But they can be a positive event for both sides if they crystallize a pattern of assessment and focus on potential. David Butcher reports.
For a process that's so well established in the corporate landscape, the performance appraisal is astonishingly unpopular. Employees dread it as an annual calling-to-account, a sinister session where they'll have to defend their record, bat off criticism and make a desperate pitch for a pay rise. Managers, on the other hand, see it as a bureaucratic chore, an hour of ticking boxes and mouthing platitudes that could be better spent on other things. According to the Institute of Personnel and Development, one in eight managers would actually prefer to visit the dentist than carry out a performance appraisal.
The bad news is that reviews are becoming more frequent - bi-annual, quarterly, monthly and even, in some eager firms, weekly. They have come to be seen as a vital component of a well-tempered company. And like so many once-intuitive features of business life, the appraisal has become more and more rigorous: a well-oiled mechanism devised by the folks in HR to calibrate every employee and map out their future.
If you're on the receiving end, that can be an uncomfortable process.
'I got called in one morning at five minutes' notice,' recalls one disillusioned manager in the public sector, where appraisals have been warmly, if sometimes indiscriminately, embraced. 'Somebody suddenly realised they should have given me an appraisal, and panicked. And nobody mentioned that it would all go to my bonus level. If I'd thought about it I might have been able to make a better case for myself.' So, goodbye bonus.
That wasn't the only downside. The same manager was conscious that the paperwork generated by the process could have a legalistic aspect if it ever came to disciplinary action or an employment tribunal. 'There was definitely a sense of 'Anything you say may be taken down and used in evidence against you'. It was all potential ammunition for if you ever stepped out of line,' he says.
Mind you, some people relish formal feedback. At 3i, a new performance review system has been popular with staff. 'I think people appreciate a well-conducted review and development session,' argues 3i director Robin Marshall, who has found the process useful himself. 'When somebody takes the time to talk honestly about how you are impacting on other people, you have to trust that person or you won't take it for what it is. But if you do, it can be hugely helpful. People say something to you and the penny just drops; it's a scales-falling-from-your-eyes moment.'
So how can we get more appraisals to the point where pennies drop and scales fall from eyes? The key skill for managers to learn is to focus on specifics. It's no good telling someone they're arrogant or unreliable: that's a character judgment and no-one responds well to being told they're a bad person. Instead, point to examples of behaviour that you or other members of the team have a problem with. 'Get right down to the particulars of the work,' advises Dr Maury Peiperl of London Business School. 'Say: 'In this particular project it would have helped me if you had contacted me earlier about this issue.' Or: 'Your customer said that you misled them in this way.' It is only in the specifics that we really learn those things that we can improve.'
If you want to be really touchy-feely about it, one way to couch a criticism is to say something like: 'When you did such-and-such, how do you think it made me/other members of the team feel?' It is hard to argue with a comment phrased in those terms and it forces people to think their behaviour through. Then again, that style won't work for everyone. Martin Hudson, general manager of the St Paul Insurance Company's UK arm, is a progressive thinker on appraisals, but he knows where to draw the line. 'It's not always enough to say: 'When you behave like x, it makes others feel y.' Sometimes you need to tell someone: 'You're pants! This is a performance issue and you need to change it.''
If you're the one being appraised, don't let your line manager get away with generalities: make him or her give you examples of what they mean.
You may find that the reason people see you as arrogant (when in fact you are consumed with self-doubt) is because you put your hands behind your head in meetings, finish other people's sentences for them, and never make the tea - all things that are easy to fix.
But hang on, if there's something I need to be told about my behaviour, why wait six months till an appraisal comes round? Why not tell me straight after a meeting that I interrupted the client too often or didn't listen enough? This is another point about appraisals that often gets lost in all the form-filling: they're pointless if they're not part of a culture of constant feedback, a formalising of conversations that happen on a day-to-day basis in corridors or taxis or over lunch. A good principle for managers to take to the appraisal process is, as the Radiohead song goes, 'No alarms and no surprises'. If the appraisee is surprised by what you tell them, you haven't been doing your job the rest of the year.
'It's good every six months or so to sit back and think on the bigger issues, but a performance appraisal needs to come proximately to the work that's done,' says Peiperl. 'All the studies on motivation support that. In a lot of service firms, after a team completes a project, it gets feedback from clients, colleagues and bosses on how the project went. That is more substantive, specific and important than any top-down, superficial year-end appraisal.'
Appraisals aren't just about giving and receiving performance reviews.
They're also supposed to be a time when you do a bunch of other things, like set fresh objectives for the coming year, identify training needs, incorporate a career coaching session and gaze in wonder on the sunlit uplands of your future in the company.
That's a lot happening at once. 'In some companies the review process is quite separate from the appraisal,' points out Charles Sutton of business psychologists Nicholson McBride. 'There's a performance/salary review twice a year, but appraisals are 'development dialogues' that happen formally at a particular time, but informally at all sorts of times. It's a much more living process.'
Whether you separate the development chunk out or not, it's easy to bungle it. 'It's really worth the effort of thinking through the development plan that should come out of an appraisal,' advises Andrew Gilchrist, a consultant at Egon Zehnder International (EZI). 'If, as an appraisee, I'm prepared to take all this feedback then in return I want some constructive ideas about a development plan.'
Gilchrist and his EZI colleagues operate in the appraisal stratosphere, called in by multinationals to assess top managers' potential for future growth. His word of advice on development plans? Prioritise. 'No-one can concentrate on more than two or three things to be improving. Even if you've come up with eight or nine action points, pick two or three. Ask what is most achievable and what can have the most impact on the organisation. Where those two coincide, those are the priorities.'
EZI's management appraisals involve calling in references from subordinates and peers. This canvassing of 360-degree feedback is increasingly common in appraisals and it makes sense: colleagues and juniors see more of you than your manager and they see you under pressure. Where a traditional appraisal tends to reward people who 'manage up' well, 'doing a 360' presents a more rounded picture.
But 360s can be fraught affairs. In his research on the issue, Peiperl found that making peers review one another's strengths and weaknesses often leads to political tensions, particularly if bonuses or promotions are at stake. People can also feel a conflict between their role as a supportive colleague and their responsibility as hard-nosed judge. What's more, close-knit teams may see the process as too focused on individual achievements - basically a popularity contest in disguise.
All this gets much more ugly when scoring is involved. The attraction of rating systems - the school-report model that ranks you as a team player from one to five, or rates your customer focus from A to E - is that the feedback is easy to gather and produces lots of data that can be aggregated and turned into bar charts. Great, so the HR department are happy because they've made a fuzzy process look scientific, and Bob from client services is crowing because he got a 4.2 on knowledge leadership and I only got a 3.7. But what do I do about it? A number doesn't offer much insight on how to improve. For that you need thoughtful, qualitative comments - harder to gather, but much more helpful.
'It should be about talking with people, not marking them,' argues Debbie Meech of internet firm Freeserve. 'Treat people like kids and they'll behave that way.' Meech's job title is director of Talent Management and the company's funky appraisal system is called Evolution. 'It's all about looking forward,' she explains. 'You can't change what you've done, you can only maximise performance for the future. The individual drives the process and it's about them taking responsibility for their own role.'
Ah yes, responsibility. But isn't that just the thing that the appraisal process denies employees? Management gurus such as Peter Block have long inveighed against performance reviews as symptomatic of the way companies mishandle employees. Appraisals, they argue, perpetuate a paternalistic culture of reward and dependency, playing to a parent-child model that is deeply ingrained in us. But what if we decided, in Block's phrase, to 'confront subordinates with their freedom'? Surely if we don't, we're just creating what he calls 'trained followship' rather than the energy and independence of mind that flexible companies need?
The interesting thing is that even as the appraisal process catches on in the public sector and elsewhere as part of a spreading audit culture, some companies are looking to cast it aside - or if they keep appraisals, making them, as Freeserve does, a process whereby employees solicit feedback rather than having it thrust upon them. If this marks a turning of the tide against appraisals, HR departments and the consultants who design review systems won't be happy. But a lot of other managers will be laughing all the way to the dentist.
TIPS FOR MANAGERS
Above all, prepare. Mug up on the appraisee and make notes. Figure out where you see them going in the organisation - even if it's out the door.
There should be no surprises. The appraisal should just confirm and formalise exchanges you've had over the past six months.
Just in case, get the appraisee to go first. Ask them how they think they're doing. That way you'll know if you're about to give them a shock.
Avoid personal criticisms such as 'you're unreliable'. You're not judging them as a person but discussing their work and potential.
Be specific. Point to any behaviour you have a problem with and tell the appraisee why it matters, how it affects the team or you. Likewise with praise.
Make sure the appraisee understands you and that you're talking about the same things. It's easy for discussions to go on and on at cross-purposes.
Give more praise than criticism. People forget positive comments and come out depressed, so give a 'feedback sandwich' of praise-criticise-praise.
See it as a way to get the best from your team. Imagine you're a sports coach. How can you help the player in front of you get the most from their talent?
At the end, ask the appraisee to summarise. If you haven't finished the discussion, make time for another meeting.
However many development areas the appraisee needs to work on, focus on three that are both achievable and can really have an impact.
TIPS FOR APPRAISEES
Think positive and try to enjoy it. After all, how often do you get the chance to talk about yourself for an hour?
Be honest. This is a great chance to get things off your chest that you've been bottling up. It may be a huge relief.
Don't be defensive. Probe comments if necessary and ask for examples to back up criticism or praise.
But don't make your boss have to fight each point. Work with him or her to shape things for the future.
Be prepared to be vulnerable. If you go in just trying to give a good account of yourself, you won't learn much.
Don't just remember the criticisms. It's a human (and very British) tendency to focus on the negative, so make a mental note of things you do well.
Think yourself on both sides of the table. Put yourself in your boss's shoes. What's going through his or her mind?
If your manager isn't being fair, invoke the 'grandparent' principle and get your boss's boss involved.
Look at it as a tool for helping you to do better. If you look at it as a sham or a political game then you've lost before you begin.
On the other hand, if your system really sucks, be cynical. Play it as a power game and forget any idea that it's an objective reality: see it all as a negotiation.