The Other Side of Employee Performance Appraisal: How Fair Are You?

Are You Thinking of Adopting an Employee Performance Evaluation?

November 6, 2012 By Fred Yuson

In today’s gloomy economy, the good news is some companies are still giving out pay raises and bonuses.

According to Mercer 2012/2013 Canada Compensation Planning Survey released in August 2012, Canadian firms expect to raise base pay by 3.2% in 2013, same actual average salary increase in 2012, and slightly up from 2011 and 2010 levels.

Giving raises or bonuses signal how important or valued the employees are. But how do you know if you are giving pay raises or bonuses fairly?

Enter employee performance evaluation.

The main goal is to evaluate the job performance of the employees, provide constructive feedback and create a development plan to improve over-all company productivity.

For companies which adopt the formal employee job appraisal or evaluations, many would do it yearly, some every six months. The employees would fill out a form detailing their work and delivery schedules. The goals should align with the company’s. For example, if the company’s goal is to increase tire sales by 15% this year, the sales manager’s performance evaluation form would explain how he would help reach that goal and provide a priorities list or action plans with timelines. Goals should be clear without ambiguity, measurable, and achievable. Both the employees and the manager will sign it. The amount of details depend on the job and the size of the company.

Cool, but why do some companies ignore it?

If you have lots of direct reports, developing, implementing, and maintaining an employee performance appraisal system can be time-consuming.

A Management Consultant in Canada wrote, “a recent study of major U.S. corporations revealed that 40% of managers admitted to fudging the performance data because it was obvious to them that the appraisal served no useful purpose in the way it was managed in their organizations.”

Indeed, employee performance evaluation is a double-edged sword. When used properly to motivate and improve the employee, it is a win/win management tool.

But when used to “power play”, find fault and lay blame, or simply having no time to do it properly, the consequences are disastrous and you are better off not having it at all. Dissatisfaction, ill-feelings, and lack of fairness in the workplace would tank productivity and hurt employee morale. According to statistics, unhappy workers cost the business in North America $350 billion dollars yearly in lost productivity.

A May 2012 survey by Ceridian Canada (a Human Resources and Payroll company) on 800 employed Canadians states that only “57% of respondents felt valued by their employer following a performance review.” Asked about this, a human resources consultant said that “most companies do not do performance reviews properly –whether it is lack of training, not an organizational priority, or no proper tools in place.”

For career-oriented employees, after the performance review, it is time to reassess the situation. If they felt not valued, they would look for something better. Most employees who left their employers are those who are highly skilled but unhappy. Sadly, with all the management literature about retaining good employees, companies lose talents easily because of a flawed performance appraisal.

“Everyone is entitled to be stupid, but some abuse the privilege.” - Unknown

Is there an alternative?

You can certainly reward and motivate your employees without the formalities inherent in the employee performance evaluation. What about having in place a simple performance metrics and providing a timely constructive feedback without the mountain of paperwork? What about good systems and policies? Good benefits. Training. Diversity. Tolerance.

I know of a 57 year-old medium-size lean and keen company who does not believe in a formal employee performance appraisal but its employees are generally happy. On the other hand, I know of one $ 9-billion dollars company who does it so poorly that its hundreds of close-door meetings and the truck-load of paperwork it entail seem pointless.

Objectivity challenge.

As an “ evaluator” there is a strong tendency to justify what you like and demonize what you don’t like, and no matter where you are in the corporate hierarchy, you still have personal beliefs and feelings. For example, your shipping and receiving guy occasionally wears a red lipstick and long skirt at work - very disgusting to see in your opinion, but the key performance metrics show that he is a productive employee. Your foreign-born secretary loudly slurps her fish soup at break-time as if it is a must-learn art but she is extremely organized and reliable. And your number one salesman has five girlfriends!

Not exactly your taste, you are a prim and proper old-fashioned man with strong Christian values born during the time of “horses and bayonets.” But what you are evaluating is their job performance, not what you perceive as right or wrong, not to mention that there are now laws which protect the rights of your employees against harassment and all forms of discrimination.

And how objective are you in evaluating your assistant who is your boss’ only daughter? She is asking for a second big raise in the middle of the year and seriously hinting that a company provided BMW 750i would be a perfect incentive.

A guy named Michael Pollan said, ”I think perfect objectivity is an unrealistic goal, fairness, however, is not.”

So whether you adopt the formal employee performance evaluation or not, think about your responsibility to be fair to all employees.***


Note: Fred Yuson is a Certified Management Accountant working as a Controller of an Ontario-based company in Canada. He has several years of experience working for large and medium-size companies both as a person doing the formal employee performance evaluation and as an employee being rated. He can be reached at eagle_yuson@yahoo.ca.

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