John Agno

John Agno, “ Unintended Consequences of Performance Reviews

Positive organizational change doesn’t take place unless the employee buys into the new corporate culture’s intended conformity roles and behavior. The unintended consequences of a new employee evaluation system can send the company reeling.

Last year, we witnessed how Ford Motor Company’s use of a new forced-ranking system resulted in a $10.5 million settlement of two class action suits with the company slipping into a crisis management mode of operation.

This year, we are learning some cultural and leadership lessons at Enron—how the emphasis on earnings growth and individual initiative tipped the culture from one intended to rely on aggressive strategy to one that relied on unethical corner-cutting.

BusinessWeek…reports that Enron CEO Jeffrey Skilling meant to encourage risk-taking through a new peer-review system where a performance review committee (PRC) ranked more than 400 vice-presidents, directors and managers. The decisions of the PRC greatly affected the bonus and stock option grants of the person being reviewed. In practice, the management evaluation system bred a culture in which people were afraid to get crossways with someone who could screw up their reviews.

Just like at Ford, Enron’s new employee evaluation system rewarded highly competitive people who were less likely to share power, authority or information—which undermined any teamwork or institutional commitment. That emphasis on the individual may have pushed many at Enron to cross the line into unethical behavior.

In a tough business climate, company priorities shift and more stringent performance reviews can affect employee raises, deny bonus payments and mark the poorest performers for dismissal.

Beware of the ‘group think’ impact on how you give and receive performance reviews this year. A down economy is not an excuse for unfair management practices. Please do your part to make sure the performance review process goes fairly and smoothly in these uncertain times.

John Agno is a former executive who is now an executive coach. He is the founder of the Coach2Coach Network.