An article in INC magazine recently reminded me that companies are still committed to annual performance reviews. One of the points of the article was that you should be able to adjust a person’s income at any time during the year when their performance merited it, not wait until the review.
I would have thought by now that everyone was aware that annual performance reviews are one of the most demotivating time-wasters in any organization. It doesn’t matter if you are having your employee perform the assessment. It doesn’t matter if it is a 360 assessment. It doesn’t matter if…
The major reason this doesn’t matter has been demonstrated by the scientific research of Dr. Elliott Jaques. Jaques was a Johns Hopkins and Harvard trained psychology professor at George Washington University. He first became known for coining the controversial (at the time) phrase mid-life crisis. It was a radical theory when first delineated in a research paper in 1965, and now is an accepted stage in life as we mature.
Similarly controversial was Jaques’s research into organizational structure and work-place motivation. He spent nearly 50 years studying what he called the “time-span of discretion”. That was his term for how far into the future a person could see the consequences of their actions. His research was conducted globally. He did a massive study with the US Army, and a similar one with the Australia military, with exactly the same results.
For the business world, the central thesis of Jacques’s work is the concept of a time horizon. The time horizon is the length of time a person can work without direction using their independent discretion to accomplish a task or project.
In short, what Jaques discovered was that the human ability to see a certain distance into the future is hardwired, and the distance varies in length from person to person. People with a longer time horizon need to be at the top of an organization. People with shorter time horizons need to be placed somewhere in the organization where they can be most effective. Part of the delineation is who is best able to strategize, and who is best suited to execute. Paul Saffo, of Stanford University, made this observation:
Time-span of discretion is about achieving intents that have explicit time frames. And in Jaques’s model, one can rank discretionary capacity in a tiered system. Level 1 encompasses jobs such as sales associates or line workers handling routine tasks with a time horizon of up to three months. Levels 2 to 4 encompass various managerial positions with time horizons between one to five years. Level 5 crosses over to five to 10 years and is the domain of small company CEOs and large company executive vice presidents. Beyond Level 5, one enters the realm of statesmen and legendary business leaders comfortable with innate time horizons of 20 years (Level 6), 50 years (Level 7) or beyond. Level 8 is the realm of 100 year thinkers like Henry Ford, while Level 9 is the domain of the Einsteins, Gandhis, and Galileos, individuals capable of setting grand tasks into motion that continue centuries into the future.
Here are the results of Jaques’s research:
Level 1 able to see from between 1 hour and 3 months: 45% of the world’s population
Level 2 able to see from 3 months to 1 year: 45%
Level 3 able to see from 1 – 2 years: 5%
Level 4 able to see from 2 – 5 years: 2%
Level 5 able to see from 5 – 10 years: 2%
Level 6 able to see from 10 – 20 years: 0.9%
Level 7 able to see 20 – 50 years: 0.1%
Level 1 has a direct correlation to intelligence. Levels 2 and above do not. We can easily have a doctor, mathematician, scientist, or programmer with a very deep, yet very narrow knowledge base. Part of the time horizon concept is the ability of individuals to see the relationship amongst disparate pieces of data.
Jaques wrote 18 books using this data to theorize about the structure that would create the most efficient organization that was satisfying to both employees and executives. His most popular (and least inaccessible) book is Requisite Organization. It is a lengthy description of both his method and a manual for creating the optimal organization.
The most valuable lesson for me in all of Jaques’s work is the realization that when we assign tasks or projects, we need to be aware of the individual time horizon of the person concerned. If a person’s time horizon is 6 months (Level 2), and the project completion requirement is 18 months, we are going to have a real problem. Someone in the line of control of the project must have a time horizon that exceeds 18 months.
It is important to not misunderstand or misuse this insight. Not being able to project more than six months out does not in any way preclude excellent work outcomes. It simply means that someone in the production chain must disaggregate tasks to fit the available workforce. For the Level 2 worker, we break the work into chunks each of which takes no longer than six months.
Let’s take the same example of an annual review of the employee with a time horizon of 6 months. This employee will not be interested in what happened more than six months ago. They will not be able to plan or project more than six months out. Why are you having this review? Isn’t it equally futile to expect annual profit-sharing to have a motivational effect?
In some circumstances, daily instruction is needed. In other circumstances, the feedback loop may need to be one week. It all depends on the work and the people at hand. What we know for certain is that by relying on an annual review for motivation, you have automatically excluded 90% of your workforce!