Criticism of the performance appraisals that are done in most organizations is never-ending. It is claimed that they do more damage to the individuals being reviewed than good and that they are a waste of time and effort. This has led numerous "experts" to recommend that organizations simply stop doing performance appraisals.
There is no question that performance appraisals and the actions they lead to often result in discrimination lawsuits, effective employees resigning or employee dissatisfaction, and they do require an enormous investment of time and energy in executing the process. As a result, there are undoubtedly some clear gains that occur when performance reviews are eliminated.
Further, there is little doubt that if managers were skilled and effective in their day to day communication and leadership behaviors, there would be little, if any, need for performance appraisals. In essence, the benefits that they potentially offer would have already been realized as a result of ongoing feedback, guidance, goal-setting and development activities on the part of managers.
But -- and it's an enormous but -- most managers do not have the skills and motivation that are required to make performance appraisals unnecessary. As a result, organizations are hesitant to abandon their performance appraisal systems and "leave it up to" managers to effectively manage the performance and development of their direct reports.
There is an interesting alternative to eliminating all performance appraisals. It is to use performance appraisals as a way to improve the skills of managers so that performance appraisals eventually become unnecessary. Instead of using performance appraisals as a substitute for effective managerial behavior, they can be used to develop managers as effective leaders and performance managers. This idea is based on the premise that managers can, and eventually will, become "self-sufficient" when it comes to influencing their subordinates' performance and development and that when they are, they should be able to "opt-out" of doing performance appraisals of one or more of their reports.
The option of not having to do performance appraisals can be a powerful motivator of managers to learn the skills that are needed to effectively manage their subordinates' behavior. Currently in most organizations, there is little incentive for managers to develop their performance management skills and little incentive for them to be effective users of performance appraisal systems. All of this changes with the opt-out approach.
The idea of managers opting out of doing appraisals does raise the issue of how an organization would measure whether a manager should be able to opt out of doing appraisals because they are unnecessary. The measurement system does need to be somewhat different depending upon the kind of work that is being done, but there are some basics it should always include.
Data from subordinates about the degree to which the manager provides ongoing feedback, direction, involvement and goal-setting should be gathered. It also should look at the performance level of the organization unit or group reporting to the manager to see if it is at a level that indicates the manager is doing a good job of guiding performance. Finally, it might involve some skill testing of managers through simulations and exercises.
Taking the idea of effective managers not being required to do appraisals one step further, having this capability could be a prerequisite for promotion to senior management levels. This would make it a particularly powerful motivator of learning and development.
Overall, eliminating unnecessary performance appraisals is a good idea. The challenge is to do just that without eliminating those performance appraisals that are necessary. Today, I believe most are necessary. But with better managerial skills and leadership, this would not be true. The challenge, therefore, is to motivate managers to develop the skills that truly make performance appraisals unnecessary. When this happens, it will be a clear win for employees, managers and organizations.
Crossposted from Forbes.com.