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February 2001 Column

Employee performance evaluations: How to do them right

Daniel O. Lybrook

Associate Professor of organizational leadership and supervision

Purdue School of Technology

Many employers treat employee evaluation like a trip to the dentist – an uncomfortable but necessary annual chore. Actually, a well thought-out and executed performance evaluation strategy can supply long-term benefits for both the company and its employees.

Employee evaluation should start early – when management, using a focused selection process, chooses the right person for the job. In a more perfect world, all new employees would begin their orientation by being shown around – not just where the breakroom is but also where the real culture and history of the business or organization lives. The new hire needs to know not just what the company espouses but also the truth about what it really values. This requires organizational self-awareness and reflection.

In a healthy organization a good evaluation process is knitted into everything – job expectations, career path, compensation, advancement. It is important to the employee to understand what he or she is to give and to get.

Talk to most managers, and they will say that evaluations divert them from the real work of the company – producing and making money. Talk to most employees, and they will say management doesn't evaluate or does a poor job of it.

So why don't more businesses use the employee evaluation process more effectively?

On a basic human level, people don't like to be evaluated themselves, so they tend not to like evaluating others. Many managers view the process itself as threatening and leading to conflict on interpersonal and organizational levels. One way to reduce potential conflict is to avoid it. This leads to the once-a-year "You did a good job. See you next year," syndrome.

Short-term demands on managers to produce also keep employee performance reviews from being a more meaningful long-term evaluative and developmental tool. Evaluations tend to be an unexamined part of the corporate culture. They aren't seen as contributing to the company's bottom line.

Here are some pitfalls leading to ineffective evaluations:

– Routine evaluations are often not tied to promotion or advancement. Because of this, neither management nor employees tend to take them seriously.

– If employee evaluations are tied to upward mobility in the organization, they can create competition among employees. This also can lead to a centralizing tendency in which everyone gets a three or four on a five-point scale.

– The recency effect, in which employees are judged on what they did last week instead of last year or last quarter.

– The Lake Woebegone effect, in which all employees are rated above average.

How can organizations evaluate employees effectively?

– Employers and employees need to be clear going into the evaluation process what they want the outcomes to be. From the management point of view, what a good evaluation process accomplishes is that the employee clearly understands the organization's goals and how to orient his or her work toward accomplishing the goals.

– From the employee's point of view, evaluations should encourage organizational involvement and present opportunities for career and personal growth through contributing to the achievement of organizational goals.

– Management should take a measured, three-fold, quantitative approach to evaluation: what the employee is doing, how the organization can do it better and what the rewards will be for achieving these goals.

– Management needs to understand there is a direct line from company-employee agreed- upon, long-term organizational goals to the company's success and profits. Employees will come to understand that organizational success translates into professional advancement.

Are there model businesses and organizations doing evaluation well? Recently, a Wall Street financial analyst worked undercover at and reiterated his buy rating on the company based on "the high energy and morale among warehouse management and workers alike." Employee morale is a good measure of how healthy a relationship exists between employer and employee.

Cisco Systems has demonstrated the ability to assimilate smoothly into its corporate culture the employees who have joined the company in the many mergers and acquisitions the high-tech giant has completed. If a Cisco can integrate employees from a different organizational culture into its own, it should, in theory, be easier for other firms to orient a new employee to the company's goals. That is, if there is an effective continual evaluation process in place.

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