Why performance appraisal matters part 1
When the former Chairman of the Federal Reserve, Alan Greenspan fronted a congressional committee about the causes of the 2008 Global Financial Crisis (GFC), he looked a wee bit sub-prime himself. He was dragged forth to explain why he'd done so little to avert the tsunami of silly debt that drowned Wall Street giants like Lehman Brothers, and pushed the world to the brink of an epic depression. Eleven years on, the recovery is brittle still. Governments and households are carrying enough debt to choke a donkey. Why did the Chairman ignore the brightly flashing signs? The reason, he said, was his faith in self-interest, a quality described memorably by Francis Bacon as the wisdom of rats. Greenspan believed the banks, as free entities, would not destroy themselves in an orgy of greedy stupidity. The instinct for self-preservation would kick in and Adam Smith's invisible hand would save the day. Unfortunately, the invisible hand was nowhere to be seen, but the rats were everywhere.
The GFC is an example of the nonsense that happens when accountability and responsibility are disconnected. If Mr Greenspan had studied psychology, he might have got a clue. To scale Maslow's peak, most people need skin in the game. They need to be both responsible and accountable. Responsibility tells us what to do, and accountability sets the bar. Jump! How high? See that bar? If a person is responsible but unaccountable, performance draws air. It sucks, you know. But when responsibility and accountability are properly married, the seal snaps into place and the engine bears down.
Where is the proof? Marx proved it, although he didn't mean to, and his proof was in reverse. Still, he gets credit for showing us the folly of diluting accountability to homoeopathic levels. Consider the economy of the former Soviet Union. It excelled at making shit. There were sunglasses so dark the midday sun couldn't penetrate them, raincoats vulcanized together in masses, and wobbly boots with the heels attached in the wrong spot at the wrong time. The Soviets had warehouses full of fail, but no one was accountable for anything except their Marxist purity.
But let's not blame the Left for everything. Greenspan's bankers had their own delusions: real estate prices will rise forever. Add to that a dose of dereg and the banking system becomes a casino. The billions in fees and bonuses funnelled to those in the sub-prime loan chain rendered them insensible to the consequences of failure. If the loans went bad and the bank tanked, so what? With the spoils they had carted off already to the alpine fastness of Switzerland, the landing would be soft and snowy, at least for them. I do not mean to suggest that every Wall Street banker was a financial psychopath, or every Soviet manager incompetent. The effects I am talking about manifest broadly and systemically.
Among the known paradigms of human endeavour, Wall Street and the Soviet Union are as far apart as you can get, yet they failed for similar reasons. I see little difference between the Soviet manufacturer who didn't care whether his sunglasses worked and the American banker who felt the same about his loans. The common factor is an absence of consequences, breeding indifference in the actors. This is what the psychologist B. F. ('Biff') Skinner had in mind when he said, "As the senses grow dull, the stimulating environment becomes less clear. When reinforcing consequences no longer follow, we are bored, discouraged and depressed."1 Herein lies the primary benefit of performance appraisal: it is a reinforcing consequence, impressing the idea that what we do and how well we do it matters. Archer North. 1 September, 2015. Edited 9 January, 2019. Next: Archer North Will Fix Performance Appraisal
1. Journal of Humanistic Psychology Spring 1991 vol. 31 no. 2 112-113