Was Deming Wrong About Performance Reviews?

W.E.Deming is often cited as one of the most vehement detractors of performance reviews. Here are a few quotes:

Evaluation of performance, merit rating, or annual review… The idea of a merit rating is alluring. the sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise. (Out Of The Crisis)

The fact is that the system that people work in and the interaction with people may account for 90 or 95 percent of performance.

“The performance appraisal nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics… it leaves people bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair, as it ascribes to the people in a group differences that may be caused totally by the system that they work in.”

Was Deming Right?

Deming had a number of important observations on the performance review process. The most importnat one has to do with the second quote above -- that performance is far more influenced by the system in which people work than factors related to each individual employee. To clarify that, at least in terms of reviewing performance, it means that employees are not in control of their own performance levels, and that in fact, if Deming is correct, the causes of performance have to do with the system. It makes sense if we simplify it. Take an excellent employee and put him in a system where he is given poor tools, and you get poor performance regardless of how good the employee could be. The same for talented employees who work in companies that have poor leadership, are disorganized and so on.

Performance reviews wrongly assume and reward on the basis, or assumption that it's the employee that determines how well he or she performs. So, in this sense, Deming was spot on. (see How Interaction of Individual and System Variables Determines Individual Employee Performance)

Deming's Observations On Psychology

While Deming's position on many things is often under-valued today, his contentions that rely on an understanding of human psychology are much weaker. After all, given his lack of formal study in the field, and to paraphase him, "How could he know?"

With respect to performance reviews, as illustrated in the third quote above, Deming is right that poorly done performance reviews can have a negative emotional impact, but certainly not in ways as powerful as he suggests.

We need to distinguish between "types" of performance reviews, though. Reviews that are disconnected from performance planning, and the other components of the performance management process ARE harmful to some degree or other. However, the negative effects of doing reviews poorly disappear when you switch the mindset for appraising performance, to managing and optimizing it.

Undoubtedly Deming was commenting on that with which he was familiar, review processes that:

• were done TO employee, not WITH employees
• focused on the fallacy that the individual employee is in complete control of his or her own performance
• occurred once a year, with little communication at any other time (managing by looking in the rear view mirror
• involved little or now problem solving or future orientation

For those kinds of systems,Deming was certainly correct that there would be potential for a lot of harm.

However, as I've suggested in the material on the Hooper-Bacal model, when you look forward, work with staff, focus on both individual and system improvement, it's a different ballgame. The employee "review" remains but only as part of a larger process that fosters looking at the SYSTEM of work. In effect, the model would be quite consistent with many of Deming's other concepts and that of his protege, Peter Scholtes.