How not to run a business (Part 4) — Performance Evaluations
Do employee performance evaluations help or hurt your business? If done incorrectly, they can hurt. Note that employee evaluations are always negative experiences, so even this can hurt. Let’s explore why?
Don’t let your Human Resources staff design the employee evaluations
If you absolutely must create and administer 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 companies like SuccessFactors to deploy your evaluation system 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 the designer fully understands what is being asked of employees during the process and how it pertains to your business. Make sure the questions pertain to job performance and not to nebulous concepts like ‘core values’. Make sure the evaluation asks questions related to actual job performance and that the questions are 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. So, either create multiple evaluations that work for 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. If one of your managers happen to have very good teams, this means that one or more than one of these individuals will end up with poor performance reviews. Stacking is the best way to lose good employee talent. You and our staff have spent a lot of time and effort trying to locate the right employees for each job. With one stale internal process, you may have effectively walked some of these employees to the door. Employees won’t stay where they feel they are not being treated fairly even while putting out high quality work. 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 them. Only can on-going evaluation processes find under-performers.
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 these 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. If not, 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 participate at the level where you need. This also means that your evaluations will be worthless in the end anyway. And, the employees will also know this. Keeping the evaluations tied to merit cost of living increases ensures that all employees 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, then what’s the point in running evaluations? Expect employees will 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 out of the evaluation.
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. So, 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 if they under-performing. 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. Rating employees and artificially capping the scale is yet another 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. So then, any real performance issues are not likely to present on an evaluation because it might actually become a hostile workplace or HR violation issue.
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 that tend to document those types of issues can possibly result in legal issues for a company. So, these types of issues are left off evaluations for this reason. This also means that the evaluations are by their very nature not completely accurate. Again, 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 something that isn’t legal to document, 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. So, if an employee unknowingly describes an illegal business activity on the evaluation, your business is at risk no matter if you delete or sanitize. 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. The more you ask of the employee to do on the evaluation forms, the less actual work they will do. 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 from their evaluation. 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 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. So, 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 to feel like crap for several weeks, this is the exact 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 under perform 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. 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 a 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.
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 laying, as it were. That’s not to say that sleeping dogs are a good thing, but depending on the sleeping dog, it may very well be worth not touching. 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 go with an ongoing manager and employee system that keeps the employee far more on track regularly 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 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, it’s a fruitless exercise for the employee that ends up as completely negative experience. This is part of the reason so many companies no longer do these.
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.