One of the most critical aspects of an employee’s job is the performance evaluation.  As an employee, how do you know when you are doing a good job or if there is improvement needed?  As a manager or leader, how do you go about determining if an employee is highly performing or if an employee needs to improve in specific areas?  Most workplaces employ the use of a structured process to answer these questions.  This process is the performance evaluation. The evaluation of workplace performance is a process that when effectively executed can serve the dual purpose of outlining high performance as well as providing feedback on areas requiring improvement.

 In recent years, the term performance evaluation process has been replaced by Performance Management Process, which is indicative of a total approach to performance.  The Performance Management Process represents the dual accountability of performance and its measurement in the workplace.  Performance Management is the process through which managers ensure that the employees’ activities and outputs contribute to the organization’s goals. In addition, the process ensures that employees have the ability to self-evaluate based on implicit and explicit expectations, standards, and goals. 

The Performance Management Process requires that both the employee and the manager:

• Know what activities and outputs are desired
• Observe whether these activities and outputs occur
• The manager providing feedback to help employees continuously meets expectations.

The Performance Appraisal Process or Talent Management Process serves two key purposes to Reinforce or to correct performance.  Managers can use the process to reinforce exceptional and high performance and/ or identify areas requiring improvement in poor performance.  The Performance Appraisal Process has additional benefits which include the following:

• Encourages communication between managers and their employees
• Establishes uniform standards for evaluating employees
• Assists the organization in identifying its strongest and weakest performers

Performance Evaluation Tools and Methodology

Remember a performance management process is a total approach to performance.  It is a formal interaction between an employee and a manager. During this process, the performance of the employee is assessed and discussed in thorough detail.  The manager communicates the strengths and weaknesses observed in the employee’s performance and also identifies opportunities for the employee to develop professionally. In most instances, a performance appraisal is completed quarterly or annually.

Now that you are familiar with the purpose and benefits of the Performance Management Process, it is important to examine the tools used to conduct a comprehensive review employee performance. Therefore, let’s examine the four most common types of performance evaluation tools used in the workplace and examine how they are utilized.

Multi-rater Evaluation

A common performance appraisal method is the multi-rater evaluation.  The 360-degree evaluation is the most widely used multi-rater approach. It is important to note that the 360-degree evaluation program is a type of multi-rater evaluation method, but is not the only multi-rater.

In this scenario, With any multi-rater evaluation program, a multiple view of the employee’s performance is considered; this technique allows an appraiser to gain a complete profile of the employee based on feedback (from relevant stakeholders-including peers, supervisors, direct reports, and internal and external customers who interface with the employee being evaluated.

In addition to assessing the worker’s job performance and technical skill set, an appraiser receives in-depth feedback on the employee’s behavior. Measuring areas of subjectivity, such as character and leadership skills, allows an employer to manage an employee’s development.

There are several advantages and disadvantages to this tool.  The effectiveness of this tool depends upon how the 360 feedback survey is designed, how communications are handled regarding the goals of the program, and what is done to support participants once they have gotten their feedback.

Advantages

• Individuals get a broader perspective as to how they are perceived by others
• The feedback provides a more rounded view of their performance
• Enhanced awareness and relevance of competencies
• Awareness for senior management too, as they will get to know their need for development
• Feedback is perceived more valid and objective as it’s collected from varied sources

Disadvantages

• Rater bias – If permitted, employees might be tempted to only ask their friends in the company to be the ones who receive feedback instruments.
• Candid and honest opinions may not be provided due to a lack of clarity around position expectations, workplace relationships, and/or poor training in relation to the purpose of assessment.
• Stress might be put on individuals for giving feedback
• Lack of action following feedback
• Over reliance on technology
• Too much bureaucracy (Official Procedure might slow the process)

The multi-rater evaluation tool is best used when an employee holds a position that interfaces with many levels of the organization.  While this list is certainly not all inclusive, a few examples of positions that would benefit from a multi-rater approach are Customer Service Representatives, Project Managers, Sales Managers, Executive Assistant that supports multiple executives and board of directors, Human Resource professionals, Account Executives, Business Development professionals, and Salespersons.

Management by Objectives

Management by Objectives (MBO) is another modern method of performance appraisal used in the workplace. The concept behind Management by Objectives (MBO) is to create empowered employees who:

• Understands their roles and responsibilities within the organization
• Comprehends the employer’s expectations for their roles
• Understand the objectives that they are responsible for achieving
• Recognizes their role in achieving both personal and organizational goals

MBO requires a manager and employee to agree upon specific, obtainable objectives with a set deadline. For example, a sales manager may be required to increase her revenue by 25% within three months. Once this goal is set, the responsibility is on the sales manager to direct herself towards the objective. With this technique, success or failure is easily defined.

Advantages

• Concentrates on actual outcomes.
• Provides clarity of purpose that flows from a set of well-articulated objectives.
• Because the employee is a contributor to the established goals, he or she will buy-in; thereby, posturing them for success.
• Provides the opportunity for both the supervisor and the employee to critically examine goals identified with both being able to tie goals to the organization’s goals or strategic plan.
• Appropriately places accountability and responsibility with the employee and provides an opportunity for the employee to identify where assistance may be needed.

Disadvantages

• Can lead to unrealistic expectations about what can and cannot be reasonably accomplished.
• Although listed as an advantage, MBO may fail if the position or the organizational goals are not clearly defined.

This tool is most beneficial for mid-level management (e.g., sales, project and account managers) and other positions that require self-directedness. 

Classical-Ratings Scale

An alternate type of performance appraisal is the ratings scale. This tool is considered a classic style of evaluation as a supervisor will evaluate an employee, rating their performance on an identified Likert-scale (e.g., 3 – Exceeds Expectations, 2 – Meets Expectations, 0- Does Not Meet Expectations).  This methodology requires an employer to develop an in-depth grading system, similar to the way students in school are assessed. This scale is then used to evaluate an employee’s success within a variety of areas, such as technical skill set, teamwork and communication skills. There is typically a minimum required grade an employee must receive in order for the performance appraisal to be considered a success. Those that do not make the grade are often put on a performance improvement plan, which is a detailed plan developed by both the employee and their supervisor that specifically outline areas for improvement, a timeline in which the performance will improve as well as the ramifications if performance is not improved.

Advantages

• Structured and standardized.
• Easy to use and understand.

Disadvantages

• May be subjective (rater bias-e.g., halo/horns effect, central tendency) and easy to debate-selective perception.
• Indicators or dimensions may not be applicable to all positions.
• Often tied to pay (e.g. pay for performance).

Rating-scales are the most widely used form of evaluating performance. However, their use is decreasing as organizations move toward a goal of talent acquisition.  Rating scales however, still possess value in the modern workplace particularly when consistency in expectations is not only clear, but communicated.

Self-Evaluation

Self-evaluations are a method sometime used to allow a worker to evaluate his or her own performance. Rarely is a self-evaluation used as the sole form of evaluation.  Frequently, employees will be asked to self-evaluate using one of the aforementioned tools Therefore, regardless of if the tool is a multi-rater, Management By Objectives, or rating scale format, the employee will be required to provide insight as to how they perceive their own success or areas of opportunity for development. 

Using Organizational Core Values and the Job Description as Key Performance Indicators

Performance evaluation tools are most beneficial when they are directly tied to specific reference points.  Two relevant points are the organization’s core values and the job description. An organization’s core values are values which form the foundation on which the company performs work and employees conduct themselves.  Connecting performance to core values play a critical role in setting explicit expectations relative to performance and behavior as well as provides a consistent baseline for supervisors and managers.  Figure M1b is a model of the hierarchy of the systemic role of an organization’s mission, core values, goals and strategic plan.  Let’s define these terms to better understand their systemic relationship:

Because core values serve as the organization’s internal conduct as well as its relationships with the external world, these conjoined with the description of duties, or the job description, often serve as the foundation for evaluating employee performance. 

Core values often serve as dimensions or indicators of how well an employee is performing; thereby, measurement for how well the organization as a whole is performing.  Many companies approach talent management in this way.  Zappos for example, has clear and concise core values that serve to guide their recruitment and selection, promotional process, talent management process and everyday functioning.  View What is Zappos for a glimpse into Zappos commitment through the communication and culturally embedded core values.