Re-evaluating the evaluation system
Despite moving into an era in which employees are really seen as a capital of the company and employee training has true value in improving a customer’s experience, the archaic system of biannual evaluations persists. Master Trainer Mark Dickinson thinks
Going back in time, there was a point when every company compulsively reviewed the performance of all of its team members on a biannual basis. January and June were statutory months for employee reviews. Sometime after came the 360 review and things got even more complex. Most companies undertook these reviews without even thinking about why they were doing so; evaluations were just one of those things that every ‘good’ company should do.
Employee happiness suffered, as bell curves averaged out the results of the evaluations and ensured that only a small percentage were ever in the highest percentile, with the majority falling in the mid-range and a few being assigned the below-standard mark. The bulk of this evaluation process was created for the purposes of adjusting salaries and ensuring that the overall increase given to the company’s workforce was an average amount, say five percent. The problem with this kind of system, however, is that the high performers end up with the lion’s share of the increase, while the workforce majority end up getting the standard pay increase and the poor performers become disenfranchised.
The problems with the current system
• Evaluations have consistently equated to annual increases and salary adjustments, yet it is frequently an unfair system. Evaluating people has often been simply a cover story for those adjustments. • True evaluation of an employee’s performance is a skilled task that requires experience in human resources and perhaps some psychology. Many evaluators do not have the required skills. • Undertaking an evaluation is time consuming and where there are many employees in a department, the task is often not given the focus and importance that it requires. • Employees rarely feel that their evaluation is a true reflection of what they believe they contribute to an organization.
In order to satisfy employees’ needs, while ensuring they feel valued by an organization and that their ever-increasing monetary needs are met, it’s important to look at the entire scope of evaluations from a fresh perspective. At Done!, here is how we approach the challenge:
There are four kinds of money that an employee thinks about
Annual raise - employees expect to gain an increase in their compensation relative to the rise in national inflation. Things cost more, through no fault of their own, and they need more money to stay afloat. The salary they earned last year will no longer pay for the things that it would buy last year. This is specifically related to inflation.
Contribution to the organization - over a period of time, employees contribute their energy, passion and efforts to their place of work. Recognizing their contribution is a moral responsibility of an organization. This contribution is unrelated to their performance; they have poured their time, effort and life into the continuance of the business. Mostly employees do their work to the best of their abilities and set out each day to give their all. We have noted over time that employees’ performance is pretty much set according to their personality, their passion and their reason for working. An evaluation highlighting strengths and weaknesses is helpful for them to understand areas where they can improve, but this is unrelated to their general contribution. Employees will frequently perform at the level that is required of them by their management team.
Increases - employees that get promoted and are required to take on greater levels of responsibility are entitled to an increase in line with the new level of authority and responsibility that they carry. Therefore, it is reasonable for an employee to expect an increase when they are promoted.
Bonuses - these are frequently tied to a contract that states what performance is required to earn a specific amount of money for a service performed and is therefore not part of the evaluation process. If discretionary bonuses are paid, it is the decision of the ownership of the company.
So, there remain three kinds of money that contribute to the employee’s expectations. What if we were to turn the system upside down?
Birthday increase covering inflation
Instead of battling with the evaluation process and all its vagaries, what if we replaced the subjective process with an objective one? Every year, on an employee’s birthday, how about they automatically received an increase relevant to the general inflationary level currently in the market? If inflation were to run at 3.5 percent, then it would follow in most cases that prices of products and services sold would increase by a similar amount. Therefore, logically, the cost of labor would increase by an equivalent amount.
Proposal: Set an annual inflation figure on January 1 each year which is the guaranteed increase that every single employee will receive annually on their birthday . This has the advantage of spreading the salary increase across the entire year, as opposed to implementing stepped increases twice each year.
Birthday gift recognizing the time that an employee has contributed to the organization
Assume that each year an employee contributes to an organization is valuable to the business, then recognize that contribution with a birthday gift.
Proposal: Create a digital box of gifts that employees can choose from, linked to the amount of time they have been with the company. For example, an employee with a number of years of seniority on their birthday will have the opportunity to choose a gift of their choice. The gifts would have different values; each year the gift could be equivalent to 5 percent of their salary minus inflation. In our example here, the gift would equate to 1.5 percent of the annual salary,
so an employee on USD 15,000 per year would get a gift value of USD 225. That gift could be in the form of a one-time cash payment, a shopping voucher (if a company were to purchase 50 vouchers from a suitable business, they would get them at a discounted price, thus adding more value to the company) or it could be access to services of the company at selling price. If a company sells food and beverages, then it could be a voucher for service at the company; again the company would be doing well as the voucher would reward the employee at the face value of the voucher, while providing the service at cost. There are unlimited ways of doing this, but the beauty is that on each birthday, an employee would feel their value to the company was being recognized. Moreover, if an employee were to personally select their own reward for their service from a variety of gifts, they’d derive greater happiness from it and avoid having to endure the painful evaluation process.
Increases given instantly
Many employees only receive promotions at their time of evaluation. They are required to wait in what represents a postponement tactic deployed by several businesses to delay the day of increasing an employee’s salary. Since the sticky issue of annual increases has now been entirely eliminated and there is total transparency in the system, it is now possible to separate a performance review and a promotion.
Proposal: When people deserve to be promoted, increase their salary on the spot.
Effect: With this system there are several benefits.
• A skilled HR team is able to know exactly what the payroll will be throughout the entire year and can plan in detail.
•The birthday-gifting process means that the additional amount each year is not an increase in the payroll and taxes, but rather a one-time gift that is given, therefore lowering the upward creep in remuneration.
• Long-term employees will not reach the end of the salary scale for their position, as the annual increase will always be in line with inflation (and probably the minimum wage).
• Birthdays become a truly fun and inspiring moment in a team member’s journey with the company.
What about evaluations?
Evaluations should be an ongoing, daily responsibility of management. Employee performance always remains under review by expert managers. When employee performance is flagging in a certain area, managers should deal with it immediately. When employee behavior is inappropriate, it should be handled instantly. Employees that no longer add value to the business should be coached and counselled on the spot, and immediate improvement should be expected. So why wait for an evaluation to deal with an issue? Deal with it immediately. Get every team member to be happy and productive on an ongoing basis.
Saving thousands of work hours per year in not doing evaluations is a massive benefit to an organization and keeps team members focused on doing their jobs, rather than worrying about filling in endless forms, submitting them and giving ‘feedback’ to team members. It avoids disenfranchising the mass and encourages the system to automatically improve the weaker members of the team or suggest an alternative employment opportunity.