Random Thoughts – Randocity!

How not to run a business (Part 4) — Performance Evaluations

Posted in business, Employment by commorancy on July 7, 2012

Do employee performance evaluations help or hurt your business? Are evaluations even necessary? The HR team may say, “Yes!”. But, that’s mostly because they have a vested interest in keeping their jobs. If evaluations are performed incorrectly (and the majority of the time they are), they can hurt your company and your relationship with your employees. Employee evaluations are also always negative experiences, so even this aspect can hurt your relationship with your employees. Let’s explore why?

Don’t let your Human Resources staff design the employee evaluations

If you absolutely must create and implement the tired ‘once-a-year’ evaluation system, then at least make sure you do it correctly. That is, assuming there is a ‘correct’ way to do this tired old thing. Employee evaluations should be designed by someone who is knowledgeable with writing evaluations and who has written them in the past. Using a service company like SuccessFactors or ADP to deploy your evaluations is fine, but is not required. Someone must still be tasked with designing the questions asked of the employee during the evaluation process.

Make sure your designer fully understands what is being asked of employees during the process, how it pertains to your business and most importantly, that the questions pertain to job performance and not to nebulous concepts like ‘core values’. Make sure the evaluation asks questions related to an employee’s actual job performance. The questions should also be relevant to all job roles within the company. Evaluations that target the sales teams with questions surrounding ‘customer interactions’ won’t apply to technical roles that have no customer facing aspects. Either unique multiple evaluations that apply to each department, or keep the questions generic enough that all job roles fit the questions.

Don’t ‘stack’ your evaluations

By stacking, this means that you should not mandate your managers give a certain number of excellent, good and poor reviews (i.e., ‘stacking’ the reviews towards certain employees — a form of favoritism). If your managers happens to have very good teams, stacking means that one or more than one of these individuals will end up with poor performance reviews, even though they performed well. Stacking is the best way to lose good employee talent.

Your staff has spent a lot of time and effort trying to locate the right employees for each job. With one stale (and lopsided) internal process, you may effectively, but inadvertently walk some employees to the door. Employees won’t stay where they feel they are not being treated fairly even while putting out high quality work. If a good employee is targeted with a bad review, don’t underestimate their intelligence to notice your stacked evaluation system and write about it on places like Glassdoor. Keep in mind that this is especially important for technical roles where talent can be extremely hard to find. Note, there are under-performers, but a once-a-year evaluation process is not likely to find many of them. Only can on-going, regular evaluation processes will find under-performers. Even more than this, only the manager can find underperformers via weekly one-on-one sessions, going through each employee’s work output.

Let your evaluation chips fall where they may. If a team ends up all with excellent reviews, so be it. Don’t try to manipulate some down because you feel the need to reduce cost of living wages. This comes back to paying your employees what they are worth. Note, this assumes that reviews will be tied to merit increases. Don’t assume that employees don’t know that the evaluations are stacked when you stack. That’s not only a condescending view, it way underestimates the intelligence if your workforce. If you’re thinking of decoupling evaluations from merit increases, see the next Don’t.

Don’t decouple evaluations from some form of merit increase

If you decouple employee evaluations from merit increases, you decouple the reason for employees to do evaluations. The question then becomes, “What’s the point in doing this?” If there’s any question surrounding the employee evaluation process, then your employees will not be motivated to participate. This also means that your evaluations will be worthless in the end. And, the employees will also know this. By tying the evaluations to merit cost of living increases, this ensures that all employees are motivated to participate properly in the process. However, keeping it tied to merit also means that this could lead to ‘stacking’. Avoid ‘stacking’ like the plague. If you really want to keep your employees on board, then let the evaluations remain truthful.

Additionally, when you decouple merit increases from the evaluation process, why have evaluations at all? Managers should be regularly evaluating their employees for work output and effectiveness. If they aren’t, then you have a bigger manager problem on your hands. If there’s no real reason to do evaluations, expect some employees to opt-out of the review process. If they chose to opt-out, let them. Forcing them to participate only leads to forced evaluations which may ultimately have them leave the company anyway and provide you with nothing of value.

Don’t require employees to rate their own performance numerically

Numerical or ‘star’ ratings are worthless. Numbers say nothing about the employee’s work ethic or performance. They are a failed attempt at trying to ‘rate’ an individual. The trouble is, if you artificially make the scale low by saying ‘No one is a 5″ on a scale of 1 to 5, then you have made the scale effectively 1-4. Then make the scale 1-4 and not 1-5. If you are using a scale of 1-5, then use the entire scale. If a person is a 5, then they are a 5. They are not a 4. This is similar to stacking. Do not artificially limit the use of something within the evaluation to make high performers appear lower than they are. This is counter productive and unnecessary and makes the employee feel as though they are under-appreciated. If that’s the intent, then it’s a job well done. However, it may lead to employee loss. Again, you spent all that time recruiting the talent, don’t squander that time, effort and money spent. Rating employees and artificially capping the scale is yet another visible employee negative.

Don’t do employee performance evaluations simply because you can

Employee evaluations are important for the manager and the employee to discuss performance issues and where performance can be improved. That’s the point in this process. It is not about anything other than how to get the manager and the employee on the same work page. Running this through multiple managers and multiple staff all the way up the chain to the CEO is pointless. Not only is it a severe time waster for those above the employee’s manager, it’s also a privacy issue that, for some reason, upper management and the human resources department alike think they should be privy to. In reality, any performance issues are between the manager and the employee. Ultimately, because of upper management prying eyes, any actual performance issues are not likely to present on an evaluation because it might actually become a hostile workplace or HR violation issue. Most evaluations are highly sanitized by both the employee and by the manager. Any real work issues are discussed in private between the manager and the employee. They are never included on HR based performance evaluations.

For example, an employee with poor hygiene and who is causing issues around the office could cause some severe HR legal issues if this information is placed onto a written employee evaluation. Yet, it is a performance issue. How do you document this without causing potential legal issues? This is the problem with once-a-year employee evaluations. Employee evaluations tend not to document the types of issues which result in legal issues for a company. These types of issues are sanitized from evaluations for this reason. This also means that company wide evaluations are by their very nature not completely accurate. If they’re not accurate, why do them?

Let the managers handle all performance issues internally. If the process needs documentation, then have the manager do so. But, do so privately. Airing the dirty laundry for all to see is ripe for both hostile workplace issues and could document potential legal issues that could arise should the employee leave as a result of a documented performance issue. Note that anything written and placed into the employee file can be come legal fodder should employee legal issues arise. If the evaluation process documents an illegal activity within the company, then your business is at risk. Leading to…

Don’t sanitize employee evaluations after-the-fact

If there is something written on an employee evaluation that puts your business at legal risk, don’t sanitize the evaluation or destroy it after the fact. This will make things far worse for your business. Instead, leave it as it is. If it’s a legal risk, you can defend yourself in court even if it’s in the document. Removing it from the document or removing the entire document is far more problematic legally than leaving it there. Note, if your employee has to write any part of the evaluation, they can make a copy for themselves. If an employee unknowingly describes an illegal business activity on the evaluation, your business is at risk no matter if someone in your organization deletes or sanitizes it. If you are concerned that some illegal activity could appear on an employee evaluation, it may be smarter not to do evaluations. An employee may keep a version of their copy for their records. You can’t easily expunge an employee’s personal records.

Don’t expect much productivity out of your employees during evaluation week

Employee evaluations kill at least a week of productivity time for every employee in the company. Instead of focusing on their job at hand, they are focusing on paperwork that is not related to their job. Expect that evaluations will lose about a week of productivity just for the paperwork portion alone and turn it into non-productive time. If your employees’ work time is important to you, you need to understand that during the evaluation process, far less output than normal will get done. This means you should choose a slow time of the year to perform evaluations. The more you ask of the employee to do on the evaluation forms, the less actual work they get done. Be careful with this process as it can lead to a lot of lost productivity. Note, there will also be a week or two of aftermath from the evaluation process where employees will reflect, brood and be distracted as a result of the outcome of their evaluation with their manager. Without any upside to doing the evaluation, this process simply leaves that bad taste to fester. Which leads to…

Don’t expect sunshine and rainbows

Employee evaluations are by their very nature negative job experiences. Always. Evaluations never give glowing job performance reviews. They are always there to show all of the flaws and weaknesses of the employee and make sure they feel like crap for at least a week or two following completion of the evaluation. This can negatively impact productivity following the completion of the evaluation. You need to understand that this process is by its very nature a negative job experience. It is never a positive experience. The only positive is a merit increase, if it comes. For an employee’s suffering through another performance evaluation, the upside is that employees will hopefully see a higher paycheck. If you decouple merit increase (as stated above), the employee evaluation process becomes a completely negative experience without any upside benefit to the employee. In fact, there is very little if any upside benefit to the company, either. This project then becomes an exercise in futility. If you really want to make your employees feel like crap for several weeks, this is the way to do it.

Think twice before implementing an evaluation system solely because you think it’s necessary. If employees feel that their evaluation is unfair (many will), expect a number of people to walk away from the company. Expect those that stay to underperform for at least a week following any evaluation. Expect some employees to brood and eventually leave months after their review. You will also need to accept some employee departures as a result. Other employees will realize the exercise in futility and seek a job elsewhere. Some my realize the unfairness of the ‘stacking’ and try to find an employer is more fair about this process. Make sure you are well aware of the full ramifications of an evaluation system before you implement it.

Make sure employees get some kind of positive benefit after the evaluation is complete (preferably a merit increase). If you’re planning to make your employees suffer through this negative job experience, then you need to be prepared to offer some sunshine and rainbows to your employees at the end to make the process go down easier. As Mary Poppins once said, “A spoonful of sugar helps the medicine go down” . You need to find that spoonful of sugar… and I don’t mean literally, either (don’t be funny and put a sugar cube on their desks).

Note that the evaluation process should never get in the way of actual work. Yet, it does. It interjects itself between the manager and the employee in a way that can drive a wedge between the employee and the company. A wedge that might otherwise not be there were sleeping dogs left lying, as it were. Employee evaluations can open a Pandora’s box with some individuals, so be careful with this process.

Do think up a better way than the traditional performance review system

If you can come up with a new improved performance system that works better than the old, stale, negative system, then by all means implement it in your company. Such a system would do wonders for making this process much more smooth. Unfortunately, I do not believe such a thing exists. In reality, having monthly one-on-ones between the employee and manager should suffice as an ongoing performance review system. It’s far less negative than the once-a-year evaluation which is mostly pointless. Do away with the once-a-year evaluation system and implement an ongoing manager and employee relationship building system that keeps the employee far more on track than a once-a-year system which really benefits no-one.

Employee evaluations can both help and hurt your company at the same time. Evaluations can open up problems that may not be necessary for an employee to perform their job properly and at the same time, it always ends up as a negative experience for all involved. If you really enjoy running your employees through the ringer once a year, the stale old evaluation process is the way to do it. Worse, though, is that because it’s a once-a-year event, it doesn’t really serve much purpose unless it is tied to a merit increase. If it’s not tied to a merit increase, this is a fruitless exercise. This is part of the reason many companies no longer do one-a-year evaluations.

Basically, do not feel compelled to run evaluations simply because you think you need them. Think twice before implementing these tired vehicles when they don’t really benefit anyone. If you must set up a performance evaluation system, then conduct it once a month between the manager and the employee. Let them discuss active projects, what’s going on today and focus on current performance issues. Having an on-going regular relevant performance evaluation system is much more productive to job performance today and ends up as a much more relaxed and positive experience. Out with the old and in with the new.

Don’t run an evaluation for an employee with 3 or more managers in 6 months

This one is pretty self-explanatory. However, it should be said that if an employee gets a new manager 2 months before the evaluation process is set to begin, the employee has no hope of a fair evaluation. If the employee’s old manager is still part of the organization, then enlist that manager to complete that employee’s evaluation. If the old manager is no longer part of the organization, then skip this employee’s evaluation.

An employee cannot be properly evaluated with a new manager having 2 or less months of service with that employee. Employees under this circumstance should also have the ability to opt-out of the evaluation process entirely. If they can’t get a fair, impartial evaluation for 6 to 12 months of service that year from their current manager, then the employee shouldn’t be obligated to submit an evaluation. I’ll also point out that change in management team is not the employee’s responsibility. Unfairly penalizing an employee’s yearly performance review because of management changes is not the fault of the employee. It’s the fault of your management team.

Unless there has been at least one manager who has managed that employee for a minimum of 6 continuous months of the year, evaluations shouldn’t be performed for that employee.

Part 3 | Chapter Index | Part 5

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