One of the main elements of performance appraisals is objective setting. Objective setting falls out of goal setting theory which states that people who are set specific, difficult goals outperform those that are not set goals at all or are set general goals like "do your best".
Where appraisal is linked to pay or where there are real consequences to performance appraisal whether in terms of tangible or intangible rewards it is of course in the individual’s interest to have a lower goal that they exceed. Goal bartering was a large part of my annual efforts in a previous role in a large corporate. Knowing that bonuses (and sackings) were driven by whether we hit target, all directors and senior manager’s put great efforts into trying to get a low target. Unfortunately, our Chief Executive was all-knowing and master of the black arts and would invariably set a genuinely difficult but achievable goal.
If there are no consequences – positive or negative – to the performance appraisal process then it can be ignored. If however, the consequences are strong then there is a tendency for all concerned to moderate their goal setting based not on whether the goal is a stretch but on ensuring it is achieved.
One route around this is regular goal setting rather than annual goal setting as is often practiced with annual performance reviews. If objectives are set annualy then in many organisations they are arbitrary. If they are set monthly then there is excellent data on which to set the goal (current performance) and a realistic timeperiod over which to assess performance.
It may not always be applicable but it is regularly a better place to start than an annual target.
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