The Lectern: Performance appraisals, pay-for-performance, and government

I see that Congress is again considering preventing DOD from implementing/rolling out pay for performance and the National Security Personnel System (NSPS). As I have written earlier, I have very mixed feelings about this whole debate. (Actually, I just got an email from a government manager who had just read an old column of mine on this topic-- ah, the wonders of Google!) On the one hand, I sympathize with the orientation towards excellent government performance that characterizes many of those who are pushing these reforms, and I worry that critics are happy with a business-as-usual good-enough-for-government-work philosophy that we should never believe represents what we should aspire to as being good enough for government work.

On the other hand, I think that the reformers sometimes ignore the fact that there is lots of evidence from the private sector that performance appraisal often displays problems very similar to those we experience in government -- it is not at all the case necessarily that firms have this under control, and government is an incompetent outlier. A survey of business managers by Sibson Consulting showed that 70 percent of managers admitted (and this is therefore probably an understatement) that they had trouble giving a negative performance appraisal to an underachieving employee. There is lots of evidence that many employees in private firms believe that their managers appraise them unfairly, and that this can demotivate people rather than motivating them. An underlying problem is that surveys show that 70 percent of employees believe they are above average -- something that is of course statistically impossible. So employees who get good ratings may sort of take them for granted, and many of those who get poor ones will consider themselves unfairly treated.

There are no easy answers here, but a good summary of best practice appears in an excellent article by Professor Gary Latham of the University of Toronto, probably the world's leading academic expert on the performance effects of goal-setting, called "New Developments in Performance Management," in the January 2005 issue of Organizational Dynamics.

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