PRODUCTHEAD: Performance appraisals are underperforming
PRODUCTHEAD is a regular newsletter of product management goodness,
curated by Jock Busuttil.
Performance appraisals fail to take into context whether the organisation is permitting them to succeed
Deming: “a bad system will beat a good person every time”
Personal development and performance are different things
Shift performance management from the individual to team, group, or organisational level
a favour: please share this with other product people
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I share the frustration of many good product people I’ve worked with, who want to make a difference and do the right thing, but are continually hampered by the levels of bureaucracy they have to navigate before they’re allowed to do anything. The organisation systemically distrusts their teams.
A bit close to the bone #
And while satirical in nature, I’m sure we’ve all seen examples in practice of the Peter principle (competent people will continue to be promoted until they reach a level where they are no longer equipped to do their job, and so plateau in a state of incompetence) and of Scott Adams’s Dilbert principle (“leadership is nature’s way of removing morons from the productive flow”, Dilbert, February 5th, 1995).
Can you thrive in a hierarchy? #
The most disheartening thing about this? After a while, it saps the energy of most good people to such an extent that they lose their motivation. Some accept defeat and compromise their personal values to become mediocre (while silently hating themselves for doing so). Others leave to work for a different and hopefully more enlightened organisation. A small minority of people I’ve met (and envied) seem to have that Goldilocks mix of tenacity, diplomacy, motivation, and unrelenting optimism, and are able to thrive even in the most Machiavellian (or Orwellian) of situations.
Salary reviews #
Hand-in-hand with hierarchy goes the problem of salary reviews. A hierarchy reinforces the notion that the higher up you go, the more responsibility you have, and so the more valued you become. As a consequence, the main way for people to significantly increase their salary (without leaving to join another organisation) is to scale the corporate ladder.
While you’ll also see this in many companies, this is particularly problematic in public sector organisations where the upper limit of your pay range is bound to your job title and grade. The only way to break through that salary limit is through promotion, which is often only possible if there’s a vacant position above for you to take (sometimes colourfully called “dead man’s shoes”). And given the nature of a hierarchy, the higher up you go, the fewer available positions there are.
Performance reviews #
Annual performance reviews in theory provide another opportunity to increase your salary in recognition of how well you’ve performed. However, these appraisals often follow a quota system, where there’s a limited pot of money available for salary increases, the relative performance of all employees is assumed to follow a bell curve, and salary increases will only be awarded to those above a certain percentile. There are a few problems with this approach.
Because performance is assessed relatively, rather than using an objective, absolute yardstick, there’s usually no consideration for the situation where most people have been repeatedly going the extra mile. In other words, the assumed bell curve is skewed to the right towards over-performance. If the yardstick for expected performance was objective and absolute, a much larger proportion of staff would receive a pay rise. (And even then would receive a smaller share of the limited pot of money.)
But because the yardstick is relative to and moves with the bell curve, when everyone is over-performing, the quota system paradoxically ignores all but the highest of the high performers for doing so. So why bother going the extra mile in the first place?
Appraisals highlight organisational flaws #
“360-degree performance appraisals … are arguably flawed because they rely on the people giving the feedback to be completely objective, rather than take the opportunity to either do a favour for their drinking buddies or exact revenge for some perceived past slight. At what point did corporate performance appraisals become a popularity contest?”The Practitioner’s Guide To Product Management by Jock Busuttil
Like Elizabeth Ayer, whose insightful and measured article I’m sharing with you this week, I believe that annual performance reviews also magnify other organisational flaws:
- Poorly chosen or misaligned goals and incentives
- Absent corporate strategy
- Internal politics colouring the view of whether some initiative succeeded or failed
- Rewarding output (productivity) rather than outcome (performance)
- Undue influence of subjective feedback, rather than objective evidence
- Recency bias (recent performance unduly masks less recent achivevments)
- Measurement by proxy (product performance for product manager performance)
Designing a better recognition system #
If you’re designing your team’s career paths, how they get promoted and how they’re awarded a higher salary, consider how you can break the traditional dependencies:
career paths should allow promotion without forcing a competition for an artificially limited number of senior positions;
promotion should happen naturally in recognition of an individual’s increasing levels of experience and capability;
salary should not depend on job title or seniority of position, rather on how objectively valuable that individual is to your organisation (given a baseline market rate for the role);
individuals should receive coaching to help them achieve their potential, which in turn governs how they increase their experience and capability;
performance should be measured without proxies, as objectively as possible, and on an individual basis, without normalisation to the rest of the team.
Final thoughts #
Traditional corporate performance appraisals are a distraction. The most important measures of your performance are ultimately your own: whether you’re fulfilling your potential and whether you’re happy doing what you do. All else should be secondary.
Speak to you soon,
P.S. Introduce a friend to PRODUCTHEAD and you can win one of four free tickets to an in-person #ProductCon in San Francisco. Details below.
what to think about this week
I’ve been on both sides of performance reviews, receiver for most of my 20+ year career and giver for 4 of the last 6. I’ve also been intimately involved in processes to improve the processes. From first exposure, my experience of reviews was at odds with other messages I was hearing from orgs, so I carefully observed the effects on people, read widely, and talked with other people to make sense of it.
The vibe from managers where they still happen is typically “enh, they’re not ideal, but what can you do?” They are rarely taken as seriously in their toxicity as they should be, and this repeatedly causes harm. Hence laying out the case here to coalesce opinion to quarantine and ultimately eradicate them completely.
[ELIZABETH AYER / MEDIUM]
The way most companies approach performance management is completely broken. Everybody knows it, yet there aren’t many companies or managers seeking more progressive approaches.
Early on in my blog, I wrote one of my most popular posts – 4 key ways to spot a successful product manager – about measuring the performance of product managers. The problem is that a lot – and I mean a huge amount – has changed in product management, and my own approach, since I wrote it.
I found myself describing to Martin Eriksson at his recent book launch some work I did at the UK’s Ministry of Justice on measuring product manager performance. So here’s an update to my original article from a real-life case study.
[I MANAGE PRODUCTS]
Jason Shah wrote a guest post recently for Lenny Rachitsky’s newsletter, “A Product Manager’s Guide to web3”, which describes how product management differs in web3 companies. He notes that joining a web3 company can be “an opaque process and a risky decision”. I’d add “ethically challenging and morally grey” to that description.
[I MANAGE PRODUCTS]
One of the most important, and arguably hardest jobs we have as product managers is to work with our team to sift through information, read between the lines, and verify what is fact and what is merely opinion.
[I MANAGE PRODUCTS]
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Read more from Jock
The Practitioner's Guide To Product Management
by Jock Busuttil
“This is a great book for Product Managers or those considering a career in Product Management.”— Lyndsay Denton