Performance Review
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For example, a new trend in performance review is quota system. There is top 20% "valuable" employee, 70% average employee, and 10% "need to do better" employee. The trouble with quota system is that what if the employees are all good? Then, there is this unnecessary turn-over at the bottom. The new replacement will most likely be inexperienced, and the cycle repeat itself. You'll end up with stable 90% employees, and 10% interns. Things would be the same as without quota, except that turnover rate will be higher.
Conversely, what if they're all losers? Then the top 20% will abuse the bottom ones, hence, you'll end up with 80% turn-over rate, instead of 10% turn-over rate. Quota system like this is always bad. It doesn't take into account the relative performance of the group. Proponents of this system argues that the decision is made by everybody as a group. That doesn't make it better, it makes it worse. Like the committee tasked with designing a horse, and came up with a camel. The trouble is, it turns the office into a political system, where popularity, instead of technical excellence, is the determining factor for leadership.
Another bad factor for the review is that they're usually done annually. This is extremely bad. It ties performance review with raises, instead of productivity. Performance review should be done continuously. Of course, it is impractical for top-level managers or human resource personnel to continuously monitor all employee performance. That's why the report is done annually. However, the immediate manager is there all the time with the employees. He should continuously lead, train, and review the employees so that come reporting time, the employee has become a model employee. Thus, no surprises.
The really bad thing about performance review is that they're often one-sided. That is, employer "judges" employee, but not the other way around. Naturally, this leads to many, many nasty instances. For example, ineffective managers will not blame themselves but instead will blame his people. Consequently, all the good people would leave, bad people will stay, and productivity plummets. Enough bad people will stay to allow bad managers to blame others without suspicion. There is really no way out of this, except eliminate the whole department or replace the manager and employee by bringing in new people.
What if good employees are allowed to evaluate managers? Then when some mid-level managers falsify reports, the top level managers will know about it and can take appropriate action. What if the managers acted rashly? The review will show that employees' confidence in management has dropped. Many problems can be avoided this way. Furthermore, good employees may even suggest good solution to existing problems, and frequent contributors can be selected for promotion. This two-way feedback is commonly done in educational system, where teacher performance is critical. Why not adopt the same system in business?
The answer to that question is simple: ego. Bosses don't like to be told what to do. They are, after all, the boss. However, by not allowing employee to have any input whatsoever means that employee loyalty is non-existent. This leads to Dilbertesque feeling that all managers are idiots, and in a way, that's true. Managers must have good, optimistic visions, at least for the company. However, fantastical visions with no way of achievement will only demoralizes employee. Who will know? When feedback process is crippled, everyone loses.
What most often happen is that whenever the company is being aggressive or tough in their performance review, it turns the company into political grounds. Relying on objective measure is usually the answer, but even that can be abused. What if the sales people engaged in short-cut selling in order to boost revenue? It will work for some time, say two or three years, but then will drop off. Of course, by that time, the said employee would have moved on, egged by glowing performance review, either promoted or transfer to another company. What happens then is the company as a whole suffers long term. It happened to Pepsi. When their slogan is "The choice of the new generation", they forget that in 15 years, there will be another generation, and the current generation will be turned off. No long term vision on that one.
Another hole in an "aggressive" performance review is that it often include growth as an indispensable factor. Unfortunately, people who have grown quite rapidly may very well hit their maximum rate. For example, a part-timer salesman may be servicing enough clients already, and may not want to take on additional clients since that means going full-time. What if management "forces" the employee to grow? The result would be alienated employee and he'll quit, thus the company loses a valuable, profitable employee, just because the policy forces growth at a certain rate. Conversely, a star salesman may just want to hold back a little to ensure enough buffer zone just in case the company gets aggresive in their quota, thus losing many opportunities for profit.
The clearest indicator that performance review process has broken down, and that politics or bullying process has occured is that when an employee is terminated, a security guard needs to be summoned or that the manager somehow feels the need to extract maximum concession from the employee, denying any chance for grievance report. This is usually done by witholding the final paycheck unless the employee signs an agreement not to sue the company. Whenever that happens, I'd be extremely suspicious of the manager, instead of the employee.
Performance review is one of the most critical component of a thriving business, just behind revenue stream. However, much can be abused and has been abused, resulting in needless lay-off and downsize. Remember: a good manager will be able to train, retain, and promote his employees. If a department is suffering, may be it's time for the manager to be judged by the people who knows him best: His own employees.