This time of year, many companies and organizations begin to evaluate their employees to give them their annual appraisal. It occurs to me that the way organizations evaluate their people is most likely related to their theory of management and employee high performance. Two basic methods come to mind: The collegiate method and the ranking method.
The Collegiate Method
I called this first method of appraisal the collegiate method because it follows what one might see in a college setting. That is, each person can vie for the top spots and if they complete a set of requirements or goals they get rated at the top. So, if I get a 100% on a college exam, I get an A. If my neighbor gets 100% they also get an A. Since knowledge of the topic is the primary concern, multiple people meeting high standards can mean that there is a broad understanding of the topic. Unfortunately, it can also suggest that the measure may be flawed.
I see the advantage of this method of appraisal being that each person has an opportunity to receive a top rating if they follow certain guidelines. If done properly, employees that work hard and meet the goals of the organization are rewarded, while those that do not are not. The problem seems to be that just like college grades, the top slots may become inflated because the managers are not doing their jobs—they avoid the tougher conversations with the employee.
The Ranking Method
I am calling the second method of appraisal the ranking method. Unlike the collegiate method, only a select few can be at the top—and some people must be at the bottom. The advantage of this type of appraisal method is that you reward the best of the best and can concentrate on improving the lowest contributors (at least, lowest relative to their peers). So, even though I may meet a set of goals for the organization, I may not have gone above and beyond: in my prior analogy, I cannot get the A because someone else did.
I see the advantage of this method of appraisal in trying to initially build a higher performing team. It gives the team and you a way to understand where your top contributors are. On the other hand, doing this for too many cycles would seem to erode trust in the employee population—especially if you are not continuously replacing the lowest people. Since people's performance does not always change that much from year-to-year, the same people may wind up at the bottom. That cannot be good for their morale.