“Performance appraisal” is not equal to “performance management.” Appraisal can help you identify problems, but it may not solve them.

Is “performance appraisal” equal to “performance management”? In the process of management and consulting, I have found that most business owners have recognized the significance of performance management, and most companies are using performance appraisal for management (a survey by Boss Consultant shows that over 90% of companies claim to have performance appraisal). However, I have also noticed that many bosses hold misconceptions about using performance appraisal as a management tool. Let me take this opportunity to summarize the “Ten Major Misconceptions in Performance Appraisal” that I have observed.

  1. Believing that “performance appraisal will work wonders once implemented.” Bosses who have never used performance appraisal before, upon being exposed to the idea, may think that all their previous management problems were caused by the lack of performance appraisal, goal management, or quantitative management, and thus harbor unrealistic expectations for its introduction. They believe that “performance appraisal will solve everything,” such as employee execution, work enthusiasm, and efficiency. In reality, performance appraisal is just one of many management tools or part of management work. Only by systematically sorting out business and management aspects (strategy, model, organization, personnel matching, systems, processes, etc.) can the role of performance appraisal be fully realized.

  2. Using appraisal to replace management. Many people focus on the appraisal aspect, thinking that by setting performance agreements, employees will understand their goals and the rewards for achieving them and penalties for not, and no other management is needed. However, the focus of performance appraisal management is not the appraisal itself, but using appraisal for management. Managers using this tool can clarify tasks and goals with employees, promptly identify deviations in the process of achieving goals, and provide necessary support, help, and management in a timely manner.

When goals are clear, an employee’s failure to complete tasks is usually not due to unwillingness but to not knowing how to accomplish them. Helping employees is the unshirkable responsibility of bosses and senior managers, which appraisal cannot replace. Appraisal can help you identify problems, but it may not solve them. If through appraisal and coaching you find that an employee is fundamentally unsuitable for their current position, you need to make a decision to replace them. But that is not the appraisal’s job; it is another management task after appraisal.

  1. Designing overly complex appraisal systems. Many companies’ performance appraisal systems fail to function because the indicators and system are too complex, causing both managers and the managed to lose focus in pursuit of high overall scores. I suggest that for frontline employees, the number of appraisal indicators should not exceed 3, and for managers, not exceed 5.

  2. The performance appraisal system is either unprofessional or formalistic. Unprofessionalism is reflected in unreasonable indicator and goal design, such as arbitrary changes to indicators and goals, or improper allocation of indicators where an individual cannot be responsible for their own goals. The opposite error is formalism, where time is not spent on substantive goal and indicator discussions but on creating many plausible forms and weight calculations.

  3. Encouraging individualism. Essentially, a performance appraisal system is an incentive mechanism that links part of an individual’s income to their performance. Since performance is broken down to the individual, many companies’ systems fundamentally incentivize individual performance rather than encouraging employees to care about their team and the company as a whole. Such incentives can lead to misguided directions.

  4. Emphasizing short-term over long-term. Another misconception in performance management is focusing only on the short term, not the long term. We all know that without proper guidance, employees may sacrifice the company’s long-term interests for short-term gains, such as deceiving customers to close a deal. This must be fully considered in the design of the performance system. One approach is to design a corresponding promotion system that aligns employees’ long-term interests with the company’s long-term interests.

  5. Only appraising business personnel, not support staff. Most companies’ performance appraisals target only business personnel, not support staff (such as technical, financial, HR, service, etc.). I fully understand the difficulty of appraising support staff, which is that their business indicators are hard to quantify. But even so, the company’s performance appraisal should be comprehensive.

  6. Not estimating the possible outcomes of the appraisal. This can lead to some people’s performance bonuses becoming excessively high due to accidental factors. On one hand, the company may not be able to afford it; on the other hand, other employees may feel it is unfair, turning incentives into rewards for a few.

  7. Egalitarianism and the “good old boy” mentality. One purpose of performance appraisal is to objectively, quantitatively, and intuitively express how well employees perform, and to give pre-agreed incentives based on contribution. The essence of incentives is to reward those who do well and not reward (or reward less) those who do poorly. However, many performance systems are designed with egalitarian thinking, and managers may have a “good old boy” mentality when scoring certain quantitative indicators, resulting in performance management becoming a mere formality. This is another misconception bosses must avoid.

  8. Appraisal frequency too high or too low. If the frequency is too high, problems cannot be identified in time for guidance. If too low, the work of the appraised cannot be matched with results. Both situations make the appraisal meaningless. Generally, business personnel should be appraised more frequently (monthly or quarterly), while support staff should be appraised less frequently (quarterly or semi-annually).

How to do performance appraisal well? My suggestions are:

  1. Don’t believe it will work wonders; combine it with other management tools.
  2. Use appraisal to identify problems, and use management to solve them.
  3. For frontline employees, no more than 3 indicators; for managers, no more than 5.
  4. Be professional but not formalistic.
  5. Don’t encourage individualism.
  6. Don’t encourage short-term behavior.
  7. Appraise both business and support personnel.
  8. Estimate the effects of appraisal (at individual and company levels).
  9. Eliminate egalitarianism.
  10. Set a reasonable appraisal cycle.

This platform will soon organize visits to representative B-end platforms in China, where dealers from across the country can inspect and exchange ideas.

Organization Format

  1. Company visits
  2. Actual market case visits
  3. On-site explanations
  4. One-on-one exchanges

Note! All food, accommodation, and travel expenses are self-funded. Each registered friend only needs to pay a 200 yuan organization fee. Due to limited organizational capacity, we are only inviting 50 dealer friends to participate in this inspection.****************************

Introduction to the Companies to Visit:

Interested dealer friends can long-press the QR code below to contact me to register. When adding as a friend, please reply with “Inspection”.

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