An organization’s performance is the product of the performance of all the employees of the organization put together. Thus, it is natural to see that the way to improve business outcomes for an organization is to improve the performance of every employee that it has on its payroll. However, to improve the performance of employees, it is important to have the right standards on which their performance could be evaluated. However, organizations also need to be very careful when they devise a performance evaluation system. As per Gallup, only 14% of employees say their performance reviews inspire them to deliver more. Thus, if performance evaluation is badly carried out, it can massively backfire. So how does an organization go about building an effective performance evaluation system? Read on to know more:
Here, business objectives need not necessarily refer to commercial terms such as revenues brought in. Every role will have different objectives that have to be met for the business to prosper. For example, for someone in a customer servicing role, it could be a certain level of average on-call interaction rating. For someone who is into sales, it could be a certain lead conversion ratio. For someone into operations, it could be the efficiency of operations. Moreover, there will also be sub-objectives to be met for every job role. Once the expectations of what is to be expected in every job role are determined, it will then become easy to devise performance evaluation standards.
While these are objective parameters, there are also some subjective parameters that most organizations are keen to ensure performance on. This could include team collaboration, soft skills, attitude towards work, conduct in office, punctuality at work, and so on. While such aspects may not always reflect in the tangible results, they could affect the overall team performance. Therefore, organizations must devise metrics to measure an employee’s performance on these aspects.
This step would only be for those organizations that already have such a system in place (though most organizations will have some of the other employee rating systems). You need to assess the existing system on:
If on any of the above aspects, there is a scope for improvement, the same should be duly noted down.
This is the most important step. Here, you would want to build an evaluation system that is fair and reasonable for everyone. Thus, you would want to create a system that would be able to:
The reward structure that the company would want to create should include:
Besides, the company also needs to determine how frequently the performance evaluation discussions need to be held with employees. Most companies have a yearly appraisal cycle. However, there are two disadvantages to this:
Therefore, companies should try to have more frequent performance feedback systems with employees. Ideally, a quarterly review of performance supplemented with a more extensive yearly meeting should keep employees on their toes to keep their performance levels high.
The nature of job roles today is highly dynamic, and thus, expectations are bound to change. Some roles may also become obsolete. Thus, it is important for a company to regularly review its performance evaluation system to ensure that such changes are reflected in the rating parameters and metrics. This will ensure that any evaluation done will stay relevant to the current working of the business. For example, a previously high-performing employee may find it difficult to cope up with changed expectations in his or her role or find it difficult to adjust to new technology. By ensuring that the reviewing standards are regularly updated, a company can ensure that the past performance of an employee does not continue to have a lingering effect, and that, the feedback that is generated by the contemporary business needs.
To enforce an effective performance evaluation system, an organization needs to execute it over a technology platform. One of the best such platforms could be a Learning Management System (LMS) which could be integrated with the HRIS. Not only would it allow effective performance assessment of employees, but the LMS integration would also recommend different training modules to the ones who need it. This can ensure timely plugging of skill-gaps, so that employee performance would not suffer due to a lack of skills. Employees would also feel valued and there would be a far lower need to fire low performers. Thus, LMS integration could ensure that the desired objectives of implementing a performance evaluation system would be met.