While doing some research on the pros and cons of bonuses as a compensation/motivation strategy, I came across Mr. Scholtes' writings on performance appraisals.

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I would love to hear your thoughts on the focus of systems vs individuals for overall company effectiveness.

ps. Great show -- love the podcast and I point it out to people frequently.

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Thanks for the kind words! Here are, briefly, my thoughts on performance appraisals and Scholtes' viewpoint.

I think Scholtes is wrong in one of his assumptions, and therefore his larger conclusion is invalid. He described the deleterious affect that reviews have on organizations, and to a degree he's right about that.

But that's because, despite his assertion that there is no right way to do it, he just hasn't seen it. What he has seen is terrible systems and policies and processes completely ignored in favor of selfish management behavior built around hidden cultural norms and a great stampede for middle ground that is anathema to development.

When I've seen it done right (hundreds of times), there are NO deleterious affects. NONE. People LOVE the system. Seriously. Clients, managers, recipients... they all LOVE it.

The reason is because he's not even following his own logic about it being part of a larger set of systems. Performance evaluations (annual reviews) are only the END of the overall performance feedback system that exists in EVERY organization. The reason everybody hates the review is not because the review is inherently bad, but because there has been no work in advance of the review, and thus the manager has NO CREDIBILITY to deliver feedback.

When managers start giving regular feedback - and I mean regular as in every day - things change very quickly. And the annual review simply becomes a compilation of strengths and opportunities already discussed, and as a platform for next year.

What's more, let's get over the whole individual getting screwed by the systems argument. Yep, it happens. That's true of every endeavor. But inasmuch as most companies PAY individuals, organizations allow those individuals to conclude that there is an individually-based talent market in existence, and therefore EXPECT performance feedback to be individually driven. If you want to change that, stay very small or start teaching kids and giving grades to large groups.

So, there you go. He's wrong.

Surprised? ;-)


PS: I am choosing not to address (he's wrong, but I don't think it's germane) his take on individuals vs systems. Systems thinking is a beautiful and maddeningly difficult approach to companies that is equivalent to modeling any living system by building a working butterfly. Abandon hope, all ye who enter here. I offer as my proof this under-reported datum: there is no reasonably sized company in the world that is run using systems thinking. If we can send a man to the moon, we can do anything... so for now, my conclusion is that there is no evidence that systems thinking actually works. Anyone who tells you to abandon what you're doing in favor of systems thinking hasn't a clue how big an order that is.