How should one actually evaluate employees?

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Of all the misconceptions and buzzword vomit around “talent management” for years, most of what surrounds the employee performance evaluation might be the most egregious. We all kind of know that performance reviews are a train wreck. When you kill them, you can usually develop your employees faster. By “develop faster” in this case I mean “have them achieve more goals,” which should theoretically be the point of work. (Unfortunately, it’s often not.) So, some companies, realizing that employee performance evaluation was mostly a series of process check-boxes — they decided to eliminate those reviews. Good! What did they replace the reviews with? Absolutely nothing. Bad! Now “employee engagement” — insofar as any executive really cared about that in the first place — is completely dropping like a stone.

A lot of this is because the employee performance evaluation, process-wise, is owned by HR. Most guys and gals who run companies (“the stakeholders”) do not care that much about HR, which is mostly for (a) compliance and (b) firing people. (This is the common executive view.) HR at most places should protect and develop the employees, but instead they just protect the top dogs. So when they “own” a concept like an employee performance evaluation, of course it’s going to be a tire fire.

Into this whole mess you’ve got a few other things about rankings. There are concepts like “rank and yank,” where the bottom 10 percent of a curve get fired, etc. There are “stacked rankings,” where only 5–10 percent can get a pay bump, etc. Different systems abound dependent on the specific organization.

Now we’ve got some intel on how to do this right and hit your bottom-line targets.

The most productive employee performance evaluation

Here’s an article on productive companies. It opens by noting that places like Google, Apple, Netflix, and Dell are 40% more productive than average competitors, with 30–50% higher profit margins. Most people assume (“Make an ass out of u and me”) this is because they get better talent. Good in, good out. Right? And they get better talent because they pay more, right? So that explains the profit margins?

As Trump would say: “Wrong!”

It’s all about how you group people and then how you reward people. To wit: iOS 10 (Apple product) was developed, debugged, and deployed by about 600 Apple engineers in under 24 months. Microsoft used 10,000 engineers on Vista — and it took five years. Why?

Apple used all-star teams because iOS 10 was a mission critical initiative. In addition, rewards were applied to team performance; no one person on the team could receive an exceptional performance appraisal unless the entire team did. On the other hand, Microsoft used a stacked ranking where 20% of every team got an exceptional review, and compensation was entirely based on individual performance. Microsoft eventually abolished stacked ranking, says Mankins.

Look for the words “stacked ranking” in there.

The flaws of grouping and compensating people

People want to be seen as relevant and competent at work, because they spend a lot of time there. To spend that much time at a place and never really be acknowledged as anything? That sucks. And right there, I just explained employee turnover.

We’ve got two problems here: how we organize people and how we reward people.

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How we organize people: If a project is mission-critical to revenue, the best people should be on it. That really means “the best people in terms of working together,” because a lot of “A-Players” could butt heads. There is a degree of experimentation here; you don’t know who will comprise a good team until that team is assembled and working together. The possibility of a “brilliant jerk” always exists. But in general, your best people and teams should be on your most important projects. When teams are randomly thrown together — “Hey, who is Dave?” — the teams will accomplish jack shit. We all know this.

How we compensate people: Look, intrinsic factors are good, but people do want to make more money. It’s unavoidable. But one of the “fatal flaws” of work is that we force people to collaborate, then promote individuals. That’s the whole 20 percent thing in the pull-quote above. This team of 10,000 engineers is busting their ass on Vista, and only 2,000 of them will have a chance at more money. That’s ridiculous, and it completely undermines team cohesion.

So what does this mean for the employee performance evaluation?

First off: don’t completely eliminate them. That doesn’t accomplish anything.

Second off: make the incentive structures fair.

And third: if a team comes together and hits targets, advance the entire team.

Finally, remember this: the goal of work is productivity. Many miss this and run around in circles all day trying to prove their value to someone else, but the goal is productivity and achieving priorities. Any employee performance evaluation needs to start and end by taking that into account.

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Blogging, largely about work and how to improve it. How I make (some) money:

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