Are Annual Reviews Killing Your Morale?
Deming listed the annual review process as one of the “deadly diseases” of management.
“Evaluation of performance, annual review, merit rating.
- nourishes short-term performance
- annihilates long-term planning
- demolishes teamwork
- promotes competition
- builds fear
- promotes playing politics
- destroys morale
- it leaves people bitter
- encourages mobility of management”
I've certainly seen all of that in my career and I'm seeing it this year. I'm going to post a podcast with Eric Christensen, the president of a self-described “Deming company.” Eric will talk about how they abolished their sales incentive programs and how that has actually helped them thrive.
Since it's annual review season, do you have any horror stories to share?
One horribly demotivating thing I saw back when I worked for Dell happened to a friend (yes, it really was a friend, not me). She was fresh out of business school and had worked her butt off for six months. She was told by her manager, “I would rate you a ‘1' but nobody gets a ‘1' in their first year, so you get a ‘2'.” Arbitrary rules and custom meant she got a smaller raise than she deserved, they told her as much. That did more to sap motivation from her than anything they could have done. It wasn't fair and it wasn't good for the company.
Annual prizes, quota contests, and “incentives” often have the same effect. Do you have an award or recognition for the “top” person in your group, organization, or company? How does that make all of the “losers” feel when they aren't the top person? If you can only have one “top” person, do you think about the demotivating impact that has on the others?
I wish more companies and leaders listened to Deming or hadn't forgotten about him at this point.
So what did Deming suggest? It was always a simple mandate, hard to execute: