Don’t Confuse Activity with Performance
The Wall Street Journal recently published an article, “Get Rid of the Performance Review!” The author, Samuel A. Culbert, a University of California, Los Angeles (UCLA) professor of management, says that the performance review, “…destroys morale, kills teamwork and hurts the bottom line. And that's just for starters.”
Some business management experts believe that a company can save costs by eliminating employee performance appraisals or reviews and not even miss any of the benefits. I decided to get in on this discussion and, based on my experience, review the costs versus the cost benefits of employee appraisal programs. You can then be the judge.
Especially now during this economic crisis, businesses are analyzing programs and scrutinizing what is important and what is not. Employee performance management is one area worth evaluating. Today, more than ever, it is important that employers and employees stay on the same page as far as organizational goals and priorities go.
Employers may want to consider the following real and potential costs for employee performance appraisal systems or programs:
- Costs for subscription or canned employee appraisal programs such as online software programs.
- Costs of performing administrative duties such as preparation time, physical and mental energies, meeting times, etc.
- Costs of salary increases, bonuses, etc. that are tied to the employee performance appraisal program.
- Costs of potential litigation. For instance, if employees are given inconsistent ratings, discrimination lawsuit doors could be opened.
- Costs of possible negative psychological or morale consequences especially if performance appraisals are not handled properly.
- Costs of ‘stars’ leaving your company. If you don’t have managers or supervisors trained in managing performance, especially when it concerns your high achievers and the highly talented, employers run the risk of losing their star performers. Losing star employees can be a major blow to an organization’s bottom line.
Add to that, some employees believe that their input does not count for much. In a previous job, I had employees tell me they felt like targets rather than equal participants in the process. In my book, employee feelings need to be considered, and management needs to do all that it can to avoid giving that kind of impression.
Likewise, employers want to consider the cost benefits of employee performance appraisal systems or programs. It’s important to note that when performance appraisals are done correctly—meaning fairly and consistently and for the right reasons—the following benefits can be well worth the efforts.
- Identifies problem areas and, hopefully, in a timely manner.
- Orients management to focus on company goals and to track employee progress. Planning and communication between the manager and the employee is essential.
- Provides opportunities for two-way feedback, placing an emphasis on coaching or counseling in order to inspire improvements.
- Sheds a light on or gives insights for further training or educational needs.
- Provides documentation for further employment action, which can be either positive or negative.
Help Them Love Their Job and You Will Enjoy Greater Success
Finally, in order to evaluate and weigh the benefits against the costs of your own performance management system, you can look at trends. Here is where your HR department can help. For example, look at your past terminations, promotions, complaints, etc. See how you can make improvements or changes to your present system. Perhaps your supervisors and managers need additional training. Do the managers have their own agenda which often can be different than the company’s? When that happens, the appraisal process gets way off the track. Are you seeing a good fit between employees and the positions they’re in?
As with any business management issue—especially when we’re dealing with people—employers need to first figure out what they want to know and measure. Then, they need to determine how their people can contribute to meeting their goals and objectives. Communicating this information to your people is all part of the performance appraisal process.
The bottom line is that you want to set up the employees to succeed. When they succeed and perform according to communicated expectations, then you and your company will also succeed.