Three Ideas for Replacing Performance Evaluations

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A version of this post originally appeared on Going Concern.

This week I spent some time at Sage Summit in Las Vegas, an event for CPAs and entrepreneurs who want to learn how to make their small businesses better, or alternatively, just want an excuse to party until their faces melt and call it a business expense.

There were lots of interesting sessions and I've met tons of cool people but Ron Baker's "Replacing the Annual Performance Ritual" stood out for me.  

I spoke to Ron briefly before his session, sharing my own terrible experiences with performance evaluations. He shook his head sadly and we shared the remorse for all of you who still endure this horrendous routine. 

Now, recently, Deloitte has pronounced forced ranking dead and PwC wonders if it's on the way but does that mean it's ending at public accounting firms? Since Ron Baker keeps doing these presentations, we'll have to assume that it's not and that seems like a perfect reason to share some of his ideas for obliterating performance evaluations and forced ranking, two storied traditions in the god-awful experience of public accounting employee appraisals.

RB kicked off his presentation by admitting that his only expertise in this area was that he had to suffer through performance appraisals himself, followed by hilariously accurate "Big Keith's Appraisal."

Baker has written two controversialblog posts on the subject, however, and both are worth reading. The second, Replacing the Performance Appraisal tracks his presentation closely so I'll be including some direct quotes from that in addition to his remarks from Sage Summit. He did not recommend that a company implement all of these ideas but rather they are the most effective he's aware of. Check out that post for all the details but for now we'll run through the high points of his suggestions:

1. Key Predictive Indicators for Knowledge Workers

Yes, KPIs, but not the KPIs you're thinking. Baker admits that a lot of these are subjective and not measurables; in fact, he's excited about that aspect of Key Predictive Indicators:

Knowledge work is not defined by quantity, but quality; not by its costs, but results. The traditional tools of measurement need to be replaced by judgment. And there is a difference between a measurement and a judgment: a measurement requires only a scale; a judgment requires wisdom. So many leaders worry that if they get rid of objective measures, they will introduce subjective bias into the decision-making process. So what? To get rid of bias we would have to give up emotions and discernment, which is too high a price to pay.

Fortunately for public accounting, subjectivity has always been a part of the performance appraisal process and a lot of these are probably something your firms already consider. Here's the full list:

  • Customer Feedback; 
  • Effective Listening and Communication Skills; 
  • Risk Taking, Innovation, and Creativity; 
  • Knowledge Elicitation; 
  • Continuous Learning; 
  • Effective Delegator; 
  • Pride, Passion, Attitude, and Commitment; 
  • High-Satisfaction Day (aka HSDs)

That last one, High-Satisfaction Day, is something Baker described in his presentation as those moments that make you go",YES! THIS IS WHAT I WAS PUT ON EARTH TO DO." He told the story of NewLevel Group who developed this KPI, who tracks these by employee and uses them as an indicator of morale, culture and even, yes, profitability.

Go to his post for details on each. If your firm doesn't already consider these, I suspect your performance evaluation process is a painful experience.  

2. The Manager's Letter

Baker takes this idea comes from John Flaherty's Peter Drucker: Shaping the Managerial Mind:

In this letter to his superior, each manager first defines the objectives of his superior’s job and of his own job as he sees them. He then sets down the performance standards that he believes are being applied to him. Next, he lists the things he must do himself to attain these goals––and the things within his own unit he considers the major obstacles. He lists the things his superior and the company do that help him and the things that hamper him. Finally, he outlines what he proposes to do during the next year to reach his goals. If his superior accepts this statement, the “manager’s letter” becomes the charter under which the manager operates.

Again, some firms might be incorporating aspects of this approach, but it's far from the norm.

3. After-Action Reviews

Who else but the U.S. Army to help teach each its people how to learn from their experiences and build on them. After-action reviews or AARs were implemented post-Vietnam because, uh, yeah, that didn't go so well. Anyway, the quick and dirty of an AAR:

Here are the questions you need to ask in each AAR:

  • What was supposed to happen?
  • What actually happened (the "ground truth")?
  • What were the positive and negative factors here?
  • What have we learned and how can we do better next time?

The objective is not just to correct things, but rather to correct thinking, as the Army has learned that flawed assumptions are the largest factor in flawed execution—another way of saying there is no good way to execute a bad idea.

Talking about projects in frank terms may not be every accounting firm's cup of tea, but at least it would force to reflect on what works, what doesn't and what will be done to improve the next project.  

Near the end of his presentation, Baker mentioned that his biggest critics on this issue are, yes, HR people. The professionals who actually go through performance evaluations would rather gargle broken glass. It'll be interesting to see how (or if) public accounting firms adjust their approach to assessing performance. If yours is already working on it, we want to hear about it. And if it's clear that the agony will continue, we want to hear about that, too. 

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By edkless
Jun 26th 2015 01:11

Ron and I are doing our radio show on this topic today at 1pm PT / 4pm ET.

Update: the show is now posted -

Or download from iTunes at

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By SherrillSleeter
Jun 26th 2015 01:11

Yes it was a FANTASTIC session! Thanks for the write up Caleb, much better than the phone photos I took of his slides.

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By Michael Crosby
Jun 26th 2015 01:11

I can see how the first two items could be used as an all-out substitute for a formal appraisal system; however, an after action review is used in the Army as a tool to improve operational effectiveness - not a substitute for the formal appraisal system. In fact, most AAR's (at least when I was in the Army) were never reduced to writing and, therefore, had little to no impact an a soldier's advancement opportunities.

I can see how AAR's, if reduced to writing, would be a valuable supplement to an appraisal system or the manager's letter, but they were not intended to be an all-out replacement of a formal appraisal system.

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By Rita Keller
Jun 26th 2015 01:11

This is an area inside firms that really does need an over-haul. I find that inside a CPA firm - everyone dreads them, the person communicating the findings and the person receiving the information.

I have done several posts on this topic. Here is a link to one (that contains some links to others).

Accountants are always looking back - at stats, at performance, at mistakes, instead of looking forward to solutions. They also tend to complicate many things that can actually be very simple - such as performance feedback. I like the Keep Stop Start method and some of my clients are beginning to use.

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