The case for ditching top-down individual performance evaluations

And replacing them with team-based performance assessment

Chances are you have probably heard one of those statements at least once: “We win and lose as a team”, “the team is more important than individuals”, “We don’t tolerate brilliant assholes”.

Most companies explicitly say that they value teamwork highly.

But at the same time, they use top-down performance evaluation systems that incentivize individualistic behaviors and undermine team collaboration so badly that even the best team-building activities can’t make up for it.

Here are 4 reasons why companies should consider ditching traditional top-down performance evaluation processes in favor of team-based performance assessment.

Reason #1: perception is more important than reality and managing perception is time-consuming

In most companies, managers rate employees’ performance, and that rating is usually a key input into other processes, such as compensation reviews and promotions.

Since this is a subjective exercise, managers’ perception of performance matters more than actual performance, and that means that top-down performance evaluation processes inevitably create an incentive for employees to actively manage up.

I bet you all know - and have been annoyed at - individuals who aren’t particularly impressive when it comes to doing actual work but are brilliant at managing up.

Don’t blame the player, blame the game.

Given how the incentives are built into the system, managing our manager’s perception is the rational thing to do. If we want to change the behavior, we need to change the system first.

To add insult to injury, managing perception is time-consuming, not only because it takes time to work on the manager’s perception, but also because it takes time to shape the perception of those who will influence the manager.

You see where I’m going.

On top of that, even without the problem of time wasted on perception management, annual performance evaluations are a massive time investment that can sometimes bring the company to a complete stop.

Is it worth it though?

Reason #2: we suck at detecting when we are being managed up

Have you ever wondered how political behavior could gradually overtake a company that started with an open and direct feedback culture? If that happened to your company, you might want to have a look at your performance evaluation process.

In an HBR article titled “Why do toxic people get promoted?” Klaus J. Templer explains that toxic people get promoted for the same reasons that humble people get promoted: political skills.

In his research, he noticed that “toxic employees whose political skills were highly rated by their supervisors were more likely to have a high-performance rating. In other words, while not all toxic people possess the political skill, those toxic people who use political skill effectively in the eyes of their bosses are seen as better performers”.

Pretty scary, uh?

Top-down individual performance assessment inevitably leads to political skills becoming critical to one’s career progression.

Why are political skills so effective though?

We just need to scan through the list of known cognitive biases, to find our answer. Many of those biases heavily impact our ability to detect when others are being transparent and authentic.

When we try to evaluate employees’ performance, we are inevitably influenced by recency bias, availability bias, halo (or horn) effect, confirmation bias, fundamental attribution error … seriously, look them up, the list is scaringly long.

In other words, we suck at detecting when we are being managed up.

360 feedback processes can help gather additional perspective and alleviate some of those biases, but only to the extent that the data collected is truthful and accurate, which is often not the case since the way most 360 evaluations are designed and used doesn’t encourage genuine and transparent input.

Even the most diligent managers will struggle to form an accurate assessment of someone’s performance when that person is skillful at managing up.

Reason #3: forced ranking increases internal competition, not collaboration

Many performance assessment systems come with an explicit or implicit expectation that employees will be forced ranked into a normal distribution from low performers to high performers.

What’s the natural conclusion? My teammates are the competition in the race to get to the “high performer bucket”.

Forced ranking inevitably creates a conflict of interest between one’s desire to be a good teammate, help others succeed and perform, and their desire to get ahead and be recognized as the highest performer in their team.

A competitive dynamic within a team will obviously undermine the ability of the team to develop a climate of trust, psychological safety, and open collaboration, which are necessary conditions to support sustained high performance.

Reason #4: performance evaluations don’t improve performance

Typical individual performance evaluation systems, and certainly top-down ones, suffer from a major flaw when it comes to actual performance: they undermine intrinsic motivation.

In their 40 years of research on human motivation and its impact on performance, Edward Deci and Richard Ryan have identified that traditional tools used to foster motivation, the carrot-and-stick types, only work within a very narrow band of circumstances. Namely, when an activity requires little creativity, little collaboration, and is fairly repetitive.

But when work requires more creativity, initiative taking, and collaboration, a traditional carrot-and-stick model will actually undermine performance.

Top-down performance evaluation systems that influence compensation reviews and promotions are not perceived as personal development tools, they are perceived as rewards and punishment tools.

“Do rewards motivate people? Absolutely, they motivate them to get more rewards” Alfie Kohn

The research on the topic of motivation has shown without a shadow of a doubt that traditional rewards and punishment tools reliably lead to poorer decision making, reduced collaboration, lack of creativity, and less ethical behavior.

So what’s the alternative?

Some organizations have purely and simply done away with performance evaluations. In some cases, they replaced them with monthly check-ins to provide ongoing coaching and take a manage-performance-as-you-go approach.

My recommendation, however, would be to shift from individual performance evaluation to team-based performance assessment.

A team-based performance assessment done right doesn’t have any of the issues we described in this article and provides some additional benefits.

“Talent wins games, but teamwork and intelligence win championships.” — Michael Jordan

A team-based performance assessment approach:

  • Creates a powerful alignment force between members of the same team to aim for what matters: the success of the team. Which then begs the question “what does success look like?”. I’m glad you are asking.

  • It forces the team to have a clear definition of success, which involves answering questions like: “who are the customers?”, “what value is the team supposed to deliver to them?”, “how will the impact on those customers be measured?”.

  • It enables teams to continuously assess their own performance since measures of success are made explicit, transparent and tied to visible outcomes. Performance is no longer based on a subjective perception of a higher authority.

  • That in turns enables managers and leaders to position themselves as a resource for the team (coaching, guidance, mentorship), as opposed to being forced to be the judge of their performance.

If you are worried that this kind of model might not create enough “pressure” on individual members to perform, remember that peer pressure is a much better source of motivation than pressure from higher authorities.

We all want to be part of a winning team.

If we are committed to fostering behaviors that lead to healthy team dynamics (trust, open communication, solidarity, and psychological safety), then we need to design organizational systems that align with those aspirations.

If you have some feedback or want to talk more about how to implement team-based performance assessment, let’s get in touch!

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