Performance appraisal systems have had the reputation of a necessary evil on management's to-do list, enforced by the HR department. Yet, managers continue to dutifully do them. In a recent study of 500 companies in the United Kingdom, nine out of ten were found to have a formal review process in place and 48% were considering some improvements to their performance management systems.

Changes are focused on business improvement, two-way communication, and clarifying for employees how they contribute to the overall objectives of the company, as well as empowering them to do so. A common feature of the changes is the introduction of broad performance scorecards. Employees might be rated on their relationships with customers, stakeholders, investors, employers, and suppliers.

Second, there is a strong focus on looking to the future and on improving the ability to perform going forward rather than offering rewards or punishment for last year's results. 83% of the improvements companies plan to implement focus on helping people develop skills in the future. The emphasis on school report-type ratings and an immediate link to pay has dramatically reduced.

A third growth area is helping line managers to coach their staff to reach their own decisions on how to achieve their goals. In performance management, the coaching process needs to be ongoing, not just an annual event.