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The Real Problem With Inflated Performance Evaluations

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It’s not as if we needed a reminder, but the Government Accountability Office has again confirmed in a June 9 report that performance ratings are badly inflated. That’s old news of course. 

It was first reported last Thursday by Government Executive and then today by the Washington Post. It’s not clear why the GAO report was requested by Sen. Ron Johnson, R-Wis. The data could not have been a surprise. He noted that the problem encourages mediocrity and fails to hold employees accountable. It is not, however, a problem Congress can solve.

Coincidentally, earlier last week the Washington Post had another column entitled, “This big change was supposed to make performance reviews better. Could it be making them worse?” It confirmed that businesses are trying to deal with similar problems. The column began by referring to “a revolution” that has “the much-hated annual performance review in the cross-fire.” 

Companies also have problems with inflated performance ratings, but they’re not nearly as bad as government. Critical articles have appeared for years—evaluations are seen as time consuming, excessively subjective, a cause of stress, demotivating and, it’s been argued, detrimental to mental health.

Almost 20 years ago, General Electric adopted its forced distribution or “rank-and-yank” policy that required managers to limit high ratings to 20 percent of employees and required that 10 percent be rated as unacceptable and eventually terminated. A number of companies adopted similar policies but most, including GE, have since ended the practice. However, employers commonly monitor ratings and make it clear to managers that rating inflation is discouraged. (I’ve heard that repeatedly in my consulting.)

The latest media reports tell us that a few companies are changing their performance system to downplay or eliminate the annual rating. Surveys suggest a trend to more informal practices that emphasize ongoing coaching. Again GE is a leader with a new approach that makes coaching a high priority.

Central to reform is the expectation that managers will devote more time, not less, to discussing performance and providing the coaching advice to help employees improve their performance. 

It’s too early to know if that trend will gain momentum or what changes will gain broad acceptance.  The dissatisfaction has been building for years. Corporate leaders ignored the problems until recently—it was seen as an HR issue—but that’s now changing.  Effective talent management has become a senior management issue. 

Government Has Forgotten the Purpose

In business, performance ratings have been central to pay for performance and also play a role in deciding bonuses and promotions. Downplaying the focus on ratings is integral to a strategy expected to improve working relationships and enhance day to day performance management. 

For government, there is a very real question about the value of requiring annual ratings  Any other management practice this intensely disliked would be scrapped. However, annual evaluations have been required by law for over 100 years so ratings will no doubt continue. 

Agencies should be asking: Are the ratings actually used? Does the time required justify the use of ratings? Is there an agency where the process is working? Is there evidence the practice improves performance? What do managers think? What do employees think?

Possibly the best that can be said is that inflated ratings are a “feel good” practice.

Actually, the inflated ratings deter agencies from recognizing the truly outstanding employees.  Clearly the process fails miserably to identify the poor performers. 

The fact that inflation is worse at senior levels only exacerbates the problem. There is no defensible reason that executives and managers should have higher ratings. The focus is or should be on how an employee performs in their current job. Higher level jobs presumably have higher expectations.

Lessons Learned in Other Sectors

At some point, government will need to address the problem. There have been too many recent incidents that highlight weaknesses in the management of performance.

  • The starting point has to be acknowledging that this is a management problem. HR has virtually no involvement in the interactions between managers and employees; the office is not involved in the year-end discussions. It will not be solved until agency leaders make it a priority.
  • Managers at all levels need to be held accountable. The best at managing performance should be recognized and rewarded. They can also serve as coaches. Ineffective managers should be moved to non-supervisory roles. That sends an important message.
  • Managers and employees should be involved in the planning. Their knowledge of the jobs and the keys to good performance make them subject matter experts. Their involvement creates a sense of ownership. That’s a key. Every year, teams should be asked to identify and address emerging problems. That practice has worked well for the National Geospatial-Intelligence Agency.
  • The goal of encouraging feedback and coaching is facilitated when the criteria or dimensions used to evaluate an employee’s strengths and weaknesses are specific to the job. The conversations managers need to have with their people are easier and more useful when the criteria--expected results and/or competencies--reflect job-specific issues. Trying to force fit the same generic dimensions across obviously different jobs is like using the same test in math and history.
  • Calibration committees, staffed with peer level managers, can help control rating inflation and increase consistency. Managers planning to rate an employee at the highest or the lowest level are required to explain their justification to the committee. Both should require solid justification.
  • Finally, HR should be proactive in monitoring ratings, looking for evidence of bias and discrimination. That’s not new.

It’s hard to imagine that anyone wants the current reality to continue. No one wins. It’s an ongoing excuse for congressional criticism and negative media reporting. It’s not a simple problem. However, my experience has convinced me that with top management’s support, teams of employees are fully capable of developing answers that will gain broad acceptance.

Howard Risher is a consultant focusing on pay and performance. In 1990, he managed the project that led to the passage of the Federal Employees Pay Comparability Act and the transition to locality pay. Howard has worked with a variety of federal and state agencies, the United Nations and OECD. He earned his bachelor’s degree from Penn State and an MBA and Ph.D. in business from the Wharton School, University of Pennsylvania. He is the co-author of the new book It's Time for High-Performance Government: Winning Strategies to Engage and Energize the Public Sector Workforce (2016), with Bill Wilder.

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