A client asked a colleague to meet with a senior executive who had been the object of numerous complaints over the years. His value to the company was quite significant due to his industry knowledge and extensive technical skills. The loss of his contributions to the business threatened a huge setback in competitive advantage. The CEO asked my colleague to conduct a 360 exercise or what's also called multi-rater feedback. Despite many earlier failures to help this talented executive change his behavior, the deep hope of management was that holding up the mirror based on the anonymous feedback from his peers and direct reports would break through his hardened shell and motivate him to make needed changes in how he related to others. Although everyone agreed he would never be a bastion of interpersonal warmth in his business relationships, they hoped that his denigration of others who did not possess his technical prowess and industry expertise could be better controlled.

The feedback session did not go well. My colleague, a leading expert in this field, carefully navigated the landmines she knew covered the landscape of his psyche. Despite her focus on his remarkable strengths, he became increasingly agitated as the critical feedback surfaced on the report. It drew stark attention to his considerable maladies.

Beads of sweat appeared on her client's forehead. She politely asked if it was time for a break. Without warning, the man stood up abruptly. He grabbed the edges of the table and violently threw the table over with a huge crash. He then stormed out of the room. Fortunately, my colleague was sitting on the client's side of the table so that they could view the same copy of the report. After quickly contacting the CEO's office and HR, a hastily called meeting ensued, during which an early retirement package was assembled for a manager the company hated to lose.

While most performance feedback meetings don't go this badly, they are probably the most universally hated experiences in many organizations, both from the giver's and the receiver's perspective. I believe that in most cases, managers intend their feedback to improve employees' performance and increase their value to the organization. The reality is that most performance appraisals accomplish the exact opposite of what's intended. They close off communication and create stress and resentment on the receiver's part.

Romantic poet Elizabeth Barret Browning wrote a famous sonnet, “How Do I Love Thee? Let Me Count the Ways (Sonnet 43),” expressing her great affection for her husband, Robert Browning. Most members of the organizational community would like to write a reverse sonnet directed at their boss during performance appraisal season, “How Do I Hate Thee; Let Us All Count the Ways.” A very long list ensues.

Here are opinions and comments I hear routinely from givers and receivers of performance evaluation:

• “My annual performance appraisal meetings with my boss are incredibly awkward and stressful.”
• “My anxiety is off the charts. I feel so defensive, I don't hear a word.”
• “How can you fairly capture a year's work into one rating—it is not a true picture of my performance.”
• “I receive very little truly helpful and actionable information.”
• “The whole process feels demeaning.”
• “As a manager, it's the most cumbersome, time-consuming thing I do. It takes months to prepare them for all my direct reports and then prove to my boss that my ratings are fair. Candidly, it's a huge waste of time. I'd rather just talk with my direct reports every day or so.”
• “While the recipient is supposed to hear a balanced view of their performance, he or she focuses only on the negative feedback.”
• “A bad rating creates a lingering effect of decreased motivation. One survey said engagement drops 23% when an employee receives a lower rating than they feel they deserve.”¹
• “I could have solved world hunger in January, but my manager remembers only the minor dropped ball in December when he rates me.”

  Author comment: Most feel performance ratings suffer from the “recency effect,” “The tendency for individuals to be most influenced by what they have last seen or heard.”²

• “I have a boss who's never given an Exceeds Expectations rating for the past 30 years. She maintains, ‘I set my expectations correctly, so how is it possible to exceed them?’ My friend's boss gives her Exceeds Expectations for the most average accomplishments.”

  Author comment: Reliability across raters is notoriously poor.

• “I just play it safe to ensure I get a good rating and a raise.”

  Author comment: How performance appraisal is frequently used discourages innovation.

Scott Adams had a field day with Dilbert around the comedy so inherent in performance reviews, as depicted in Figure 10.1.

How do we fix such a broken model? What must be re-engineered to make performance feedback meaningful? Based on what we learned about the brain in Chapter 4, it seems obvious that the basic premise of most performance appraisal systems throws the hyper defensive part of the brain (the amygdala) into overdrive.

Some large companies are addressing common problems with the traditional systems. For example, Microsoft, Lilly, GE, Dell, The Gap, Accenture, Adobe, New York Life, and other well-known companies are getting rid of rating categories.³ Goldman Sachs, known for their highly mathematical 1-to-9 scales, recently stopped rating employees with numbers.⁴

To make this topic much more accessible, I talked with a practitioner who led his company to radically rethink how performance appraisal works in his organization. It was my privilege to talk with the CEO of a highly admired company that has dramatically changed its process for employee performance appraisal. Michael (Mike) L. Ducker is chief executive officer and president of FedEx Freight Corporation. Mike served in a variety of other roles at FedEx, including the chief operating officer and president of international express freight services at Federal Express Corporation. Mike previously served as an executive vice president of international express freight services for FedEx Express.

I asked Mike why he wanted to change the traditional system of performance appraisal at FedEx Freight. He minced no words in saying, “People just hated it!” He added that the officer and director levels particularly hated it and found it very labor intensive and exhausting. Managers dreaded the end of the year when the forms had to be completed, and described it as “fruitless activity.” According to them, it took a week of just “filling out squares.”

Mike pointed out that another compelling reason the company “ditched the old system” was the negative cloud that hung over the experience for everyone involved. “We wanted to celebrate employees' success. We wanted to make it a much more positive and uplifting experience.”

“We are in the service business, and we thrive depending upon the discretionary effort of every employee. It's just a different feeling when discretionary effort is present. This is crucial for us. You cannot recognize this vital competitive differentiator just filling in the boxes.”

Mike strongly believes that, “Employees want to do a great job. Nobody puts on their uniform, walks out the door, drives to work and says, ‘I'm going to screw something up today.’ Most people go to work and think about how they can do a better job than they did yesterday—they feel responsible and accountable for their actions. The manager's job is to create an environment where people can succeed and excel.” According to Mike, the old performance appraisal form, and more importantly the philosophy behind it, neither fostered nor recognized these inherently positive inclinations of FedEx Freight's employees.

Mike further espoused his philosophy of employees in saying, “We hire the best and the brightest people. We give them a just and fair place to work. We pay them commensurate wages with the marketplace. We give them promotional opportunities, and as such, we have always run some of the lowest turnover rates in the transportation industry. We believe that if we do those things well with our employees, then our employees will make every customer experience outstanding.” The problem remained that the legacy performance appraisal system was out of step with the company's philosophy of people.

After Mike became CEO of FedEx Freight, he hired a new senior officer of human resources, Jeff Greer. “One of the first assignments I gave him was to ditch the performance system and develop a new one that served the mission in a much more constructive manner.” Jeff, an attorney by background, began a total performance management redesign project, involving his peers from the start.

A critical goal was to “… make it less formal and a lot less intimidating. We called it a ‘performance chat’ and significantly increased the frequency from once a year to three times a year. We also stressed the need for managers to have much more frequent conversations about how employees were doing.

“We tied our new system to the foundational principles that have made our company successful—people, service, profit. We review these principles with our employees all the time. These three form a ‘virtuous circle’ that starts with people. If our employees are treated well, they give our customers an excellent experience, and then the customers reward us with more business and we make a profit—the virtuous circle. We reinvest that profit back in our people, back in our service, back in our company. The performance chat then revolves around the three elements of the virtuous circle. Additionally, we added two other categories: Development of Self and Development of Others to make a total of five categories, which form the ‘platform’ for discussion during our performance chat.

“Each of the five categories has specific subelements we discuss with our employees. For example, the people category includes interpersonal skills, collaboration, professionalism, hiring, and other facets. Conversation about profits would include budgets, efficiencies, costs, management of capital, etc. Managers guide the conversation through the topics but are expected to focus first on how the individual feels about his or her performance in various categories. The other point to emphasize again is that we want the frequency of the performance chat to increase dramatically. This includes the planned three times a year, but even more often on an informal basis.”

One of my curiosities—is there a form? “Yes, but a very simple one and only one page that covers the five categories.”

I also asked Mike how the performance chat stays connected to strategic priorities and other key expectations for a given job. Mike emphasized the company's fiduciary responsibility to FedEx shareholders. “The company determines a management by objectives program born out of the work of the strategic management committee at the holding company level. This committee reviews markets, competition, and company performance. The conclusions of this very detailed process are distilled into major corporate objectives. Some subset of these overarching corporate objectives is deemed relevant to each manager's functional responsibilities. The manager level and above have two ‘platforms’ reviewed in what are usually two different conversations. The first platform includes the five categories described earlier. The second platform for managers and above includes their subset of corporate objectives, which are tied directly to their bonus compensation.”

It's quite normal to encounter resistance when changing a legacy process. For example, certain stakeholders mastered the existing approach or maybe embraced the philosophy of the way performance appraisal worked historically. Those stakeholders may view the old approach as the best means to hold members of the organization accountable or believe the new slant as too soft.

Some human resource organizations prefer a more compliance-oriented approach and want the system to provide accountability as well as careful documentation of employee performance. It would be quite normal for HR professionals with this orientation to resist an approach with less structure. They also might feel that the average manager may not possess the interpersonal savvy to effectively use an approach that does not have the configuration of a check-the-box form.

Mike reported that there was a celebration when they jettisoned the old system and introduced the new one. They experienced minimal pushback, and he attributes the positive reception to several factors. First, FedEx Corporation chairman Fred Smith was “… incredibly supportive. He is an innovator and welcomed the simplification.” Second was Jeff Greer's leadership of the effort. Third was the inclusion of a variety of stakeholders, including those who may have been invested in a more compliance-oriented approach. When I asked Mike about any changes he would make in the process used to develop the new system, he said the involvement of key stakeholders was so valuable, he wished that he had included even more people.

Mike insisted that the legal team be involved. “It helped that Jeff Greer is an attorney himself, but the company's legal team participated from the outset.” He also wanted assurance that any new system would include appropriate documentation, “should controversy occur.” The system provides for a formal “performance improvement” process, as needed.

When I asked Mike how managers who prefer a more structured approach were adapting to the new system, he pointed out that built-in flexibility guides how it's used. Also, managers are required to provide one overall rating of each employee on a four-level scale:

1. Above Acceptable
2. Acceptable
3. Needs Improvement
4. Too New to Rate

Raters do not use numbers—only one of these four verbal categories listed. There is no forced distribution, in which a manager must divide the employees he or she rates in set percentages within each category. Mike added that if a manager rated 90% of his or her employees Above Acceptable and the unit was not reaching its strategic goals, then a conversation with the rating manager would ensue.

I asked Mike about training for managers in the use of the new system. For the initial launch, there were limited support materials. The company employs a highly talented learning and development group, which will soon implement a cutting-edge learning system with video and interactive modules.

FedEx Freight and other companies mentioned previously have clearly led the corporate world in innovation of new approaches to performance management. Legacy elements like check-the-box and elaborate numerical rating systems seem headed for the scrapyard of performance appraisal. The virtually universal hatred of most legacy systems forecasts a revolution over the next few years.

What Must Any Reinvention of Performance Feedback Include?

Because Extraordinary Influence speaks to how leaders transform members of their organizations, we should consider what principles and practices from this book might be incorporated in any rethinking of performance management.

Some elements of what I propose could be facilitated in a process or even a form. More important are the perspectives that leaders must adopt to truly transform the people they lead. A check-the-box system may inform, but it will not transform. Ultimately, a leader's transformational influence depends upon the person of the leader.

A check-the-box system may inform, but it will not transform.

I am a strong believer in the value of training; however, training alone will not make this approach work. Rather, it's the personal deepening of the leader who must learn to connect with his or her followers in a more substantive way. A leader's solid core makes transformation of others possible.

What are the perspectives and practices that I particularly value when an organization wants to reinvent its performance review system?