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Ranking Without Rankling
How to evaluate your staff fairly (and protect your back)
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Business New Haven
10/15/2001
By: Deborah Ketai
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Like the blind man trying to identify an elephant by feeling only one part - the leg, the trunk, the tail, the tusk - how you feel about performance evaluations often depends on what part of the process you experience.
For employees, the annual performance review is traditionally stressful, the one time all year when they find out what their managers really think of them -- not to mention what their prospects are for pay raises and promotions.
For managers, on the other hand, performance reviews can represent an administrative nightmare or the threat of an unpleasant confrontation - or even a lawsuit.
In the best of all possible worlds, performance reviews would be accurate, fair, timely and understandable by employee and manager alike. They would identify training needs, reward overachievers, encourage and guide average employees to do better and, yes, provide proper documentation for management decisions about underperformers - including termination.
Needless to say, this is not the best of all possible worlds. The evolution of the modern workplace has only confused the situation. Today, a worker's value to an organization depends just as much on qualitative criteria, like teamwork and communication skills - “soft” competencies that can be tough to measure - as on quantifiable output.
In addition, many organizations seem unclear about the role of the performance evaluation. Is its purpose to document problem performance? To reward good employees? To encourage workforce development? To avoid lawsuits?
For that matter, do standardized performance evaluations have any place in smaller companies? According to Chris Hodgson, a partner with the Bridgeport employment law firm of Durant, Nichols, Houston, Hodgson & Cortese-Costa, a lot of Connecticut's smaller companies have never incorporated performance reviews into their administrative, developmental or managerial routines. In fact, he says, many firms that used to conduct evaluations have stopped doing so.
A look at the Fortune 500 explains why some small organizations are leery of standard performance appraisals. The complexity of some systems appears to require a full-time human resources manager and a strong legal team, neither of which is common in small firms. Furthermore, the wide variety of systems makes choosing a role model difficult.
Focusing on Review Dates
Even the apparently simple question of when to evaluate employees turns out not to be so cut-and-dried. Annual appraisals used to take place on the anniversary of a worker's hire. Today, some companies have adopted a “focal” date - a single date on which all employees get reviewed.
While focal dates sound like - and can be, if not properly implemented - a tremendous administrative burden on managers and payroll departments, they also have certain advantages. Chief among them is fairness: Focal dates prevent the inequities that occur when managers mete out reward according to how much is left in the annual budgets at the time of the hiring anniversary. In addition, some researchers say, managers evaluate staff more accurately with all the data in front of them.
Forcing Out the Workforce
Large corporations have pioneered several innovations in performance appraisal, not always to unmixed reviews.
The most controversial trend nationwide is probably forced ranking, which “grades” workers along a curve, according to the results of their performance evaluations.
Such systems have existed for years. Recently, however, up to 25 percent of the Fortune 500 have instituted forced ranking systems or have standardized curve ranking in their existing systems.
Forced ranking originally came into vogue in training-oriented companies as a performance-enhancement tool. In today's economy, however, some companies use the systems - also known as “rank and yank” - to determine where to cut staff.
General Electric, for instance, dumps employees into the top 20 percent, middle 80 percent or bottom ten percent. In a letter to shareholders from the company's Fairfield headquarters, then chairman John F. Welch Jr. put a kinder, gentler spin on the system. “Not removing that bottom ten percent early in their careers,” he wrote, “is not only a management failure, but false kindness as well,” in that it may simply delay the shock of being winnowed out until midway through their careers.
Forced ranking does have some good points. For instance, it compels managers to acknowledge and do something about poor performance. But it can also penalize average employees who happen to find themselves on powerhouse teams. Conversely, sub-par workers surrounded by even worse performers may benefit from a halo effect.
Worse yet, poorly constructed forced ranking systems are fertile ground for discrimination lawsuits. In the past couple of years, Ford, Microsoft and Conoco, among other giants, have become targets of class-action litigation brought by terminated employees.
A 360-Degree View
Another trend in performance evaluations, the 360-degree review, may be harder to implement, but gets somewhat better, um, reviews.
In the traditional performance review, a manager critiques an employee. In their worst incarnations, such reviews were - or were perceived as - arbitrary and mean-spirited.
The 360-degree review purports to offer more balanced evaluations by combining the perspectives of managers, co-workers, employees and, in some cases, subordinates or customers. Feedback on any given employee is compiled into a report, with individual ratings and comments rendered anonymous, and presented to that worker.
Over half of U.S. companies - by some counts, as many as 65 percent - now use some variation of these systems.
Technology has greatly aided the rise of 360-degree systems. Paper-based 360 instruments were error-prone and tedious to collate. Computer-based programs are considerably faster and more accurate. Web-based surveys let employees respond in the privacy of their own homes, if they choose.
My own employer, Distributor Information Systems Corp. (DISC), has taken a middle ground. Workers at this Farmington-based software developer use the company's own intranet product, Enlighten.Net, to fill out 360-degree assessments on anyone and everyone, right up through the president. Customer service and technical support personnel also get “report cards” from customers.
Workplaces with team environments or remote employees, like DISC, may find 360-degree assessment systems especially fruitful. Without preparation, however, 360-degree systems may be doomed to failure.
If you're thinking of instituting 360s, take a look at your organization's culture. Is honest, informal feedback the norm or the exception? Are leaders prepared for the possibility of unwanted revelations about their own performance?
Perhaps more than any other system, 360-degree feedback requires complete buy-in at the top and a commitment to continuous improvement. Without readily available supports, employees may feel they're being asked to change without being given the means to do so.
Even in the best environment, preparation is essential. It takes time to tie in 360s with training plans; to develop documentation; and to minimize the administrative burden that the new system will place on employees and managers alike.
Perhaps most importantly, it takes time to establish and test procedures for keeping responses confidential. Neither reviewers nor reviewees will feel comfortable unless reports are secure and anonymous.
Staff must also be taught how to provide - and receive - appropriate feedback. Give employees their reports in person, rather than by mail or e-mail, and make sure someone knowledgeable is available to help them interpret the assessment and to focus on compliments, as well as criticism.
Doing Well in the Ratings
If you're planning on changing your employee review system, give yourself enough lead time - as much as a year, if reviews are annual - to educate all parties. Here are some tips on developing an objective, non-discriminatory evaluation system:
Get consensus on the policies surrounding evaluations. Should high scores automatically trigger promotions or pay raises? Should low scores automatically mean dismissal?
Choose measurable criteria based on workplace needs and the positions being reviewed. Measure observable behaviors, rather than values or opinions. Solicit employees' input in developing realistic standards.
Choose an evaluation scale. Simpler scales (e.g., “achieves standards”/“does not achieve standards,” or “below standards”/“meets standards”/“exceeds standards”/“superstar”), offer several advantages, including greater consistency between reviews.
Provide opportunities for unstructured narrative comments, and press evaluators to use them.
Give behavior descriptions and concrete examples of good and bad performance to both evaluators and evaluees to use as benchmarks.
Encourage and provide opportunities for managers (and teammates, if appropriate) to provide regular feedback on employee performance at frequent intervals throughout the year, regardless of your company's evaluation system. The results of the annual appraisals should not come as a shock to employees.
Make sure performance reviews take place on (or very close to) their scheduled dates. Otherwise, employees may legitimately complain about missing opportunities for associated pay raises and promotions.
Monitor evaluation results to make sure decisions based on your evaluation system do not weigh disproportionately on particular demographic groups (i.e., age, race, gender, etc.).
Encourage supervisors to work with HR to learn how to give accurate reviews. Organizations without HR departments may want to consult the Society for Human Resource Management (www.shrm.org) or the American Society for Training and Development (www.astd.org).
Avoid “slippery” evaluation systems. Managers that gloss over poor performance or fail to identify weaknesses, Hodgson says, “could pay the price later when they terminate the employee, [who] then turns around and sues, presenting evidence of a good evaluation with a merit pay increase.”
Finally, for a much-needed laugh at evaluation systems, see “Squirrel Fishing: A New Approach to Rodent Performance Evaluation” (www.eecs.harvard.edu/~yaz/en/squirrel_fishing.html), by two students at Harvard's Division of Engineering and Applied Sciences.
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