02/18/2015 01:27 pm ET Updated Apr 14, 2015

Why Evaluate Performance?

Performance appraisals have received a lot of criticism over the past several years. Most supervisors and employees dislike the whole process. Perhaps because it is a process; an annual paper exercise requiring the supervisor to make judgments about each direct report.

There is a great deal of information available about what's wrong with performance appraisals. In 2010, Samuel Culbert wrote a book titled Get Rid of the Performance Review. His primary arguments include the top-down evaluation, lack of honesty, focusing on past performance and ratings negatively affecting teamwork.

What needs to be explored is why companies evaluate employee performance. Some companies may do it because they always have. It may simply demonstrate the completion of a supervisory exercise. Some companies may use the results of the evaluation to make employment decisions, such as promotions, and wage adjustments.

Employment decisions are serious matters. Generally when the appraisal process is used for this purpose, performance ratings are used. Both parties are focused on justifying the ratings rather than obstacles affecting outcomes or overall team performance. Many rate everyone positively to avoid conflict. This creates a number of problems.

Performance ratings can be used effectively when measuring behaviors which to lead to desired outcomes. Identifying these behaviors for each position can be daunting. The evaluator must also be in a position to observe the behaviors.

Another use of the performance appraisal process is to identify employee interests and developmental needs. Do not attempt to combine this appraisal with one focused on decision-making. An appraisal process focused on development requires a deeper level of trust for the employee to reveal needs and interests.

An appraisal focused on development will evaluate knowledge, skills, and abilities needed to achieve the position's purpose. This competency model is useful in aligning the position to the company's goals. Shared competencies such as demonstrating respect of individuals can also be established to identify cultural expectations.

Competencies can be defined in behavioral terms and then used to rate performance. For instance, demonstrating respect can be observed when greeting individuals with eye contact and by name; focusing on understanding the individual's intent; and responding in a collaborative manner. However, in the real world, the supervisor may only address the employee when there is a demonstration of disrespect.

People at work either have positive or negative working relationships. Supervisors should consider using marriage counseling techniques to improve these relationships. John Gottman's famous 5:1 ratio established a need to balance every negative interaction with five positive interactions to have a positive long-term relationship. This has significant impact in building trust and open communication.

The only way a performance appraisal process can improve outcome is by a safe, two-way communication. The supervisor can then ask the direct report how to make work easier to achieve better quality, greater volume and improved outcomes. For instance, "How might we improve our effectiveness as a team?"

From a performance management perspective, 80 percent of outcome is a function of systems and processes and only 20 percent directly attributed to an individual's performance. That may be precisely why supervisors need to discuss performance with their direct reports. The person performing the task is aware of what systems are negatively impacting outcome. Without trust, an understanding of the company's goals and safe, open-communication that information is lost.