Why do we do performance appraisal? The authors suggest five different goals or functions that tend to be wrapped up in performance appraisal systems:
- Improved results for the organization
- Coaching and guidance for employees
- Feedback and communication to employees
- Staffing decisions and professional development
As Bas Vodde and Craig Larman discuss  and Michael James  points out, most HR professionals do not seem to be aware that modern research has shown that the most popular performance management systems in use today not only do not achieve the positive results for which they were supposedly designed, but they actually tend to produce net negative results. These systems are in place because they seem like a good idea and everybody expects them to work and, gosh, they sure seem commonsensical.
Yet, Tom Coens and Mary Jenkins say, "The widespread practice of using individual performance appraisals to attain organizational improvement stems from the myth that better organizational performance will result from getting each person to do a better job. Substantial organizational improvement can only be achieved by improving the whole organization as a complex system." The authors show that current performance management systems do not do a good job on any of these functions, and they further suggest that, as a start, companies should design separate systems for each of these functions if they want good results. I am not an HR professional, so I rely on the authors' surveys of the literature when I (hopefully correctly) restate their conclusion that there is virtually no scientific data that supports the idea that performance appraisal as currently practiced by the vast majority of companies achieves any of the things that we all routinely believe it does. It's interesting to me that W. Edwards Deming's 14 Points for Management, published in 1986 , includes the exhortation to "eliminate management by objective" and "abolishment of the annual or merit rating."
Performance Appraisal: Satisfying Your Company and Doing the Right Thing
None of the preceding negates the fact that most managers and most employees today must participate in the annual productivity-sapping and spirit-deadening ritual of performance appraisal. Managers in organizations that have adopted agile practices have a particularly difficult problem: Nearly all performance-appraisal systems are based on principles that are diametrically opposed to the agile philosophy, and virtually nobody can opt out of those systems. What can a sympathetic and thoughtful manager do to make lemonade from the clear water of agile and the lemons of traditional performance appraisal?