Saturday, 23 March 2013

The 360 degree performance appraisal system

If ever there were a tacit admission that modern financial institutions are too big to manage then the 360° Performance Appraisal system is surely it.

It can be characterised as many things: a orchestrated scheme for institutionalising nepotism; a sanctioned suburbia of rotten boroughs; management sponsored low-level cronyism; a Massive Multi-Player Online Role-Playing Game and, most emphatically, an unflinchingly tedious and colossal waste of an institution’s collected time and resources.

One thing you may be sure it is not is a meaningful way of evaluating staff.

The “360” is administered, as one might administer cod liver oil to an unwilling child, by the good people of Human Resources. They alone hold any affection for the process (and why wouldn’t they: it keeps them gainfully occupied for seven months of the year). Theirs are the ultimata and naked threats that accompany the system’s release each year. (inevitably it is decreed that this year there shall be no deadline extensions under any circumstances; each year defiant non-compliance and massive IT malfunction ensure it will be otherwise). The scope of the 360 - how extensive; how frequent; how in-depth - is a good measure of how captive a firm is to its HR department. It might be fun to index aggregate time and energy invested in the 360 process against share price and marvel at the inverse relationship. But no matter.

No-one doubts the 360 is well intended. So was Neville Chamberlain when he went to Berlin. By polling those with whom an employee has most closely worked regardless of rank, department or disposition and aggregating the feedback, it is meant to provide a comprehensive and unbiased analysis of each employee’s contribution to the firm’s performance.

Scoring is numeric against standardised criteria (i.e., multi-choice) although since marks out of five fail to provide a script for the awkward half hour “performance conversation” each October, appraisers are required to write prose evaluations as well. As one may have as many as 20 appraisals to write, even the most public-spirited employee will find the process trying.

Reducing matters to statistical analysis which can be fitted to a normal distribution is, of course, the sort of thing that aspiring management consultants (who inhabit HR departments in scores) adore, as it dispenses with the need to understand the fundamentals of the business. It is considered, wordlessly, to be lunacy by everyone else. If an employee’s contribution really can be reduced to something no more nuanced than a set of percentages, the open question is why have the employee at all.

Despite its admirable intentions to the contrary, the 360 is wide open to abuse, for the person who knows best with whom an employee has worked is, of course, that employee, and unless he is uncommonly stupid in no circumstances will he nominate anyone with wh0m he hasn’t already entered a mutual admiration pact.

To correct this bias, some systems allow “unsolicited anonymous feedback”. An admirable intention, but bitter indeed is she who goes out of her way to torpedo a colleague who has at least done her the favour of not requesting an appraisal in the first place. Bitter, and clearly short of better things to do. Most appraisers have trouble summoning the will to appraise those whom they do have to evaluate without volunteering to character assassinate those they don’t.

Some institutions will even go as far as appraising the appraisers on the statistical largesse of their appraisals, sanctioning those who are wantonly positive and rebasing their assigned grades. But to go to this length is to concede the system is irreconcilably broken and really only assesses an individual’s acumen at knowing who will put in a good word.

It is also to forget the all conquering power of one’s direct line manager (and, oftentimes, hers). No manager in her right mind will allow the statistical output of an obviously crooked system override her innate prejudice. Simply put, if your boss thinks you’re a moron, no amount of “consistently exceeds expectations” scores from your buddies in Operations will make a rat’s arse of difference to your hopes of promotion. And nor should they. The implied, and wholly false, presumption of a performance appraisal is that your performance management can be crowd-sourced. If that were true there would be little need for middle management or, for that matter, a Human Resources Department (now there’s a thought) at all: the firm would operate like a free market, and not the Soviet-style dictatorship it in fact is.

In the storied history of investment banking, that would be a radical idea indeed.