Performance evaluations: Do they really add value?

The traditional way to evaluate an employee’s performance has been through an annual performance evaluation. Businesses have spent a lot of time and resources on creating performance evaluations with an attempt to quantify an individual’s performance and contribution to the organization. The results of a positive review generally result in merit increases or bonus opportunities for employees; negative performance evaluations are often counterproductive and do not necessarily motivate a poor performer to enhance their situation.

Some thoughts to ponder:

1. Why does one save everything up for a once-per-year serious sit-down with their employees?
2. How many employees truly understand the performance evaluation process?
3. How many employees do you know who score high on their performance evaluations and the go skipping down the hallway because they got a 2.8% raise?
4. Do we do annual performance evaluations because we think they are useful, or do we do them because the human resources department wants to control the process or because this is how historically things have been done?
5. Do managers enjoy the process?  Who trains the managers on how to best perform the evaluation process? Are all evaluations scored equitably and fairly?
6. Do the evaluations truly reflect the employee’s performance, including any shortcomings? Or are the evaluations and ratings inflated because managers do not want to say anything negative? 

The annual performance evaluation process does very little to promote the mission, vision and values of the organization; does little to create a sense of camaraderie and is nothing more than a ranking system that does little to energize staff and propel the organization forward. It also may not address performance issues and concerns in a timely, efficient, and productive manner.
 
The intended purpose of the performance evaluation is to let an individual know how they are doing and where they need to improve to continue in their job, receive a wage increase, receive a bonus or to be eligible for their next assignment. Why does this have to be done via an annual performance evaluation compared to meaningful feedback between the manager and the employee throughout the year?  Or can (and should) we insist on both annual reviews and meaningful feedback/constructive criticism year-round?
 
I submit that there is always a better way to provide feedback and keep your employees engaged through continuous interaction and feedback. Many I have talked to oppose the concept of monthly feedback sessions because of the time commitment required. I would turn that around and state that annual performance evaluations are sacrificing effectiveness for efficiency. 

By doing an annual performance evaluation you can “check a box” and not be bothered with continuous feedback and “hard discussions” with your employees throughout the year. (Interestingly, those “hard discussions” become “easy discussions” if you spend more one-on-one time with your employees on a regular basis. Familiarity enhances the communication process). 

Waiting an entire year between performance evaluations creates an environment that is prone to uncertainty and can set an employee up for disappointment if there is a gap between the “score” determined by the manager on the evaluation and the employee’s own perception of their performance. It can also be difficult to terminate an employee for performance if prior annual reviews are positive and there have not been meaningful discussions about performance issues throughout the year. The employee deserves to know where they stand on a continual basis instead of hearing about their status at an annual performance evaluation.
 
You need to step back and ask, “What is best for the organization?” and “What is best for the employee?”
 
In Paul Spiegelman’s and Britt Berrett’s book, “Patients Come Second, Leading Change by Changing the Way You Lead,” they state by building an exceptional team, you will create an exceptional organization. Your patients actually “come in first” by the virtue of having an energized and exceptional group of individuals providing services to their patients.
 
The only way you can build an exceptional team is by having regular conversations with your team, providing timely feedback and guidance and directing them to perform at their highest level where they achieve professional and personal satisfaction from their contributions to the organization. This is what is best for the organization.
 
What do employees want? They want to know how they are doing and what they need to do to add value to the organization. Adding value to the organization puts the employee in a better position to maintain job security, receive competitive pay for their work and prepares them to advance in their career.
 

The Evaluation Process

You want to create a formal process where each of your direct reports gets a spot on your calendar for a minimum of 30 minutes at the same day and time each month. I recommend monthly, and if you cannot do it monthly, then your scope of the number of people you are supervising is beyond your capability of managing and providing meaningful feedback in an effective manner. Plus, as an added bonus, you can use part of this time to get to know your employees better. You would be amazed at how good it makes your employee feel if you meet them in the hall and ask them how their dog is doing, and you even know the name of the dog. You could also consider 15-20-minute conversations each week or every other week. That way if it is necessary to skip a meeting, then you do not miss too much time between meetings.
 
This time becomes set it stone. It shows you value and respect your employee and creates a sense of a team. You should never make excuses for not keeping the appointment.
 
The process is simple:
 

1. Require a written report from your employee 2 days before the meeting
2. The report must be no longer than one page and could be in email.
3. You create three tables on the page and the comments are brief and in bullet point format
4. The top part is a) what have I completed, the middle part b) what is a work in progress, and the bottom part is c) what do I want to work on and what resources to I need.  This could be modified depending on the position that the individual holds in the organization.

The Compensation Process

Recent wage increases center around 3%, keeps up with inflation but hardly noticeable once granted. Instead of simply doling out cost of living increases, you should do a market survey on an annual basis and pay your employees a rate that is competitive based on their years of experience, job duties and what your competition is paying for similar jobs. If you do that you can justify your pay scales. This may mean that at times some employees get larger adjustments and for others it may mean a very small change in their pay rate. If you are paying competitive wages, then you do not have to make any excuses for what you pay your employees.
 
At times, some may leave, but a manageable rate of turnover can be healthy for an organization.

I am a strong believer in bonuses. With a competitive wage, it is much more meaningful for an employee to get a chunk of money at one time than it is to get a small percentage wage increase spread out over an entire year. As an example, a 2% bonus is the same as getting one extra week of pay.  You hand an employee an extra week of pay 3 weeks before Christmas and it will be well appreciated.
 
Final thought: “How an organization handles how they evaluate their employees says a lot about the value they place on their employees.”