The logic behind forced-ranking systems is that employee performance falls on a bell-shaped curve—the normal distribution, as you learned in your statistics courses. Thus, only a small percentage of employees fall into the outstanding category, and an approximately equal number fall into the unsatisfactory category. Most employees are considered average in terms of their performance and need further coaching or training to improve. Large organizations have recently been questioning whether such systems work. Concerns have been raised that forced rankings are demotivating and harm cooperation and teamwork. Some companies removed numerical ratings from their evaluation systems after learning that employees stop listening after they get their number and don’t hear the essential feedback needed to improve their performance. Doing away with formal performance reviews is a trend that continues to grow. Fewer employers conducted formal performance reviews in 2017 compared to 2018: 91% versus 87%. According to Gallup, only 14% of employees strongly agree their performance reviews inspire them to improve. Research conducted by Gallup and Stanford University found that traditional performance reviews and approaches to feedback are often so bad that they actually make performance worse about one third of the time. Ninety-six percent of managers surveyed by Gallup said that real-time feedback and periodic performance discussions with their boss was more effective than annual reviews.....

Discussion Questions

1. What are the pros of performance appraisals? Provide an example of when a performance appraisal has a positive benefit.

2. What are the cons of performance appraisals? Provide an example of when a performance appraisal has a negative outcome.

3. Based on motivation theory, we know that employees need feedback to perform well. What is an alternative to performance appraisal that provides necessary feedback?