is a Washington, DC, writer and former Forbes magazine staff writer.


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