Without a doubt, the most scrutinized and criticized talent management practice is the employee performance evaluation.
Yet, in order to compete in today's market, businesses must view employees as their most valuable asset and look to their performance management practices as ways to drive employee engagement and of course, performance.
Still, in 2013 Fortune 500 companies carry out performance reviews and 360-degree assessments that are far from frictionless; and many small businesses continue to have nothing structured or measurable in place.
So, do performance evaluations cause more harm than good? The short answer is no.
Problems stem from poor management training, poorly designed or difficult to use performance evaluation forms, and processes that provide little value to their participants or organizations.
But performance reviews, when part of well designed performance management systems, can provide real opportunities to companies large and small.
Here's a look at some of the keys to conducting effective performance evaluations.
A focus on competencies
One of the most critical tasks is to first define what constitutes "high performance", then establish a shared vocabulary and expectations between employees and managers. One of the best ways to do this is to create a competency library or framework.
Most competency frameworks include three types of competencies:
- Core competencies that help define the organization's culture, values and unique competitive strengths.
- Leadership competencies that define the key attributes needed by successful leaders
- Functional competencies that drive high-performance results in specific roles
Competencies enable managers to standardize "performance"-give it some identifiable shape and meaning for employees-and propel talent to contribute to global business objectives.
Defining performance evaluation phrases
Both manager and employee need to understand what high performance looks like. In essence, they need to speak the same "performance" language. What kind of sustained performance merits an "exceeds" rating? What does performance look like if an employee "meets expectations"?
To ensure managers and employees clearly understand the differences between the different levels of performance, and ratings are assigned fairly and consistently, you need to provide detailed definitions and examples. While most companies stop at providing a brief definition of each rating (e.g. 2-fails to meet expectations, 3-meets expectations, etc.), best in class companies provide a detailed description of each performance level for each competency in their library or framework. These detailed descriptions help everyone understand more clearly what is expected and helps managers to more accurately rate performance.
Another key to effective performance evaluations is the alignment or linking of goals, top to bottom and across the organization. While most companies, large or small, do in some way have a mechanism for assigning employee goals, that process is not always formalized.
To truly align its workforce, the organization should first set high level organizational and departmental/divisional goals (making sure they're SMART), then invite every employee to set and link individual goals that contribute to the achievement of these. Doing so not only engages them in the goal-setting process, it holds them accountable to meeting those goals.
The goal setting process is important because you can't develop employees, give them feedback, and then evaluate their performance if you haven't first made sure they have clear goals and given these goals a context.
Finally, employees, managers and leaders at all levels need to communicate progress on goals and their status to keep everyone accountable.
The importance of employee recognition
Employee recognition hinges on communicating expectation and appreciation-drawing clear parallels between predetermined goals and competencies, and employee contributions. Employees need regular feedback on what they can do to improve performance, not a laundry list of everything they've done wrong. But they also need recognition of all that they've done well and accomplished. This positive employee recognition helps to boost morale and engagement while encouraging more exemplar performance.
A continuous process
One of the most common reasons for performance evaluation process breakdown is the antiquated view that it's a once a year event. Communicating expectations, recognizing performance, developing employees, providing context, giving feedback and coaching-these need to be ongoing, daily activities. The annual or semi-annual employee performance evaluation should only serve to sum up and document the dialogue that goes on every day.
In essence, nothing that is discussed during the performance evaluation meeting should come as a surprise to either the manager or the employee.
Performance management tools are simply that
Performance management systems are not managers themselves, but instead tools to help manage and retain talent, and drive alignment, performance and engagement. If you simply use them to capture data, but never go back to review that data, calibrate it, analyze it, and make strategic decisions based on it, then you've missed the point.
Managers need to focus attention on the meaningful metrics, such as core and functional competency ratings, that actually drive performance outcomes. Performance management systems should be understood as the tools that take overwhelmingly intricate data about employee performance, distil it, and present it in a way to offer critical management insights.
From scapegoat to strategic tool
Though some view performance evaluations as the weak link in HR processes, the reality is that they remain vital to effectively nurturing and retaining talent. Instead of being occupied with common criticisms, focus on making your performance management system and processes more effective.
Communication is an integral part of the best practices listed above. You must communication the value of the evaluation process to your employees and managers - both at an individual and corporate level - and provide training as required to get that needed buy-in.
For more information on how to design a best-practice performance management process visit our Center of excellence on this topic.