What’s the best way to compare the performance of people doing the same job? I know it’s easy to simply rank employees by the ratings they received in their evaluations. However, my inner voice is telling me there’s more to this. Can you help me? — Long Shot.
You’re right! There’s more to doing a comparative approach in analyzing and ranking employee performance. You must do a ranking to gain insights on which worker to promote when the time comes.
Basically, there are five approaches. One is the ranking system you were referring to, where you list the individual workers’ appraisal ratings from highest to lowest.
Next is forced distribution. This is also known as grading on a curve. The normal curve in statistics places the majority (around 70%) of employees in the middle, or the average group. Generally, this is the group that meets the company’s expectations.
The rest are distributed into either side of curve. The extreme left consists of the 5% that “need much improvement” and the 10% that “need slight improvement.” The extreme right represents the 5% who are deemed “outstanding” and the 10% that “exceed expectations.”
The third approach is called the paired comparison. This requires every line leader, supervisor and manager to compare every employee with every other employee in the work group. An employee is given a score of one point every time another worker considers him as the top performer in the group.
Once all the pairs have been compared, the concerned manager computes the number of times each employee receives a favorable score and totals them all. This becomes the employee’s performance score. After that, they are ranked accordingly. Paired comparison eliminates the managers’ subjectivity and their tendency to play it safe by giving an average rating.
BALANCED SCORECARD
The fourth approach is called the 360-degree feedback system, where an employee receives confidential evaluations of their work performance anonymously from the people who work around them. They include the boss, colleagues and direct reports. For efficiency, this is better done through an online form and measured on a scale similar to the forced distribution system.
This allows the person being rated to accomplish a self-rating questionnaire similar to what the boss, colleagues and direct reports are using.
The last performance approach is the so-called balanced scorecard, a performance management system that focuses on translating the company’s objectives into a set of performance metrics that include financial analysis (profitability and return on investment), customer interaction, internal business analysis and the learning perspective.
I would normally recommend the balanced scorecard as it connects an individual performance to corporate results. In other words, you cannot have people being given an excellent performance rating when the company is losing money. It may sound unfair, but that’s the way it goes. All employee accomplishments must be translated to financial performance.
Somehow, the unfairness can be tempered by evaluating, first and foremost the performance of division and department heads. Mr. Erick Reyes, a human resource (HR) management professional with more than 40 years of experience, says that “individual performance emanates from the corporate results.”
For example, if a Department ABC has exceeded the expectations of top management, a certain percentage is given as a merit increase to those people with an above average rating. On the other hand, if Department XYZ received a poor rating, then it’s almost impossible for anyone in that department to be given even a small monetary or non-monetary recognition.
Of course, that’s assuming that all goals are specifically defined by individual and department Key Performance Areas or Key Performance Indices.
FINANCIAL REWARD
As I’ve said earlier, this becomes necessary if we’re talking of financial reward like merit increases, profit-sharing bonuses or performance bonuses, except the mandated 13th month pay which must be given to all workers regardless of their employment status. Also, there’s a caveat to this — not all jobs can be measured easily.
For a department like HR, measurable objectives can be set for how it manages the recruitment cycle, prevents conflict with the labor union, reduces employee grievances, maintains a suggestion system, administers town hall meetings, conducts the annual morale survey, keeps turnover rates down, etc.
It’s also a good idea for HR to take the lead in implementing a continuous improvement program such as Lean HR, which applies kaizen and lean thinking to the HR function.
In conclusion, nothing is more convincing than creating an approach that suits the company’s culture. Just the same, don’t be afraid to change the system. Even major organizations don’t copy everything from model companies. They adjust things to achieve an ideal process.
Bring Rey Elbo’s leadership program called “Superior Subordinate Supervision” to your management. Chat with him on Facebook, LinkedIn, X (Twitter) or e-mail elbonomics@gmail.com or via https://reyelbo.com
