Employee Performance Review

Wednesday, October 06, 2010

It is almost impossible to disagree with the concept of evaluating employee job performance through some review process. Programs such as Pay for Performance, Merit Pay, and Paying for Results have taken on religious like qualities and are strongly defended as essential to the ongoing success of their parent organizations. Regardless of what kind of organization is employing these reward systems, private vs. public, for profit vs. not for profit, large vs. small or service vs. manufacturing; they all perceive their system is working for them. Their fundamental mantra is the linkage between the needs of the organization, the individual meeting those needs, the success of the organization and ultimately, the success of the individual.

Take for example the “Training Objectives” introduction of the Office of Personnel Management’s guide for “Senior Employee Pay for Performance”,

… understand both the philosophy and mechanics of their performance and pay systems

… understand the required linkage between individual and organizational performance and its effect on ratings

… establish and clearly communicate the relationship between overall organizational performance, specific results and individual ratings in discussions with their subordinate executives to dispel any perceptions of forced distribution or quotas

The message is very clear, link individual performance with the organization’s performance, simple enough for the U.S. Federal government or any organization, public or private. In order for the employee to archive their goals, i.e., higher pay, higher position, or prestige, … etc., there has to be a quid pro quo arrangement. The employee gives the organization the desired level of knowledge, skills, abilities directed at the organization’s issue of the day and does that for 5, 10, 15, 20 plus years, and the organization rewards the employee with higher pay, higher position, or prestige, … etc. So evaluating employee performance is just a matter of determining whether the employee succeeded in meeting the organizational needs … or is it?

Consider the sales representative “A” who sold $10 million worth of the company’s product vs. sales representative “B” who sold only $1 million. Who is the better performing employee? “A” is of course. What if I now tell you that 50% of A’s clients defaulted on their credit arrangements, 100% of A’s clients will never do business with the company again, and on 25% of the sales the company actual lost money. Who is the better employee? Is it “B”? You will not know until you compare the performance of “A” and “B” using the same factors of performance.

Employee performance evaluation is a complex endeavor. It is relativity easy to put together a few questions with a 3, 5, 7 or 10-point scale and say that it measures performance. It is another mater to pay for performance. Would you pay for A’s performance?