HOMEThe Hidden Costs Of A Broken Performance Appraisal System
While an effective performance management system can have multiple huge benefits, those benefits don't happen just because there is some sort of system in place to manage performance. In fact, a badly executed strategy not only destroys the ability to improve performance, but it has a significant downside. There are hidden costs, such that if the execution is poor, there are hidden costs that make a significant difference on down to the bottom line.
So, a compelling reason for caring about whether your performance reviews are effective or not lies in the consequences of having a system that is failing.
Performance review systems are rarely neutral in terms of their costs and benefits. They either contribute or cause damage. It may be true that damage from poor systems is hard to find unless you’re looking for it, but poor systems cause real damage to companies and to your ability to manage effectively.
Some Off The Hidden Damages Of Poor Systems
• Performance review systems that don’t help employees do their jobs hurt the relationships between employee and manager and create confrontational situations.
• Managers doing ineffective performance reviews lose credibility with employees, particularly when the manager acts as if the reviews are valuable when they are clearly not. Employees are smart: they know when a manager is just pretending to do something useful.
• Time and resources are lost. The only reason to justify doing performance reviews is if they somehow add value. If they don’t add value, they cost.
• Poor performance review systems can make the HR staff seem amazingly stupid when the forms and mandatory requirements they set out are clearly a waste of time.
Conclusion: Fix The Review System Or Scrap It