Wednesday, June 01, 2016

Performance Appraisals: Are "A" Players Always "A" Players?

Peter Cappelli and Martin Conyon have conducted some interesting research regarding performance appraisals.  The topic has received much attention lately, with a great deal of criticism leveled at this common management practice for evaluating and rewarding employees.  However, limited empirical research has been done in the field, according to these scholars.  Cappelli and Conyon studied a number of issues related to performance appraisals.  Perhaps most interestingly, they examined whether people scored consistently on their appraisals year after year.   In other words, managers often about having A players, B players, and C players in your organization.   Capelli and Conyon asked:  Are "A" players always "A" players?  Are results consistent year after year?  Surprisingly, perhaps, they found that results were highly inconsistent.   Cappelli explains in this interview with Knowledge@Wharton: 

Cappelli:  As far as we can tell, no one has ever looked at this before or at least published it. Are the people who do well always doing well, or not? If we know your scores this year for everybody in the company, how much of next year’s score could we predict or explain? If the good people are always good and the bad people are always bad, we can explain 100% of your scores because next year’s score will be identical to this year’s score. If it’s random, which would be kind of astonishing, then it would be zero. There’d be no relationship between how people on average perform this year and how they perform next year. The good people could be good, the bad people could be good or bad.

Knowledge@Wharton: But you would think that they would follow a pattern. If you’re good in 2014, unless something has drastically changed, you’re going to be pretty good in 2015 as well.

Cappelli: Right. It’s between zero and 100%. If you think this A-player, B-player, C-player model is right, it’s going to be closer to 100. If you think it’s all just random or it’s kind of noise or people vary a lot, you’re closer to zero. So, that’s the question.

Knowledge@Wharton: I’m going to say that it would probably be closer to 70 or 75.

Cappelli: That’s a very common answer. People in human resources guess 80%. The correct answer is 27%, so it’s way closer to zero than it is to 100%.

Knowledge@Wharton: Why so much lower? I would think that it would be almost an automatic that it would be on the higher end.

Cappelli: Many people seem to believe that, especially people in human resources. But when I ask them if they have ever actually looked at it, the answer is no. They just assume it’s that way. Maybe they assume it’s that way because that’s what you hear from the A-player, B-player, C-player kind of story, and you could see some of this is a cognitive bias. There’s something in psychology known as the fundamental attribution error. It means that when you see somebody behave in a particular way, we are inclined to assume it is because of who they are rather than the circumstances. The classic example is somebody racing by you on the expressway going home. They’re driving on the shoulder and whipping past. Your inclination is to say, “That guy’s a jerk,” rather than to even entertain the idea that maybe it’s an emergency. We seem to be wired to think everything is due to the person. If you believe that, then you would be inclined to think the A-player, B-player, C-player model is right and good players this year are going to be good players next year, etc.C

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