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Ed Kless: Ron, you left the section of your Performance Appraisal completely blank. You haven't done the Q&A.

Ron Baker: I thought that you filled that out.

Ed Kless: No. No, no. This is aimed at you. To what extent, do you believe that you have the skills to perform your job effectively? Then you just tick one of the boxes, not at all, to some extent, very much so, don't know, what would you tick?

Ron Baker: Don't know.

Ed Kless: Okay. Do you feel you have received adequate training to use your computer effectively?

Ron Baker: What are the options?

Ed Kless: The same. They're always the same; not at all, to some extent, very much so, don't know.

Ron Baker: Don't know.

Ed Kless: Don't know, again. Do you feel you're given the flexibility about how best to perform your goals? Do you want your options again?

Ron Baker: Yeah.

Ed Kless: Not at all, to some extent. It's always the same; very much so, don't know.

Ron Baker: Don't know.

Ed Kless: If don't know wasn't there, what would you put?

Ron Baker: What were the options?

Ed Kless: Not at all, to some extent … It's always the same; very much so, don't know.

Ron Baker: Very much so.

Ed Kless: Do you remember what the question was?

Ron Baker: No.

Ed Kless: Just forget it. Why do we repeat this Kabuki theatre, Ron; that gets it played out all across America and the world on our performance appraisals every year? Why do we do this?

Ron Baker: It's a great question, Ed, and of course, that scene is directly lifted from the British version, which I think is the funnier version of The Office and on our website, we will actually put the link to that, but you can find it on YouTube. It's a hilarious scene. Ed, every time we show at the audiences, including HR people, everybody laughs hysterically and as you love to say, laughter is confession.

Ed Kless: Yes, it is.

Ron Baker: We talked in last week's show, the economy in mind and we talked about the importance of knowledge workers and human capital and we know that human capital determines the performance capacity of any organization and that knowledge workers own the means of production. Essentially, they are volunteers, which means, they're only going to come back if they are well- treated and respected, and it just seems to me that the performance appraisal is not a human system.

Ed Kless: No, very much. It's … I think it was invented because there were a ton of poor leaders and managers out there and then some HR folks got involved and said, "Well, we got to make sure that people are at least having a conversation at least once a year." Then they came up with this stuff and they jam-packed this stuff in there, and well, at least, they are talking once a year now. Of course, this is just crazy because you became a substitute for, again, a human relationship. There we go again, Ron, talking about humans and soul and why we have to make organizations more human for people.

Ron Baker: It is interesting that our organizations are less humane and human than the people that worked in them and that I've been fascinated by this topic over the last 10 years and maybe it's grown out of looking at professional firms and looking at their … The timesheet and all these other devices that we have, we're just studying management ideas in general and looking back at their rates. One of the things I found interesting about the performance appraisal that Peter Drucker points out in his book which I highly recommend, The Effective Executive, is that the origins of the performance appraisal go back to clinical psychologist, the abnormal psychologist. Obviously, they were concerned about diagnosing weaknesses, right? You went to a psychologist with a, "Presenting Problem". The diagnostic is intimately familiar, intimately obsessed with finding weaknesses and that's one of the big problems I see with the performance appraisal it's inextricably focused on weaknesses, not strengths.

Ed Kless: Right. Of course, what people do is they'll add in the strengths and weaknesses type of questions just so that we have, "balance". That's not the reality. There's no truth to that at all. It's really about the weaknesses and that's what everybody focuses on no matter what. It's interesting you bring up this idea of presenting problem, because it's also a term that's used in consulting theory and practice about this presenting problem. What that is, is it's the problem that the customer comes to you with, as a consultant, and your job as a professional consultant is to not take that presenting problem as an actual statement of fact, but to … Instead, do your own research to find out what the problem behind the problem is, because oftentimes the presenting problem is not the real problem, it's an inaccurate self-diagnosis. Even if we're finding this presenting problem, is probably an inaccurate self-diagnosis, so somebody is saying, "What's my weaknesses are?"

Ron Baker: Right. It's like a doctor that focuses on the fever rather than looking for the cause of the fever, right?

Ed Kless: Exactly, correct.

Ron Baker: He's not looking … He got to look at the cause, not the symptom. One of the other great book that … You probably turn me on to this because you got me hooked on Peter Block.

Ed Kless: Right.

Ron Baker: Peter Block wrote a foreword to what I think is one of the greatest books written and specifically on abolishing performance appraisals which is the book, Abolishing Performance Appraisals by Tom Coens and Mary Jenkins. It's interesting because in there, they say that appraisal is not the system that drives pay or careers or status, it's an incidental effect of those dynamic systems. It's basically … The paper shuffling that takes place to sanctify decisions that have already been made.

Ed Kless: Oh, absolutely. We see this all of the time in organizations. It's this mad rush at the end of the year. You got to get it done by a certain time period. Especially, when it's done in coincidence with perhaps the end of a fiscal year, it just makes for putting an added pressure on it. Managers, leaders aren't focused on it. They just try to do it as quickly as possible. You find books too that are written about how to couch the language on a performance appraisal. I think there was a book, 500 phrases to use on a performance appraisal. Again, the phrase, "Kabuki theatre" comes to mind again.

Ron Baker: It really does and I wrote a couple of blog post on this on LinkedIn and it's so far … It's my most [Crosstalk 00:07:06].

Ed Kless: They exploded, right?

Ron Baker: It did. Yeah. Over 450,000 reads, I think there was over 500 or 600 comments and you have to divide those comments up between HR people and non-HR people, but the HR people took me to task, which I understand. One of the issues that I'd like to talk about just briefly is this legal defense of the performance appraisal. Everybody seems to think that there is some type of law that requires companies to do performance appraisals, and that's not true.

Ed Kless: No, no. I mean, as far as I know the only laws that are in place on certain things are attendance laws. They must … You must take attendance.

Ron Baker: Right. What's interesting about the book, Abolishing Performance Appraisals, Tom Coens, one of the authors is a third-year labor attorney who actually defended employees and brought lawsuits against corporations and other entities for wrongful discharge and those types of things. One of the things I loved about the book is, at the beginning, he tears down the argument brick-by- brick-by-brick that the performance appraisal will protect you in a court of law. He says, it's absolutely not true, and there is no law requiring performance appraisals. Now, this isn't to say that if you have a troubled employee and there … Or you're having disciplinary problems that you wouldn't document those things, of course, you would. Why are we subjecting a 100% or 99% of the people for the 1% that are bad apples?

Ed Kless: Right. Then our friend, Jay Shepherd, goes in his book, Firing at Will, goes even further. I mean, he says … Well, I think he calls it the "dumbest managerial tool," and then … From this perspective, he says, "No, this actually, on average, hurts your chances in court as an employer."

Ron Baker: Yeah, it will hang you in a court of law. In fact, that's what Tom Coens says, working on the employee side. He said, "I could usually hang a corporation with their own performance appraisal." I remember talking to Jay about his book in the whole performance appraisal issue, he said, "Yeah, when I took on a case and I opened up the personnel file and all I saw was the W9 and a few performance appraisals." He said, "I knew we had a tough case ahead of us."

Ed Kless: As opposed to that … Right. Actually having like fully documented performing appraisals that said, "Glowing things for like six years," and then all of a sudden nothing.

Ron Baker: Yeah, it's interesting. Most people that bring suits actually have great performance reviews at some point in their history. It's that change that triggers the suit. They don't protect you in a court of law. As Jay points out … He actually wrote a book called, Firing at Will, which is a manager's guide to how to fire people because Jay worked on the employer side, and it's actually a fantastic resource to help you do everything you need to do to fire somebody and protect yourself from lawsuits and other issues that you may have.

Ed Kless: Yeah, it really comes down to that. These things just do not work. What it … Some of the questions … Now, you said the feedback from your LinkedIn articles two categories. Clearly, the folks who were not HR employees they were really in favor of it, right? They're like, "Let's get rid of this. It's garbage."

Ron Baker: Yes, they were overwhelmingly supportive of the idea that these are just ridiculous things that we seem to go through, like you say, "Kabuki theatre," and they were all for getting rid of them. The HR people usually came back and said something like, "Well, you're throwing the baby out with the bathwater. Yeah, they may not be implemented but … Correctly, but we just haven't done at the right way, maybe we need more education … Managers, leaders need to be educated on how to conduct effective of performance appraisals."

Ed Kless: Okay. One of our favorite mantra is, "There's no good way to implement a bad idea."

Ron Baker: There isn't. That's the argument against this, is its deeply flawed from the get-go and there's just no right way to do it. It's like socialism or communism. I mean, this has been tried so many times. You can't say, "Oh, it's only because the wrong people have implemented it." No, it's a rotten idea from the court. There's no good way. Nobody could do it. The saints couldn't do it right.

Ed Kless: Well, just quickly Ron, before we take a break here. It is the rare HR person that did agree with you though, right?

Ron Baker: Yes. I actually located several different HR people who totally agreed and actually told me that their business was either turning these things off or moving away from them and devising other methods. That was really, really encouraging, because it's really hard, Ed, to find companies that don't do them. I believe the statistics that Coens cites in the book is 97.2% of American corporations use them and 91% of worldwide corporations use the annual performance appraisal.

Ed Kless: I mentioned last week a book that I've recently read and Ron has read it too called, Dear Reader, in which it's the unauthorized autobiography of Kim Jong Il, the dear leader of the People's Democratic Republic of Korea. One of the things that he talks about in the book … Remember this is … The author is Michael Malice who's now using Kim Jong Il's words against him because he collected all of the propaganda, is they came up with this great idea. Kim Jong Il came over this great idea what he called, "Criticism Sessions." The idea was that, every week you had to join to groups. Those who either through the party or through your job or even just neighborhood groups where everyone would get together and having kept notes on everyone else during the week, they'd fire criticisms at one another to help you in getting better what you're doing wrong. They went … They go through this whole process every week. I just want you to know imagine doing this. This is now have been going on in North Korea for, I think, it's 30 plus years that these criticism sessions have happened on a weekly basis. What I find interesting about this is that, we have, in modern American business and even business throughout the world that the same thing. We couch it a little bit differently; we called it, "The 360 Review."

Ron Baker: That's excellent. Samuel Culbert, who was a professor down at the University of Southern California, also wrote a great book against the performance appraisal called, Get Rid of the Performance Appraisal. What he said about the 360 … He said was, "The fad of 360 degree feedback is …" That it's supposedly objective and it's anonymous. He said, "Well, so as hate mail." He's a real [Cro-Magnon 0:14:21] when it comes to the performance appraisal.

Ed Kless: Ransom notes there. That's awesome, yeah.

Ron Baker: It does bring out an interesting point about the performance appraisal. By the way, probably many other management ideas that are now over a hundred years old that were originally invented or created for the industrial era and we are obviously in a knowledge economy. I equate these things to an analogy from the medical profession, an iatrogenic illness. An iatrogenic illness is a disease caused by the doctor. They're trying to treat you for one thing and they caused a problem and another. It's quite a problem because it's estimated that about 10 percent of people in the hospitals right now are there suffering from an iatrogenic illness. That's what I think about the performance appraisals. This is something we're inflicting upon ourselves.

Ed Kless: Yeah. Hundred thousand people a year by the way die from iatrogenic illnesses in American healthcare system, hundred thousand every year.

Ron Baker: Yeah, yeah, and that's big.

Ed Kless: Yeah, it's big. We see that, that's a huge problem in medicine. By the way, most of it is causing us something as simple as really doing a good job washing hands between patients, which that's only been around a 150 years.

Ron Baker: Correct.

Ed Kless: Take this and multiply it in the performance rate … Appraisal in businesses. This is … I love this concept of iatrogenic. I've done sessions on it because I think it happens in consulting all the time. Specifically, with the performance appraisal, it is absolutely iatrogenic. I think Drucker somewhere in … It might be in Effective Executive, but he says, "There's never been a performance appraisal system that has been designed by anyone, anywhere that has not caused someone some emotional harm."

Ron Baker: Right. I think you can get that just by talking to anybody who's gone through them. I don't know of anybody who goes into a performance appraisal or comes out of one feeling good or motivated or energized.

Ed Kless: No, in fact, the exact opposite. I got to tell you the story. This is back in the days when I owned an organization and I was doing a performance appraisal for one of the folks on my team. I was to deliver, at the performance appraisal and being the fun, gregarious guy, so "Let's go out to lunch. Let's do it over lunch rather than sitting here in the office go out to lunch." She gets in the car with me and we drive to the restaurant, I think it at Friday's or something like that. We sit down and I delivered the performance appraisal which, by the way was an absolutely glowing … I thought glowing review. I thought I had some really good stuff and I think she was doing really, really, really well. Of course, I had to say the weaknesses and I could see her sink in her chair a little bit when we talked about the weakness because it was on the stupid form. Then the last thing we did in the performance review is we let them know what their salary increase was. Now … This person got … I believe it was a 10% to 12% raise. She was expecting more, right? As a result, I learned my first lesson about this is if you're going to do a performance appraisal for anyone, do not drive to lunch with them in the same car. That's the first important point. Make sure you've got separate modes of transportation.

Ron Baker: Right, right.

Ed Kless: Then what we took from that … There was, "Oh, okay, well, then to fix this, all we needed to do is separate this out." We separated out the performance appraisal from the salary review and that … Therefore, they wouldn't get conflated and [confused 00:18:09], but it didn't work, it didn't matter. It was … Because we're still talking about, "Here's your weaknesses."

Ron Baker: Right. This is the other fascinating thing about this, is that, performance appraisals, if you look at it, this is what Coens does in the book. They look at all the academic studies and there's even meta studies. He has studies of studies on, "Does performance appraisal improve performance?" That's the one thing that it's designed to do and there's no evidence that it does, Ed, and how rare it is to see academic studies lined up that way.

Ed Kless: Yeah.

Ron Baker: There's not many that come in over 90% and say, "There's no evidence that these things are improving future performance." It's like you would think that we would have better systems or better processes in place for knowledge workers than simply relying on something because that's what we've always done.

Ed Kless: Right. Well, I'm reminded of the … Like the Facebook meme that goes around, "You had one job." That is like the picture of the Olympic rings where it didn't [cut 00:19:18] light up or whatever. Like the performance rate, "You had one job."

Ron Baker: [I guess 0:19:20].

Ed Kless: "Actually, you increased performance."

Ron Baker: It didn't work. Some of the … Coming out of this iatrogenic illness, I think another principle comes out of that, that's really, really useful, which is the Hippocratic principle, right? The first, "Do no harm."

Ed Kless: Primum non nocere.

Ron Baker: Yes, thank you. I know you're the Latin expert. That's excellent. That's a fantastic principle not only for professionals but I think for just an ethic … For any business or any system or process, it shouldn't do harm. Let's face it. The annual performance agony seems to do more harm than good.

Ed Kless: Yeah, oh, it absolutely does. It absolutely does. I just want to get back just quickly before we go to the details of the deleterious effects, the Kabuki theatre that it is. I had a performance appraisal done a number of years ago by a boss of mine. It was interesting because clearly … It was one of those deals where he was not enthusiastic. I was not enthusiastic about it. I mean, we had a great relationship as … No matter what. This was really Kabuki theater, because it was just a complete waste of time for both of us but he had to take off … Did Ed's performance appraisal. He flies in to Dallas and has to stay and he's sick as a dog. I mean, absolutely sick. We're going to meet for dinner or something but he said, "Oh, I can't do this." I drive over to his hotel room instead to deliver the performance review while lying on the couch, right? I'm sitting in the chair trying to stay away from the dude, because I don't want to get sick, right? He's going through the whole thing and it was classic. He hadn't actually read what I wrote.

Ron Baker: Yeah.

Ed Kless: Right?

Ron Baker: Right.

Ed Kless: Because … The one section … This guy, by the way … I'd know he was a stickler for grammar, right? He is very precise about spelling and grammar. I knew that about him and that is cool, right? On the performance appraisal … There's a Word Document, right, that you had to fill in. The Word Document … You couldn't change the question, right? You'd only put the answers in. You've seen those. We have to fill in the form, right?

Ron Baker: Right.

Ed Kless: Right? One of the questions was, which is hard quoted into the form, "What do your …" It was supposed to be peers but what it said, "What did your payers think about you?"

Ron Baker: How did you answer that?

Ed Kless: How do … Well, [inaudible 00:21:43] you're going to get us into trouble here.

Ron Baker: Well, that's great. Ed, let's talk about some of the deleterious effects.

Ed Kless: Yeah, they are counterproductive, right? It's totally counterproductive. It's supposed to drive out fear and what it does it just increases the fear in people and they end up performing I think more poorly.

Ron Baker: Right, your mentor Howard Hansen talks about the level of anxiety and how anxiety inhibits creativity and innovation [wasn't it? 00:22:19].

Ed Kless: Yup, yup. I mean, his point that he makes this that, the idea of creativity and your ability to be anxious or non-anxious were inversely proportional. When you're highest … We have high levels of anxiety, you have low creativity and vice versa, right? Yeah, so, we want … We're talking knowledge workers here and 10 of what we're ended up doing is, making them more anxious, therefore, making them less creative. No, thanks.

Ron Baker: Great. As we talked about before, because of the origin of the performance appraisal coming from psychologists and looking at the presenting problem, there's a systemic weakness and that, they focused on people's weaknesses by design. Yet, when you read these books about how to conduct an effective performance appraisal … I remember reading one thing called the "sandwich technique" where you list maybe three or five strengths that the employee has and then include one or two weaknesses that, "You need to work on these things, Ed."

Ed Kless: Right.

Ron Baker: Because the way our minds work, we naturally gravitate towards the negative. To me, this is like taking a dollop of dog poop and scooping it into your favorite ice cream. What are you going to taste?

Ed Kless: Okay. I get it. That not only gives me a visual but it was … The smell thing and I just … okay. [Crosstalk 00:23:45].

Ron Baker: Sorry about that.

Ed Kless: [I can 00:23:46] break now, yeah.

Ron Baker: You know what I mean. It does it. It just … Our mind goes to the negative, so you're going to blackout all the positive that you heard. You're going to focus like a laser on those negatives and that's the systemic weakness in these things.

Ed Kless: Yeah, yeah, and it's reinforcing the command and the control. Hey, how are we going to enhance creativity not command and control?

Ron Baker: Right, right. Before we go on with the deleterious effects of the performance appraisal, I'd like to read an email that we receive from last week show, which was the "Economy in Mind" where we talked about intellectual capital and that being the chief source of wealth. This is from Jared and he writes, "Great stuff, Ron and Ed." He also asked, "Have you also read the Experience Economy" by B. Joseph Pine and James Gilmore?" Yes, we have read the Experience Economy and we have more to say on that. He goes on to say, "It's not necessarily pertinent to your great conversation but it's interesting, nevertheless." It definitely is interesting, Jared, and thank you for that. One of the things that we always talk about Ed, and this is the point that the Experience Economy makes as well, is industrial errs or economic eras are defined by their output, right? Hunt or gather, the agricultural revolution, the industrial revolution.

Ed Kless: Right.

Ron Baker: Knowledge is an output. There's no doubt that knowledge increases every year but it's also an input. What Pine and Gilmore say in the "Experience Economy" book is that … It's more accurate to say that, we live in an experience economy rather than a knowledge economy. I think it's a fair point.

Ed Kless: No, and we actually talked about that when we were preparing for the show … What we were going to call it. We really just felt the best to stick with the knowledge economy for the purpose and say, "It was the knowledge in mind." But Jared's point is dead on accurate, it's a great one. I've even … When we have talked a … Maybe about talking about it as the transformational economy and that, what we're really trying to do is produce transformations in people.

Ron Baker: Right. Where businesses are starting to take responsibilities for producing an outcome rather than just performing a series of tasks or selling new products, but actually taking responsibility for an outcome, I do think that, that is a fascinating way to look at where the economy is headed.

Ed Kless: Yup, yup. No, absolutely. Thanks, Jared. [That 00:26:21] we appreciate the email and you guys can send us emails as well. Anybody out there, tsoe@verisage.com., also #TSOE on Twitter. We do monitor that and as Ron says, the show notes verisage.com/tsoe.

Ron Baker: Right. Back to the deleterious effects, focusing on future performance is what these things are supposed to be all about … Shouldn't affect the feedback be given at any time, Ed. Why should it rely on some arbitrary date on a calendar?

Ed Kless: Right. It's madness and that's the other thing that happened. I said … I mentioned we separated the performance review from the salary review. Well, salary review is going to happen no matter what, right? I mean, that's going to happen. Shouldn't the feedback be known? In fact, my mentor, Howard, for a long time talked about performance appraisals. Before I think he has come down on the fact that we should get rid of them … Abandon them anyway. One of the things that he is to say is, there should be no surprises on a performance appraisal. Well, in order for that to be no surprises on a performance appraisal, you should be having an on-going conversation between two people, again. Therefore, if you're having that, wouldn't that make them the performance appraisal null and void?

Ron Baker: Yeah, negates the reason to have a performance appraisal if you have effective leadership. It seems to me sometimes that the performance appraisal is a substitute for good leadership or good management.

Ed Kless: Yeah. Yes, it absolutely is. At least I have seen it because I've worked most of my career in the technology space to some degree is because we have technical leaders and managers. Let's just be fair here, they don't always have the most endearing and outgoing personality types. I mean, I think that's an excuse though. I think that you can still remain and engaged individual even if you're not always gregarious, right? You should be able to have conversations with people.

Ron Baker: Absolutely. Somebody who grew up in an accounting firm, I can certainly confirm that a lot of the managers were not, "people, people" but it still … You've got to communicate; you're working with these people. "Geez, you're practically living with these people. You're spending one third of your time with them. You should be able to have effective conversations outside of the realm of this once-a-year arbitrary date.

Ed Kless: Well … Then the worst thing, I think this is worst in the performance appraisal is it … With the performance appraisal on steroids where they had … Where we forced rank ordering of people.

Ron Baker: Yes.

Ed Kless: I'm convinced that this is one of the things that has almost destroyed Microsoft. They have backed off of it. I don't know, Ron, if you saw this at PWC I think announce last week that they are backing off the forced rankings.

Ron Baker: Dr. Edwards Demings wrote about this. He said, "Ranking people does not help them improve performance." Again, we go back to the overarching reason why we even have these things is to improve performance and they don't do that.

Ed Kless: Right, right. I mean, I've talked to the people that I have worked for on some of these forced rankings and we have to have a certain number of people in this group, in this group, in this group. One guy said to me … He says, "Look, if there … If people weren't pulling their weight and were now standing, they wouldn't be on the team very long because quite frankly, we don't have capacity to deal with people who are not … That getting their job done."

Ron Baker: Right. It's almost like their peers would vote them off the island, long before their bosses even found out about it.

Ed Kless: Absolutely. That happens all the time.

Ron Baker: In the book, Abolishing Performance Appraisals by Tom Coens and this is a book I highly recommend. The foreword is written by Peter Block. One of the points he makes about the deleterious effects is that the Performance Appraisal makes it looks like it's the company or your boss who is responsible for your personal development. That's not true, it's the worker themselves. That is certainly true for a knowledge worker. You are in charge of your own development, not the company.

Ed Kless: What's interesting though, it is I believe its Drucker when he talks about what he, he says it's, this is what became to be noticed management by objectives. The problem is that the management by objectives has implemented was completely opposite of way it was originally intended. It became, all right I need to sit down and develop the objectives for my people and list out what their objective should be, after all I'm the leader, I'm the manager. Well, no, that's not what it's supposed to be at all.

Ron Baker: You know your story about taking the person to lunch. It brings up the other problem with these things as well. Is that there are so much noise surrounding the Performance Appraisal; information theorists call it noise in signal. The noise is, well, geez, am I going to get promoted, what's my pay raise is going to be, am I going to get disciplined, am I going to get fired. There is all this noise that surrounds an affective conversation about actual performance. That's another problem with these things.

Ed Kless: They're almost too many to list out here. It's just they're just silly.

Ron Baker: Even if a team member acknowledges weaknesses, a weakness that they have, it could be used against them. Who wants to acknowledge any weaknesses, it's like we're almost afraid to admit airs. It's just insane and it was funny in the late 10 posts in some of the comments because I was replying to the comments as well. I said it seems to me like the Performance Appraisals are well loved by HR people because they're like the KGB with little dogs ears on everybody. It's like a power trip. I have to say that did not go over well with the HR crowd.

Ed Kless: No?

Ron Baker: I think there is an element of truth to it. These are a control issue, but as we always loved to say, it's the illusion of control.

Ron Baker: Totally fake control. I just feel what it's also forcing is that it's we're supposed to be interdependent with each other. It's just it should look at promise as a whole but it looks at all of the some of the parts. How are you doing on this area, how are you doing in this area, the opening skit that we open with, do you have the proper skills to use your computer. One after the next there's a litany of staff as if that's what we are is all just different pieces coming together.

Ed Kless: Why can't you just have a conversation with your people? I mean, isn't that what management and leadership is. I remember being in a law firm earlier this year and somebody said well I don't know what my people are doing. I'm like what do you mean you don't know what your people are doing, where are you and of course he was a lawyer. Well, I'm in court a lot. I said, really you're in court practically every day for eight hours a day and you don't. Then maybe you shouldn't have people that you are in charge of, because you're completely ineffective manager or leader.

Ron Baker: He was then a therefore a non-presence. The question was, was he an anxious presence or a non-anxious presence; more in that in the future shell.

Ed Kless: It's also its interesting analogy, I just thought of this but somebody made the same argument about mentor programs, that there are substitute for crappy leadership.

Ron Baker: Mentors are chosen, never imposed.

Ed Kless: Exactly.

Ron Baker: You can't. So and so is going to be your mentor, great.

Ed Kless: If they work in the same organization and most of my mentors they don't even know they're my mentors, because they tend to be authors or even dead people. That you're exactly right, you can't impose a mentor on somebody I'd never seen that work. How can you impose a relationship on someone?

Ron Baker: Actually they can and do try but it doesn't work at all.

Ed Kless: I know. We want to talk a little bit more about this idea of what perhaps is the substitute for the annual performance appraisal and to kick that conversation off, I want to share with you one of the best quotes about leadership that I've ever come across. It's really from this quote that I think our substitutions come from. It's from Peter Block, Ron had already mentioned Peter Block earlier today. Block says the real task of leadership is to confront people with their freedom. He says this because he believes that freedom and accountability are not too sides of the same coin but actually the same thing. In order to have accountability, we must be free. His belief is and I think he's absolutely true that accountability is always chosen, never imposed. I choose to be accountable; everything else would just be compliance. Now maybe some of you out there are saying hey we'll just deal with compliance, that's fine. If you really want to add pave accountability in your organization, you can't sit around saying how do we get these people to be accountable. What you need to do is to have them choose to be accountable and the way that you choose for them to be accountable is by giving their freedom to make decisions, to do things and know that hey it's up to them really in the end. Ron, that being at the overall cover for this and the launching point, what are we suggesting that we should do instead of Annual Performance Appraisals?

Ron Baker: By the way I love that definition from Peter Block; real task of leadership is to confront people with their freedom. That is a fantastic definition of leadership. Peter Drucker wrote in all of his works about how important it was to focus on people's strengths and either make it relevant or ignore their weaknesses. Take anybody who is really good and have strong strengths and you're going to find somebody with a lot of weaknesses as well. Just like a sports coach, you got to move people to where they can play the best. Not try and improve where they are really weak. In that spirit, I think there's three replacements for the Performance Appraisal. There is key predictive indicators; what we call key predictive indicators; and what these basically are is if you think about your star performers in your organization and you would like to clone them, what characteristics do they have? What characteristics are predictive of star performance in your firm and so that's the first replacement. The second replacement is what Drucker called the "Manager's Letter," which I absolutely think is a profound idea. The third one of course is the after action review which we think is the best knowledge tool ever devised by man. Maybe Ed we can quickly go through some of the KPIs that we've seen companies put in place for their knowledge workers.

Ed Kless: That sounds great. I think what's important to note is that in knowledge work again, it's not defined by quantity but quality; not by cost but results. Once we keep those things in mind, we have to understand that what we're making here within in many cases with the key predictive indicator is not a measurement but a judgment. That's the thing I think that gets people a little bit uncomfortable is for them to get comfortable with the fact that we are judging people. We are judging them. We're not just measuring them. Measurement seems to be objective but when we're talking about performance especially of knowledge workers, its judgment and we have to be at comfortable with the fact that we are in fact judging people.

Ron Baker: We're not comfortable with being subjective. We rather be objective, hang or had on that and carry it out to two places, that you know two decimal points. You can end up being precisely wrong rather than approximately right. Some of the KPIs that we've seen and folks we're not recommending that you use all of these. You would pick from some of them or maybe even develop your own but some of the ones we've seen are the contribution to the organization. This could be not just things that generate revenue from customers externally but they generate value inside of the organization like capturing knowledge or mentoring or coaching, those types of things that they generate knowledge inside the firm, what we call the "invisible balance sheet." What do the customers say about this person? I rather have a firm head of people who are not very efficient but my customers love them, rather than have a group of people that were super- efficient but my customers really didn't enjoy being with them.

Ed Kless: Right.

Ron Baker: This is interesting. Interpersonal skill; things like listening skills and communication skills; what a doctor would call your bedside manner. These things can't be measured, they have to be experienced. What's their ability to deal with change, what is their pride, their professionalism, their passion. Again these are things that can't be faked nor measured but you can definitely see it when they are there.

Ed Kless: What about things like and we also take risk taking, innovation, creativity. One of my favorites, which is I think important and talk about something that's almost completely immeasurable but definitely being able to be judged and that is knowledge elicitation, are they capable of creating new knowledge and it's really I guess in another way of saying innovation. Are they even also able to transfer successfully transfer their knowledge to other people? Then off course the flipside to that is, are they a continuous learner, are they something somebody who is always increasing their knowledge skills.

Ron Baker: Right. All of these things as you can see are a form of their judgments. They are not measurements. The Manager's Letter, Ed, is interesting because what Drucker thought should happen. I'm going to use the terms "Employee Boss", I hate those terms but just for clarity, he said the boss and the employee should meet twice a year and he actually thought that the employee should write out the boss's objectives for the next year. What the boss wanted to accomplish and had to accomplish and what performance standards were going to apply and what additional resources you might need to achieve these objectives. Then he thought that both the employee and the boss should sign this Manager's Letter and it becomes the covenant between them. He wanted you to meet twice a year to role up for an update because conditions change. I thought that was very interesting and he made the employee think about their bosses objectives.

Ed Kless: What I love about it is it's not reflective at all. We're not going to talk about yesterday, we're not going to talk about six months ago, its future directed. What I also like is that the ideas of putting down to the team member, hey listen what do you think should be your manager's objectives. One of the things that this does is it tests if the strategy of the organization has been effectively communicated throughout the organization because if a team member is coming up with stuff that isn't in alignment with that, it's most likely a fault not of that team member but a fault of the leadership in the organization that you're not effectively communicating strategy.

Ron Baker: It has the strategy cascaded down to everybody. One of the companies that does not use Annual Performance Appraisals is Procter & Gamble. They use something called the Work Development Plan and it's got these characteristics of Drucker's Manager's Letter but everything's tied back to the brand strategy, because that P&G are working on a brand; pampers are tied. All your objectives are in line with that brand strategy. It's all forward looking, it's not looking backwards and that's what's missing from the Performance Appraisal. The Performance Appraisal were all sitting around playing historians with bad memories.

Ed Kless: Yeah.

Ron Baker: Talking about the future.

Ed Kless: Let me be clear in something. This goes back to your poop comment. Is that we can't just put some of these things because I think that's what so many people have attempted to do. They do put some of these forward thinking things into the performance appraisal. Then there is still the Performance Appraisal. How did you, how reflective and looking in the past and accounting for it. That's the thing I think that is hard for folks to understand. Is we're saying … I'm saying anyway, eliminate that conversation, it's done, it's in the past, lets concentrate on the future.

Ron Baker: This is why I think any organization would be better off just eliminating the Performance Appraisal even if they didn't replace it with what we're talking about. Because I think sometimes if you cut the cancer out you'll be healthier without trying to have to worry about what you replace it with. 

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