Judgment Day
It's survival of the fittest as companies tighten the screws on employee performance reviews
Of all the nerve-racking, stomach-churning days of the work year, only one is scheduled in advance: performance review day. The consolation used to be that it didn't matter much. If your boss checked "exceeds expectations," you might get a 6 percent raise. "Needs improvement" might get you just 2 percent. No big deal.
Grab your antacid: It's a big deal now. Companies, desperate to eke out ever more returns on their human capital, are using computers to turn every day into rating day. And they are turning every customer, subordinate, and peer into a rater. Most important, the companies have raised the stakes in a go-slow economy. Increasingly, top ratings are rewarded with eye-opening goodies like 30 percent bonuses. And in nearly two thirds of all companies, a subpar rating can mean a pink slip.
Biased? These changes are turning what was once a mild annoyance into one of the hottest workplace controversies. Some researchers and disillusioned executives say some of the newest appraisal methods aren't returning the promised profits. And some workers claim the new systems are biased. A corporate Who's Who --including Ford, Goodyear, General Electric, and Capital One--have been sued for adopting tough new systems that, workers allege, are designed to weed out workers of a specific race, age, or gender rather than just poor performers.
But the controversy isn't likely to curb the trend toward new and different appraisal systems. If anything, companies will tinker even more, says University of Wisconsin management Prof. Ken De Meuse. "When times were good, companies could retain fat more than they can today," he says.
One of the biggest and most controversial trends: changing who does the ratings. The traditional method of having only a boss rate an employee has been criticized for almost 2,000 years. A third-century Chinese philosopher complained that one civil service evaluator "seldom rates men according to their merits but always according to his likes and dislikes." And modern-day research confirms what every employee knows: A boss who happens to be in a bad mood gives employees harsher ratings. Studies also show that managers' subconscious stereotypes about race, age, physical attractiveness, and other characteristics affect their ratings.
In an attempt at greater fairness, companies began trying out "360 degree" appraisals in the 1990s. Today, one fifth of all employers build such well-rounded appraisals with comments from customers, subordinates, and peers as well as bosses. Michael Lieberman, vice president of marketing for Synygy, a Philadelphia-area firm that sells rating systems to other companies, likes what 360-degree appraisals do for his firm. At previous employers, he noticed lots of office politics as workers tried to ingratiate themselves with the one or two managers who controlled their careers. "But there is very little politicking here," he says, "You had better treat people with respect," because anyone can submit a rating on any employee.
Despite their logic and rising popularity, 360s have drawn plenty of flak. A 2002 study by the Watson Wyatt consulting firm found that companies using 360s returned, on average, 10.6 percent less to shareholders than did companies using more-traditional reviews. Watson Wyatt theorized that while the 360 idea is sound, it's time consuming, and too many companies stint on training needed to make sure raters give constructive criticism. De Meuse says anyone who watched the Survivor TV show knows the problems of badly run 360s. "One way to make me look better is to make you look bad," he says. "And people make alliances."
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