(From LinkedIn)—My prior post pointed out the deleterious effects of the annual performance appraisal and how they don’t actually increase performance. So, what should replace them?

Although I will attempt to provide a superior replacement, I think the premise of the question is flawed. After all, you don’t ask the firemen who saved your home what they intend to replace the fire with.

That said, there are three strategic resources to replace the performance appraisal system:

1. The manager’s letter

2. After-action reviews

3. Key predictive indicators for knowledge workers

A critical distinction is being made between a key performance indicator and a key predictive indicator. The former is merely a measurement—such as the number of patents filed, or new clients—but lacks a falsifiable theory.

The latter, by contrast, is a measurement, or judgment, guided by a theory, which can be tested and refined, in order to explain, prescribe, or predict. It is the search for cause and effect.

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. Neurologist Antonio Damasio has studied brain-damaged patients, demonstrating that without emotion it is impossible to make decisions.

Admittedly, the following KPIs raise rather than answer questions, but at least they raise the right questions. Better to be approximately relevant rather than precisely irrelevant. Enlightened organizations allow their team members to decide which of the following KPIs are most important to track and develop.

I am not suggesting utilizing all of the following KPIs. These are just some of the more effective ones I have seen.

Customer feedback. What are the customers saying—good and bad—about the team member? Would you trade some efficiency for a team member who was absolutely loved by your customers?

Effective listening and communication skills. It is easier to teach reading and writing, which are solitary undertakings, than to teach listening and speaking, which always involve human interactions. But how do you measure listening and communication skills?

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