Evidence is mounting that conventional approaches to strategic human capital management are broken. This is particularly true for performance management (PM) systems—the appraisal approaches in which employees (working with their managers) set goals for the year; managers interview others who have worked with them and write up an appraisal; employees are rated and ranked numerically; and salary, bonus, and promotion opportunities are awarded accordingly. A 2013 survey by the Society for Human Resource Management asked HR professionals about the quality of their own PM systems; only 23 percent said their company was above average in the way it conducted them. Other studies uncovered even more disdain. According to the Corporate Executive Board (CEB), a management research group, surveys have found that 95 percent of managers are dissatisfied with their PM systems, and 90 percent of HR heads believe they do not yield accurate information.
The performance management systems in many companies are misleading, cumbersome, and complex, requiring some HR departments to put aside an entire quarter to manage them. More important, they can be counterproductive. In the context of neuroscience research, most PM practices turn out to damage the performance they are intended to improve. That’s because they are based on a fundamental misunderstanding of human responses, as revealed in recurring patterns of mental activity.
Watch this video to see why traditional employee evaluations are flawed.
There are at least two basic problems with performance management. First, labeling people with any form of numerical rating or ranking automatically generates an overwhelming “fight or flight” response that impairs good judgment. This neural response is the same type of “brain hijack” that occurs when there is an imminent physical threat like a confrontation with a wild animal. It primes people for rapid reaction and aggressive movement. But it is ill-suited for the kind of thoughtful, reflective conversation that allows people to learn from a performance review.
For example, a supervisor might say, with the best of intentions, “You were ranked number 2 this year, and here are some development actions for the future.” In this company, which scores its appraisals on a 1–3 scale, a 2 ranking is supposed to represent high praise. But a typical employee immediately disengages. Knowing that others were ranked still higher is enough to provoke a brain hijack. The employee may not say anything overtly, but he or she feels disregarded and undermined—and thus intensely inclined to ignore feedback, push back against stretch goals, and reject the example of positive role models.
The second problem with PM is that it fosters an incorrect but prevalent view of human growth and learning. As Carol Dweck, the Lewis and Virginia Eaton Professor of Psychology at Stanford University, has discovered, most people hold one of two implicit theories about human growth and learning. The “fixed mind-set,” as she calls it, holds that intelligence and talent are basically established at birth and remain static throughout life. People are born smart or not, and there’s not much anyone can do about it. The “growth mind-set,” by contrast, holds that people learn, grow, and improve all their lives. This is accurate; most people do learn throughout their years. But they could learn far more effectively, and bring more of a high-performance attitude to everything they did, if they weren’t held back by the mental paralysis associated with the fixed mind-set.
Few people are thoroughly inclined toward either the fixed or the growth mind-set. Some people, for instance, might go to work with a fixed mind-set about their ability to be creative, believing that they can never become any better at innovating new products than they are today. But they might have a growth mind-set when playing classical piano, associating the rigors of daily practice with their ability to improve.