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Traditional individual performance appraisals of subordinates have been one of the cornerstones of management practice for most of this century. Managers have relied on them to influence employee performance through feedback, motivation, rewards, and punishments. Indeed, the ideas and assumptions that form the basis of performance appraisal theory have become so ingrained that they are no longer questioned (if they ever were). Consequently, research in this area has tended to focus more on improving the validity and reliability of appraisal systems, rather than on assessing the actual utility of the systems to organizational performance. However, a critical, detailed analysis of traditional top-down appraisal practices suggests that they can foster short-term performance, build fear, destroy teamwork, and encourage rivalries. Thus, while managers have been led to believe that performance appraisals positively impact employee performance, the opposite may actually be the case.
The purpose of this article is to explore this alternative point of view, that individual appraisals may actually impede employee and organizational performance. Support for this conclusion has been drawn from the theories advanced by W. Edwards Deming and his associates that performance appraisal is one of the "seven deadly diseases of management [3]." Very little research has been conducted that supplies empirical evidence directly supporting Deming's theories. However, many studies of performance appraisal systems have provided data that may be used in this analysis. Data from numerous studies seeking to define and assess specific aspects of performance appraisal systems have provided significant indicators that Deming's theories may be correct.
VARIABILITY OF WORK
Most managers assume that the systems and methods they develop to measure individual performance are generally objective and have some degree of precision. Although managers using these methods believe this to be true, objectivity and precision may not be possible in an individual rating system. An individ
ual appraisal system is based upon three assumptions. First, employees differ significantly in their contribution to the organization. Second, the differences in their contributions must be due, in part, to the employee's individual skill and effort (as opposed to sources of variation caused by factors outside the employee's control). Finally, raters must be able to distinguish between these two possible sources of variation and base the employee ratings only on those factors over which...