Why was the performance appraisal first established what was its purpose

Employee performance management isn’t a new concept. Performance management has evolved in many ways over the twentieth and twenty-first century, but some companies are still using antiquated methods to measure employee performance. In this article, we outline a brief history of performance management to understand the main drivers of changes throughout history and some of the main factors that are driving modern day companies to evolve their current performance management systems.

A Brief History of Performance Management

Performance management became critical during the expansion of business and industry in the 1920s. With companies’ goals to maximize mass production, operational efficiency became the focal point. As you would expect, employee development and engagement were considered less important at this point.

In the 1950s, personality-based performance appraisal systems started gaining adoption. Employees would be rated on traits such as job knowledge, sincerity, and loyalty; however, it was soon realized that measuring the performance of workers based on inherited traits had nothing to do with their productivity in the workplace. As a result, companies began to look for better ways to assess their employees.

In the 1960s, annual formal appraisals began to focus on what an individual might be able to achieve in the future. In addition, there was more focus on goals and objectives, and the term ‘management by objectives’ became popularized.

The 1970s was fraught with court cases due to the subjectivity and biases with performance appraisals, which led to the introduction of psychometrics and rating scales in performance management. In the 1980-1990s, the multi-rater feedback system (also termed 360-degree feedback) became popularized, although it’s worth noting that multi-rater feedback was used prior to the 1980s by a few companies, including Esso Research and Engineering Company which was one of the first organizations to use multi-rater feedback in the 1950s.

The 1990s and early 2000s saw a shift of focus to employee motivation and engagement. Many companies have ditched the annual performance reviews and opted for more continuous feedback-driven practices.

And while the importance of continuous feedback cannot be overstated (check out our blog article about the importance of feedback), many critics in this modern day are saying that continuous feedback is simply not enough anymore for maximizing employee productivity and increasing retention.

Evolving Our Current Performance Management Systems

There are several drivers that are forcing business and HR managers to question the effectiveness of their performance management systems. These include: changes in workforce, the movement toward more agile structures, and the realization that feedback is a double-edged sword.

1) Changes in workforce

Millennials now comprise the 35% of the workforce and this is expected to be ~75% of it by 2025. While all employees want feedback, Millennials want more of it. They want recognition for jobs well done, corrective feedback on what they need to improve, and transparency into their career paths. It’s crucial that managers implement systems that work for them.

2) Deconstruction of company hierarchical structures

Companies no longer operate in the hierarchical structures that once worked decades ago. Employees are now working in multiple roles, across different teams, with several managers throughout the year. We need agile performance management systems that match these agile networks of teams that organizations are now becoming (to this end, many companies are implementing 360 degree feedback).

3) Continuous is not enough – feedback has to be constructive

Feedback is a double-edged sword – poorly-delivered feedback is worse than no feedback. All feedback should be constructive. In most companies, there isn’t enough training or tools to help employees understand how to provide and receive constructive feedback. Constructive feedback is action-based, effort-based, and forward-looking.

Performance management will undoubtably continue to evolve as new generations enter workforce. What do you think the future of performance management looks like?

Not really important because, after all, it's history.  So who really cares?  We need to concentrate on "fixing" it, not on history.  But those questions stayed in my mind.  So I started researching it.

What I came up with was surprising.

The practice of appraisal is a very ancient “art”.  In historical terms, it’s been around since before 220AD, and I guess it could claim being the world's second oldest profession!

There is, says Dulewicz,  "... a basic human tendency to make judgments about those one is working with, as well as about oneself."  He taught that appraisal was both inevitable and universal.    People have tended to judge the work performance of others since the beginning of time.

Some might say that the use of performance appraisals began in the early 20th century.  They say it can be traced to Taylor's pioneering Time and Motion studies.  But this is not very helpful, because it can also be argued that almost everything in the field of human resources management started with him.   So we will start a little farther back in time.

Here is the history.   I haven’t included all of it, but you can follow the link if you want to see everything.   Although it’s a mess today, see if you think we have progressed any over time.

221AD-265AD:                    

The practice of performance appraisal dates back to the third century when the emperors of the Wei Dynasty (221-265AD) rated the performance of the official family members.

Fairness of raters was questioned.   A rater employed by the Wei Dynasty said: “The Imperial Rater seldom rates men according to their merits, but always according to his likes and dislikes”

1540-1560:                           

A procedure to formally rate members of the Jesuit Society was established by Ignatius Loyola.

Late 18th century:              

Performance management theory and practice in the United States started with the Industrial Revolution in the late 18th century. Workers were evaluated and paid primarily on the basis of quantity output -- the number of "pieces" they satisfactorily turned out

1800-1817:                           

Performance appraisals were initiated by Robert Owen in the early 1800s. Owen monitored performance at his cotton mills in Scotland through the use of monitors. The monitors were cubes of wood with different colors painted on each side and displayed above the workstation of each employee.  The color of the visible side of the cube was associated with a rating to indicate performance. At the end of the day, the block was turned so that a particular color, representing a rating of the employee’s performance, was facing the aisle for everyone to see.

1911:                                     

Frederick Taylor stressed the importance of the individual worker by advocating the payment of individually based financial incentives to those workers who could increase their output as a result of the application of scientific management.

1918-1955:                           

The widespread use of performance appraisal techniques with blue-collar employees didn't start until after World War I. Appraisal systems for measuring managerial and professional employee performance weren't used extensively until about 1955.

1957:                                     

Emergence of performance appraisals based on Management by Objectives. Employees were appraised on the basis of achieving short-term goals, jointly set by the employee and the manager, rather than personality traits.  There was also a shift in the purpose of performance appraisal system towards employee development and feedback.

1960-1970:                           

In the US, passage of the Civil Rights Act of 1964 and the 1966 and 1970 Equal Employment Opportunity Commission Guidelines for Regulation of Selection procedures created a need for improvement in company appraisal practices. These legal considerations exerted strong pressure on companies to formalize, validate, and organize appraisal systems.

1996-present:                     

Strategic performance management systems cut across company levels, linking strategic, operational and individual performance management. Individual performance management starts to be aligned to corporate strategies, to create a clear line of sight.

So, what’s the trend for the future?    Well Bersin says that an old trend, the coaching and development model of performance management, is becoming increasingly popular.   They predict that in the future, appraisals will be less focused on past performance and more focused on career development and developing skills for the future.

If this is true, as talent becomes increasingly scarce, companies will have to go the extra mile to retain critical employees.  This will involve the need for training management on effective coaching and developing techniques as well as training on providing performance feedback.

What do you think the future holds?

Jacque Vilet, President of Vilet International, has over 20 years’ experience in International Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career.    Her true love is working with local national issues.  Jacque has the following certifications:  CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA.    She belongs to SHRM, Human Capital Institute and World at Work.   Jacque has also been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.  She lives in Dallas and has 3 four-legged children and one Chinese daughter (it’s a long story).  She’s had a life-long love of animals and the ocean.   So what is she doing in Dallas?

Image courtesy:  Jerksatwork.com