Employee performance and compensation should be tied to achieving
quantitative results that are tied to the specific job function that is mapped to
specific responsibilities.
The Current Employee Performance Evaluation Framework
The current approach to managing and evaluating employee performance is broken. It has been broken for a long time. Most organizations: however, lack the vision and courage to rethink how this process should be conducted.
The current process works as followed. When an employee starts his job, he is given a group responsibility that is tied to the assigned role. These responsibilities are very qualitative in nature. He is responsible for xxx, xxx, etc. At the end of the evaluation cycle (which is typically year-end), the employee is asked to evaluate his performance through self-evaluating select aspects of his job performance. That self-evaluation is then sent to the respective manager. The manager then reviews the employee’s inputs and then comes up with her view of the employee’s performance. With a few exceptions (i.e., terrible performers, culture alignment, etc.), the rankings are not too different between how the employee rated himself and how the manager rated the employee. The manager then gives the employees a list of 3 to 5 things she does well and 3 to 5 things to improve on prior to the next evaluation cycle.
In some instances, there may be quantitative goals, but for the most part, the development goals are typically qualitative. A profound exception pertains to how sales executives are measured. Most organizations will have firm goals for their sales roles. For the other roles (specifically non-P&L owners), soft criteria are set and reviewed in the next employee performance review cycle.
Rethinking Job Responsibility
People managers, along with their HR business partners, should establish a framework to ensure that employees’ performance aligns with corporate goals, priorities, and performance targets. Each position should be deconstructed to its respective roles. These roles should further be segmented into job responsibilities. Each responsibility should then be updated to include performance targets. It is highly recommended that performance targets be set to a specific measurement period or time horizon. Please refer to the below examples:
Avoid these…
- Lead a global finance team in driving financial performance to ensure financial goals (P&L, Balance Sheet, and Cash commitments) are met while aligning with corporate policies and procedures
- Lead reporting, forecasting, and planning process, including distribution of appropriate financial targets for profitable growth of the various business segments and proactive analysis of the financial statements for opportunities to increase income
Use these…
- Lead a global finance team in driving financial performance to ensure financial goals (P&L, Balance Sheet, and Cash commitments) are met while aligning with corporate policies and procedures. The financial goals include a $35MM improvement in operating margins for the 2023 fiscal year, a reduction of bad debt write-off of 12% by end of Q2-2023, etc.
- Lead reporting, forecasting, and planning process, including distribution of appropriate financial targets for profitable growth of the various business segments and proactive analysis of the financial statements for opportunities to increase income. Level 1 reports should be accurately developed (100% accuracy) and delivered within 24 hours post the 6th business day of the following month, etc.
This framework does not eliminate qualitative measures. Rather, it elevates responsibilities with quantitative measures over responsibilities with just qualitative measures. Each position should have between three (3) and five (5) responsibilities with quantitative measures. It is not recommended to have more than five (5) responsibilities since there will be a diminishing return when weighing against building a tracking mechanism. If you are interested in finding out more about adopting a quantitative framework (metric-based), please reach out to us at info@perluxi.com.
