Question: How do we use performance appraisals to drive a change in employee behavior?

I write to you to seek your opinion on how to put teeth in our appraisal process, in order to change the culture of the organization.

Over several years, we have followed a two tier process. In the first phase, employees fill their appraisals and discuss it with their managers. In the second phase, managers discuss their staff ratings with their bosses... and make recommendations on salary increments and other actions.

While this process works just fine in keeping order. We are unable to drive behavior change through this. In fact, I can't think of an example where an employees behavior was very different after an appraisal discussion... even after several modifications to the "appraisal form", over the years.

Is that your experience with other companies? For instance, two behaviors we are trying to drive are "process innovation" and "greater collaboration with our international team members and outsourced service providers."

15 Expert Insights

I agree that performance appraisals rarely change behavior in the long run, and do not have a driver role in culture change.  Culture change is altering the paradigms, the truths, of the members of an organization, and that does not happen with evidence or convincing or threatening - it happens when people see both the benefits and the possibility of a future that is different than the one they have.  That is a bigger conversation than permitted here.

We have found that true strategic planning (not 3-5 year tactical planning) that points to the difference the organization was created to make (which we call Vision), and that connects the present to that Vision, provides the incentive in the present to alter behavior and a culture.  So, the place to start is with a strategic plan, then redo job descriptions, and make sure they connect with the strategic plan (most job descriptions are just "to-do's", some have goals, almost none have an inspiring committment).

THEN, performance reviews can be used to help people be effective in getting what they want (the desired future).  

However, performance "appraisals" are the wrong view.  A manager's job isn't primarily to "appraise", like a judge at an ice skating competition.  A manager's job is to alter behavior so the desired results get produced.  Thus, if an employee deserves a poor appraisal, then their manager deserves the same poor assessment - in fact, all the way up to the CEO.

Then job reviews involve:
- How did WE do on last year's goals?
- What did we learn?
- What should be our goals for the coming year (informed by the strategic plan AND the personal goals of the employee)?
- How will we monitor and evaluate how we are doing?

There's a lot more than can be put here.

Cultures never change from process.  Cultures change because leaders develop compelling shared vision that the organization can't help but go for, and as that unfolds, culture change follows.

Traditional performance appraisal is a hygiene factor in this: it can screw things up royally, and often does, especially because it drives a focus on activities, not outcomes.  Put in rest in place, and think minimalist/development-oriented on appraisal, and you'll have a decent mix.  That applies to incentive design too, by the way.  (See Dan Pink's Drive: The Surprising Truth about What Motivates Us.)

While all of the above is true there is another component to consider. Driving behavior is antithetical to process innovation and collaboration in the first place. When you think about it, it's the attempt to compel people to be more creative and play together better. That rarely works. Both are a function of the experience of the ecosystem the people are playing in.

In both senses the concept of 'crowdsourcing' may be useful.

Consider this statement "I want to make people be more collaborative."  Inherent in the statement is the actual problem. Sometimes the best leadership is evidenced by the leader getting out of the way. In this case, It sounds like a top down directive that is absent collaborative energy in the first place.

So the direction could be instead....give the problem over to them to solve. Pose the question to the group you are seeking to be more collaborative. Ask them to collaborate on the solution. This will do three things.

First, it will already have them working together which is what you want in the first place.

Second, whatever solution is arrived at, will have a sense of ownership vs. buy-in to a methodology that someone else has imposed and then persuaded people to agree to do.  This sense of ownership is much more sustainable than buy in for the long term.

Third it can increase engagement for both the now and the future since it establishes precedent for how to address questions like this.

Re: the Process innovation shift is actually the same issue although slightly varying in the question posed. It's more like the groups challenge should be "What kind of environment do we as an organization need to create in order for process innovation to be a natural and organic event?"   Then give them the task of scoping out that picture. Let them innovate the solution for that environment. You always have final say but without your input it's like you're trying to improve the performance of the line without input from the line. Quality circles many years ago pointed out the limitations of that methodology.

I don't know the nuances of how you are actually conducting the performance evaluations, but based on what you have said, my sense is that the problem is the process you are using.  The employees are not involved with setting their own goals, and I suspect that that they don’t have much input on the organizational goals.  

Fact is, we cannot force people to change - they must want to do it.  And if you want to effect change in an organization, you need to involve people in that process.  People support what they help create.  

First, try having employees set their own goals so that they align to the organizational goals.  Get the managers to buy into this process.  (This is critical, as if managers don’t buy into the process, or assign workout outside of the goals, the evaluation becomes a useless tool.)

Second, have them evaluate themselves periodically against their goals along with their managers.  This should be done at a minimum of every six months.

However, tying performance evaluations to organization goals and culture, and having employees involved in the process are only part of the equation.  

The other is what are you actually doing to implement the new culture.  Have you changed your hiring practices to align with your strategic objectives?  To your new values?  Have you allowed (or encouraged) those who do not meet the new goals, culture and values to leave (or helped them leave)?  

If you want to change the culture of an organization, you must change the leadership and people in that organization over time.  That isn't said to be cruel or inhuman, but it is fact.  One organization I work with just fired their CEO, and three weeks later is as though it is a new place to work.  Are there still challenges?  Yes, of course.  However, how the challenges are viewed is different, as is how the people are treated.  That has made all the difference.

Finally, if your people don’t meet the goals that they have set for themselves, then they may not be at the right organization and YOU have an obligation to help them move on.  (Note I did not say fire them, but help them find a new position that is better suited to their strengths.)  

If your goal is to change the behavior of the employee, you need to implement the concept of reliable consequences. By this I mean there needs to be reliable consequences for every level of performance and behavior regardless as to whether you like the employee or not. In other words, you need to systematize the consequences so that people see and understand that there are benefits to excellent performance/behavior, they will retain their jobs for average performance/behavior and there job will be in jeopardy of they are not up to snuff.

If you do this well across your organization, people will get the message that you are serious about your expectations and will take appropriate action to address deviations. Once that happens, your systems will drive the right performance/behaviors rather than the supervisors,w which is critical to success.

Another way to think about this is that your organization is perfectly designed to get there results that you get and if you want to change your results, you may have to change your design. In other words, the types of behavior you are concerned about may be less a function of the employees and more a function of the system they work under. often times, a top down, controlling system will produce the types of behavior you just described. Look at your design and if that is a problem, consider changing it to one wherein people have the chance to have autonomy, mastery and purpose. The traditional work design will not allow people to act and feel that way. However, if you were to build a team of leaders where everyone is involved, engaged and well developed, you are likely to see the traditional employee problems go away and be replaced by a greater degree of energy, commitment and performance.

If you want to drive culture change, stop with the performance appraisals altogether. They are antithetical to positive culture change, provide very little value to anyone and carry a huge cost burden. What drives culture change is value-centered, people-focused, hands-on,  every day leadership. Leaders must "be the change they want to see."

The appraisal process can become totally ineffective in driving cultural change unless it is  aligned with human resource policies, the defined cultural behaviors and values, business strategy objectives, and brand positioning.

Have you clearly defined the behaviors required to deliver on the brand promise and business strategy and the behaviors that support the culture you are trying to establish?  And are these behaviors reflected in the goals and objectives that are established for employees at the beginning of the performance appraisal process?

If an organization does not hire, promote, discipline, reward and recognize, etc., based on the behaviors it is trying to drive, why in the world would an employee change behaviors?  What would be the motivation?   Don't know enough to say if this is the situation at your company or not, but in general, people do what you pay them to do, recognize them for, promote them for, etc.   What are the consequences and impact to the employee of not changing behavior to support the culture change?  If employees see others promoted, recognized, etc. based on criteria that contradict the required behaviors, again, why would they change?  And I also agree with Peter.  Leaders must lead by example.  Regardless of what you say or what you put into a performance evaluation, they will watch the alignment between the actions and words of your leaders.

So the bottom line is that I don't think this is necessarily an issue of the quality of the performance appraisal as it is one of alignment.

First, employee performance appraisal goals must be tied to the (desired) company culture (the identified core values and behaviors that drive “the way work gets done around here”) and, the strategic goals and objectives of the company, so that what the employees are being measured on and pointed to is what you are working to create and what you are reinforcing through rewards and incentives. If leadership does not live the defined values, employees will follow suit.

Next, performance appraisals need to be more regular and relevant to shape behavior– meaning multiple times a year, engage the employee (and perhaps peers in the process (360)), based on specific measurable outcomes, and include individual developmental goals and aspirations to best engage the employees to advance performance.

The traditional three level, two tier performance appraisal system (you describe) is sacred in many organizations.  It often is impossible to do more than tweak it and even that effort often encounters great resistance.  It may help if management recognizes that this legacy system is operating “perfectly.”  It is producing the results it was designed to produce: low risk, compliant behavior.

An organization’s culture is “the employees’ most successful way to thinking, feeling and behaving.”  However, Management can not DIRECTLY control the way employees “think, feel and behave” except through coercion (which does not work).

If you want a culture shift that nurtures “process innovation and greater collaboration,” management must create an environmental ecosystem that calls forth those behaviors.  Discovering and internalizing new skills and behaviors requires permission to explore, experiment, and safely gain experience that only comes from seeing what does NOT work!  All behavior correction must come in a safe environment, in real time,  with respect for the courage exhibited and the encouragement to keep experimenting.  

In our executive leadership model, we describe what you are trying to create as an "agile, enthusiastically engaged organization."  Performance reviews are part of the model, but they focus entirely on how management can sup-port the employee’s career development goals.  (There is not the space to further discuss ways of influencing how employees think, feel and behave.)

Performance appraisal can be part of a cultural change effort, but there are a lot of other things that will provide greater leverage (for good or ill) in changing culture.

That being said, they way you can use your performance appraisal system to drive behavior change is straight-forward. Maybe not easy, but straight-forward.

1. Define as clearly as you can what behavior you want. What does it look like, what sort of measurable, or at least observable, results does it have?
2. What, specifically, does that behavior look like in each role? What definable, measurable, observable outcomes does it produce for that position?
3. How often do you expect those outcomes to be seen in that position? Is this an everyday expectation for minimal success? Is it a once in a while, extra-ordinary observation?
4. What, specifically, are the impacts of the behaviors on the person in that position? If they don't do it is it cause for disciplinary action? If they do it, is it cause for disciplinary action? Is a specific number expected each appraisal period, and more is cause for upgrading, and less is cause for downgrading their appraisal? How much? Is it something that is not expected, but cause for upgrading their appraisal if observed?

As an analogy, think of a basketball team. One of the behaviors they want to encourage is assisting other members of the team in scoring. The appraisal system might state that each player should have x number of assists per 20 minutes of play time. Or on a football team, the running back has a minimum number of touchdowns expected per game, but the linemen get a bonus every time they make a touchdown.

If you clearly define what "winning" looks like for your people, clearly link observable, measurable behavioral outcomes to that definition of winning, and then your appraisal is primarily based on the review of unambiguous outcomes, you will be getting the maximum leverage from your appraisal system whether you are trying to drive cultural change, business improvement, employee development, or anything else.

The performance appraisal (PA) process can be used as a value-add to implementing strategies, such as what you describe in your culture change initiative. Rather than a year-end scramble to document accomplishments PA and Performance Planning can be positioned as a year-long focus on performance. The trick is to align individual performance with the accomplishment of key strategies of the organization.

One suggestion I would make is to consider incorporating a front-end goal-setting step that is aligned with the strategic plan, in this way:
1) widely share (cascade) the strategic priorities for the upcoming year or two; and make sure the desired culture behaviors you care about are clearly articulated;
2) set expectations that all employees create goals and objectives for the upcoming performance year that are aligned with these strategic priorities;
3) during PA reviews consider giving those desired behaviors (process innovation and greater collaboration ... ) greater weighting in the assessment and rating (yes measure both “what” was  accomplished AND “how” … the behaviors … the work was accomplished); and  
4) shape the second phase conversation is such a way to again reinforce these behaviors (such as, set the expectation that for higher ratings the manager must demonstrate via example what the employee has done to demonstrate these behaviors and what the impact on the organization has been as a result; and have others familiar with the employee’s work performance weigh in to affirm or challenge the manager).

And as you indicated, just changing the process or format is not sufficient. All management must be held accountable for implementing the changes and for modeling the new behavior. Their performance must be evaluated as well the same way.

For any significant change to take hold and for you to gain a critical mass of energy (this is how we work now) it is important to engage your employees on multiple level simultaneously by appealing to everyone's head, heart and gut. The case for change must be communicated again and again using a multiple methods (town halls, training, newsletters, focus groups, etc.).

Find alternate ways to engage your workforce for culture change is one of the most difficult changes to manage successfully; one process or approach will not be sufficient.

Performance appraisal has in my experience never been the vehicle to change the culture in an organization or the behaviours of the people. I have found that to change peoples behaviours coaching is the best vehicle. Through effective coaching starting on the top one can with time achieve a change in culture.

I don't think that performance appraisals are inherently bad. It depends on what one expects from them. Whether a performance appraisal is formal or informal, it's an opportunity to let someone know how they are doing compared to previously agreed upon expectations and goals.

As others have suggested, simply letting an employee know (or reminding them) that they need to improve in a given area isn't enough for many employees. Some may not feel motivated to improve and some may feel motivated but are facing obstacles to change that haven't been properly identified and/or dealt with.

So, one issue is what are the incentives to change and consequences for not changing. Another issue is how to help employees (and the organization) realize what the obstacles to change are (what are the incentives to stay the same, for example) and how to overcome those obstacles once they have been identified.

A potentially powerful tool for identifying the organizational and personal obstacles to change is Kegan and Lahey's approach for overcoming immunity to change. You might find it helpful for your organization.

Good afternoon,

In my work with Wells Fargo, I learned that sustainable behavior change comes from continual feedback and coaching. As others have said, effective feedback and coaching relies upon clear goals that are tied to organizational purpose, values, vision, and goals. In addition, it relies upon shared knowledge about what effective and ineffective behavior looks like within your organization. Some companies achieve this via competencies others via shared skill sets.

Of course if your organization does not use feedback and coaching currently, depending on the size of your organization and the current culture, it would take at least a year to affect change and most likely a three to five years to master feedback and coaching to affect behavior change. In my experience, it's worth it!

My best,

An essential discussion to have before trying to put teeth into a behavioral component of performance and rewards is this: if you had a top performer who was a behavioral problem are you prepared to reduce his/her rewards, perhaps even give none? are you prepared to let them know their behaviors limit their career potential? are you prepared, if necessary, to terminate their employment if the problem creates significant issues on a broader scale?  Are you absolutely sure you are committed to taking action in the scenario I have just described.
In the case of an existing behavioral problem I would often collaborate with the manager to set a high value weight on the behavioral performance problem and then fully explain to the employee why the value weight has been set so high and the potential impact it has on their future rewards and opportunities.  
The behaviors desired have to be clearly defined, supported by specific examples of what the desired behaviors look and act like and examples of how the existing behaviors differ from the desired ones.  It is also important to support the behavioral feedback with multiple sources of data related to the observed behavior (using tools such as 360 surveys, anecdotal data from multiple sources, management assessment data)
Take a look at GE's Results-Behaviors model for Performance Management and Rewards.  It is very simple, practical and descriptive.