In the past, I've encountered organizations that believed in two very different methods for evaluating performance. There are the Outcome-driven evaluations: by and large, it doesn't matter how you arrived at an answer (provided it was legal – presumably! – and ethical – to some extent), so long as the end result was good. And then there are the Process-driven evaluations: by and large, the outcome itself is not as important in evaluating performance as the process one used to arrive at the outcome. I've spent some time thinking about which camp I fall in, and why.

There is a logic to both approaches. For the proponents of the Outcome-driven approach, the logic is simple: outcomes are all that matters. The process does not put bread on the table. A good process is not that important, because over time, those that do have a good process that generates good outcomes will continue being rewarded. It's possible that one gets lucky once or twice, but it's unlikely that someone will continue getting lucky so those who rely on luck (or in some other way have a substandard process) will drop out sooner or later.

The proponents of the Process-driven approach, on the other hand, argue that the outcomes are just too noisy to get any sort of information. It's much better to evaluate someone on a good process they used to arrive at an answer, because with a good process, they may get unlucky once or twice, but by and large they will produce good outcomes. Rewarding people on process also encourages them to think about their process early on, which is more efficient than letting them "figure out" what works by observing the rewards from the outcomes.

The Process-driven approach used to appeal to me intellectually. It eliminates the element of luck, provides a clear structure for others to operate, and lends itself better to systemization (since the fundamental "building block"–the thing being reviewed, fine-tuned, and shared with others–is the process). It's less arbitrary and more elegant.

But as I saw more organizations, and thought about it more, I ultimately switched camps. I believe in Outcome-driven evaluations.

Why? The more I looked at companies advocating the Process-driven approach, the more systemic failure I noticed. A massive risk in evaluating based on the approach one took is that such an evaluation is inherently subjective. What makes a good process? Presumably those whose own process is good can judge others' process to be good. But that creates a vicious cycle: it's not that long before everyone praises and self-congratulates one another on an outstanding process while the outcomes deteriorate because of a lack of any kind of feedback loop. It also creates a structural excuse to poor performance: "Well, my approach was fine but I just got unlucky" becomes the commonplace response. Finally, it leads to misattribution of errors: the focus on process causes managers to want to alter the process if bad outcomes stream in, rather than to address the root cause of the problem, which usually is an underperforming individual.

Of course, many criticisms of the Outcome-driven approach are valid. But there are easy fixes. That's true, outcomes are noisy, but if we perform rich diagnoses that collect many data points, essentially turning an outcome from a binary one to a multifaceted one, we can extract a lot of information from any one outcome. It's unfair to evaluate someone based on bad luck – but there are ways to take that into account (for example, by having a three-strike policy). And the focus on making decisions systematically is possible to achieve through the creation of a culture that encourages debate around process, emphasizes success stories (i.e. good outcomes) that incorporate systematic decision making, and focuses on process in employee training and education (education, rather than training, is good for aspects of performance that involve long time frames).

On the other hand, I view the Process-driven approach as structurally and fundamentally flawed and thus unfixable. It's nearly impossible to objectively evaluate a process in the absence of an outcome (as Process-driven approach stipulates) – since that involves counterfactuals. Discussions around process often end up being theoretical in nature – good logicians often win. Finally, a focus on process prevents creative albeit unorthodox approaches from prevailing even if they are desirable and superior to others.

Venturing a generalization, I believe that any approach that relies on intelligent designers rather than feedback systems has fundamental flaws which limit its effectiveness.