And the way that performance appraisals are done in too many companies makes it easy for the scoffers to scoff and for Scott Adams to find a wealth of material to satirize.

But let me be blunt. Performance appraisal, mocked as it may be, is genuinely important. Lets look at all of the different organizational purposes a performance appraisal system serves. And then, in the entries to come, I’ll explore each one and why it’s important. Performance appraisal:

• Provides feedback to employees about their performance
• Helps determine who gets promoted
• Facilitates layoff or downsizing decisions
• Encourages performance improvement
• Motivates superior performance
• Helps set and measure goals
• Identifies poor performers for correction or termination
• Helps determine compensation changes
• Encourages coaching and mentoring
• Supports manpower planning or succession planning
• Determines individual training and development needs
• Determines organizational training and development needs
• Confirms that good hiring decisions are being made
• Provides legal defensibility for personnel decisions
• And finally, if it’s done right — improves overall organizational performance

About the Author
Dick Grote is one of America’s most successful and best-known authors, consultants, and speakers on performance management. 

But today, a growing number of companies are moving away from using a criminal-justice mentality for employee performance improvement through corrective action. They are abandoning traditional approaches that focus exclusively on punishment. Instead, they are adopting an approach of accountability – employees with unfavorable performance, conduct or attendance issues are required to take personal responsibility for their choice of behavior.

Discipline and Recognition. One immediate difference is that traditional, punishment-based discipline systems ignore the great majority of people who never create disciplinary problems. In a non-punitive, “Discipline Without Punishment” approach, there’s a new step added to the process — a positive contact. Just as the policy is expected to resolve employee problems when they arise, it also makes clear that supervisors are expected to recognize employees when they perform well. Recognizing good performance is no longer just good advice handed out in a management training class. Now it’s a formal policy requirement, a step of the organization’s overall discipline procedure.

Diffusing Problems. Supervisors continue to be responsible for beginning the correction process by employee coaching prior to formal disciplinary action. The exception is when the magnitude of the behavior warrants serious disciplinary action or even termination for a first offense. In the early stages of disciplinary action, the Discipline Without Punishment approach replaces the familiar responses of verbal reprimands and written warnings with two comparable steps toward employee performance improvement: Reminder 1 and Reminder 2. Yes, they seem similar, but there’s more than mere semantic sleight-of-hand at work here.

Instead of being reprimanded for his mischief or warned about what will happen the next time he misbehaves, the employee is formally reminded of two important things. First, he’s reminded of the organization’s exact expectations of high-quality work, on-time performance, or whatever else has triggered the need for the discussion. And second, he is reminded that he has a responsibility for meeting the organization’s standards – he must do what he’s being paid to do and he must do it well.

The Last Chance. The biggest change from the traditional, punishment-based approach comes at the final step of disciplinary action. When the employee is one step away from termination, a dramatic gesture is needed to forcefully drive home the message that the end is at hand — one more time and you’re fired. But merely giving the employee a “final written warning,” or placing her on probation for some period of time, or creating an employee performance improvement plan aren’t powerful enough to clearly communicate the message “Once more and you’re out!” That’s why a disciplinary suspension from work is the best final step for a corrective action system.

Withholding Pay Does Not Work. Traditionally, this disciplinary suspension has been without pay. The intent is that by depriving the employee of pay, he will come to his senses and return to work determined to do whatever is necessary to keep his job. But the theory rarely works in practice. Employees who are placed on a three-day disciplinary suspension without pay don’t often return having seen the error of their ways and a commitment to excellent performance. They usually come back angry, all the organization has accomplished is creating a bitter employee.

There are other problems with using punishment as the basis for disciplinary action. Supervisors, many of whom are in the tricky position of being both on-the-job boss as well as off-the-job friend, often hesitate to place friends on an unpaid disciplinary suspension. Because they know the family is also getting punished by the loss of pay, they may cut their people more slack and open themselves to charges of favoritism. And suspensions without pay just aren’t appropriate for exempt, knowledge-worker individuals.

A Paid Disciplinary Suspension. A “Decision Making Leave,” the final step of the responsibility-based Discipline Without Punishment process, provides all of the advantages of a disciplinary suspension as a final step and eliminates the drawbacks. This disciplinary suspension with a twist suspends the individual for one day and one day only. On this day, the employee is required to make one of two choices: correct whatever problem brought him to this final step of the discipline process and make a commitment to fully acceptable performance in every area of his job in the future, or decide to quit and find greener employment pastures elsewhere.

Paying the employee for the day he’s away on “decision day” changes the supervisor’s role from adversary to coach. It demonstrates the organization’s good faith in wanting to see him change and return to fully acceptable performance, and is consistent with the values of almost every organization. By eliminating money as an issue, it doesn’t impact the family’s grocery budget and thus reduces the possibility of anger, hostility and even workplace violence.

Agreed Accountability. If the employee decides to remain with the organization and commits to fully acceptable performance in every area of the job (as almost all people placed on decision making leave do) and then doesn’t live up to his commitment, termination turns out to be much easier and guilt-free. And should the employee challenge the termination in an EEOC complaint, unemployment hearing, or any other venue, the fact that the organization gave the person a day at its expense to decide whether he was willing to do then job he was being paid to do and the employee didn’t live up to his own commitment assures legal defensibility.

Traditional discipline approaches may indeed convince some problem employees to shape up, others to ship out. But punitive tactics can’t produce employees who are genuinely committed to the goals of the organization and the policies and rules by which they operate. We may be able to punish people into compliance, but we can not punish them into a commitment to employee performance improvement. And a culture of commitment is what today’s organizations really need.

About the Author

Dick Grote is one of America’s most successful and best-known authors, consultants, and business keynote speakers on performance management. He is the Chairman and CEO of Grote Consulting Corporation – http://www.groteconsulting.com.

First objection—it’s arbitrary. Well certainly using a predetermined distribution (like top 20 percent, vital 70 percent, and bottom 10 percent) is arbitrary—and that’s its great value. Using fixed and arbitrary percentages forces managers to make tough decisions about who’s an A player, who’s not, and why not. Otherwise, as happens in too many performance-appraisal systems, everyone gets rated superior, managers never have to have tough conversations about performance, and the organization slowly slouches toward mediocrity. Restricting the number that can fall into the A category, and demanding that managers identify a bottom 10 percent who, relative to their peers, are weaker performers, ensures that top talent is recognized and that those bringing up the rear have no false sense of security.

Of course, if you ranked a hundred people using a 20-70-10 process, #21 would be much closer in performance to #20 than she is to #90. That’s why companies that use the forced-ranking process tailor the actions they take with individuals to the individuals themselves, not just to which ranking bucket the person ended up. When I write scripts for managers to use in letting people know how they came out in their company’s A, B, and C player analysis, I develop five scripts, not just three: for the solid A player, the B+ (the #21 guy and his counterparts), the genuine B, the B- (the ones who barely avoided falling into the C category), and finally the true C level performer.

But it is important to use buckets in making relative comparisons (e.g., top 20, vital 70, bottom 10; or quartiling, or some similar scheme). Never ask managers to precisely rank their people in exact performance order. It’s impossible to distinguish between #20 and #21, and the totem-pole approach (who’s #1, who’s #2, and so on down until the last and worst performer is fingered) generates highly valid concerns about accuracy.

Yes, forced ranking is an imperfect process, as is any process in which fallible human beings must make tough decisions in an arena where solid, unarguable, quantitative data don’t exist. The forced-ranking process requires the exercise of honed, objective managerial judgment in a situation where information is always incomplete and the facts are sometimes contradictory. But managers make decisions based on limited data all the time—which projects to fund, which to shelve; when to react swiftly to a competitor’s move, when to let time take its course. Just because a decision isn’t based on countable units doesn’t mean it isn’t objective. Employee ranking is not the same as solving an algebra problem—it can’t be reduced to a mathematical formula.

About the Author

Dick Grote is one of America’s most successful and best-known authors, consultants, and business keynote speakers on performance management. He is the Chairman and CEO of Grote Consulting Corporation.