In 1996, Frederick Nickols estimated the cost at just under $2,000 per employee. ...includ[ing] manager preparation time, employee time, HR processing time, opportunity costs, and advances in technology, still puts the process cost at over $2,500 per employee per year.
Partial list of the 50 Problems cited.
Most Serious Performance Appraisal Problems
1. Don’t assess actual performance — most of the assessment that managers complete focuses on “the person,” including characterizations of their personal “traits” (i.e. commitment), knowledge (i.e. technical knowledge) or behaviors (i.e. attendance). While these factors may contribute to performance, they are not measures of actual output. If you want to assess the person, call it “person appraisal.” Performance is output quality, volume, dollar value, and responsiveness.
2. Infrequent feedback – At the very minimum, formal feedback needs to be given quarterly, like the GE process.
3. Non-data-based assessment — most assessment criteria are “fuzzy” and subjective.
4. Lack of effectiveness metrics — many accept that the goals of the process are to recognize results, provide feedback to address weaknesses, determine training needs, and to identify poor performers. Unfortunately, rarely do process owners ever measure their processes’ contribution to attaining any of these goals. Instead, the most common measure relating to performance appraisal is the percentage completed.
5. Lack of accountability – ...One firm attempting to remove a troublesome employee found that the manager had rated the individual the highest within the department and awarded them employee of the year.