Early in my management career, I got pretty frustrated with the performance review process. In fact, I’d have to say that I hated to do employee reviews. But realizing that reviews are the means by which employees find out how they’re doing and what’s expected of them, I knew it wouldn’t be fair to take shortcuts.
Of course, I’ve also been on the receiving end of many performance reviews. Some were detailed—too detailed, perhaps—and others too simple. Not one of them could explain satisfactorily to me how my raises were calculated.
So I invented an approach for establishing measurable goals, tracking performance, and then integrating them into my budgeting process. I built my system using Microsoft Excel and fueled it with a commonsense approach to evaluating an employee as a whole instead of focusing on one or two strong skills. I incorporated a report-card-type scoring system with a weighted performance point average, or PPA. You can download this spreadsheet and plug in your own numbers, using this article as a guide.
Establishing the broad investment criteria
The purpose of the evaluation process is to set goals and provide guidance for needed or desired improvement in specific areas. However, deciding what to measure in an employee can be difficult. The reality is that everyone has certain strengths and weaknesses, and almost no one encompasses all the strengths. Basically, a manager’s job is to look at each skill set individually but to evaluate the employee as a whole.
Most managers take a qualitative approach to employee evaluations. My system combines both qualitative and quantitative approaches. I started by asking myself what I thought made for the perfect employee. That person would be one who got everything done to perfection on time, had the necessary knowledge and certifications, went home at night and read up on new technologies, worked overtime when asked, had a great relationship with team members, and garnered excellent survey results from customers.
I use four major aspects as investment criteria:
- Job Performance
- Job Knowledge
Generally, IT managers and the market are willing to pay higher salaries to people with the knowledge and skills necessary to keep the company operating. As a manager, I was always impressed and appreciative when a team member brought in ideas and solutions to problems based upon his or her self-motivated learning of new technologies; such people represented to me a clear investment in the future. Results are important as well, but if a person is not acquiring new skills, his or her performance will diminish over time. Conversely, sometimes an employee may have all the certifications but just isn’t getting the job done. That’s another problem you need to quantify and address. I also believe a person needs to work effectively as a team member and focus on customer satisfaction.
As a result of this reasoning, I came up with the following weightings. You can apply different weightings, but the concept should still apply:
- Job Performance: 30 percent
- Job Knowledge: 20 percent
- Self-Education: 25 percent
- Teamwork: 25 percent
Performance ratings and weighted results
Most companies have a simple rating system with categories like Meets, Exceeds, and Outstanding. It’s often difficult to explain to employees the idea that they were “close” to the next higher rating. I had no good format to explain how they could achieve their personal target rating. I prefer to use the idea of a continuous scale, rather than fixed steps.
The continuous scale provides the employee with a much better answer: “After careful scoring of all the important factors in your performance, your overall rating is 2.9. Let’s review the components, see where your goals are, and determine how you can achieve your goals.”
That 2.9 will still have to be converted into the more simplistic companywide system, but the weighted rating will give the employee a truer reading of his or her performance. It also gives the manager extra leverage with senior managers when asking for an appropriate pay raise for the employee.
This method may cause some initial frustration among your employees, but they’ll gain a better understanding of the evaluation process. They’ll appreciate receiving more accurate evaluations and being able to set measurable goals.
Basically, the manager and the employee should agree on the goals, and those goals should be the basis for the next review. Setting goals is the best way to be sure that everyone knows what to expect at review time.
Samples and calculations
Let’s briefly review some of the basic assumptions and calculations of my weighting method. You should start with your standard company rating system but provide for scoring using a continuous scale. I prefer the scoring to be in tenths.
The sample rating system shows how to convert a commonly used step system into a continuous scale. I expanded the values of each step from, say, 4.0 to a top value of 4.9. Now, a solid “outstanding” would require a rating of 4.5 but still allow for higher or lower values, sort of like the plus and minus grades we had in school.
Next, I developed the major investment categories and assigned the percentages that make sense for my team. As you can see in Figure A, I used Job Performance, Job Knowledge, Self-Education, and Teamwork.
The final step is to break down each of the investment criteria into detailed measures. For example, I’ll need to break down Job Performance into the major aspects of the employee’s job description. These components need to be different for functional job classes, because a Programmer function is fundamentally different from a Help Desk Support function. Figure B, for example, shows a breakdown of the Programmer function.
Basically, the same measures should hold for both junior- and senior-level programmers; however, the weightings may be different.
It’s important that the measures be general to the job class and not specific or detailed to a project or a person. I recommend a special bonus as compensation for detailed performance plans so that they won’t muddy up the general performance evaluation. For example, if you ask a programmer to lead an IT project to set up a disaster recovery plan, that would fall into a detailed performance plan and be compensated through a special bonus.
Let’s look at some typical results using the Job Performance criteria in the case of a help desk technician. The following would have been taken from the job description and weighted by the manager the same for all help desk technicians. In Figure C, you can also see the scored results and the potential gaps between the review and the goals established by the employee.
Loading the high-level information into Excel gives some nice features, such as the ability to sort the table by the different columns, make some changes, and then re-sort. This is especially important when you have larger numbers of people to evaluate. Figure D shows several employees listed.
Some preparation advice
The best preparation I’ve found for the performance review process is to rank my entire team before beginning the individual reviews. Over the years, I worked for two managers who required me to rank my employees prior to going into the budgeting process. I found the process very enlightening and adapted it to my review process. I further enhanced the approach by applying scores for my four investment criteria and then ranking by the composite score.
The ranking process does a good job of highlighting individual differences and strengths, and it will also help you work out the relative differences to achieve the curve that you’ll need. It’s one of the better ways to get your manager on board before the formal review process begins.
After comparing scores, you might find that you’ve rated someone too high or too low. This will help you avoid the need to backpedal later on because your manager didn’t agree with your assessment.
You may need to change the ratings after a more detailed review, based upon your discussion with the employee, but that’s okay—your assessments will be more objective, and you’ll be better prepared to explain your ratings.
Advantages and disadvantages
As with any change, there will be implementation obstacles, as well as benefits. The obstacles to this process include the following:
- It takes time to set it up initially.
- Compared with more simplistic approaches that don’t require the manager to provide specific scores, the manager may feel uncomfortable using this approach the first time.
- Employees will have to face their strengths and weaknesses.
- There will be resistance from both managers and employees the first time around. It will be new and much more detailed, and everyone will wonder what the catch is. It’s important to use the approach initially to set goals.
Benefits of this process include the following:
- Doing the next review will be easier. In fact, employees are encouraged to score themselves throughout the year, and managers should be willing to rescore at an employee’s request.
- In general, the employee reaction will be very positive that you made this kind of objective effort.
- You’ll learn more about your employees’ capabilities, interests, and goals.
Once the rating system is in place, you can enhance it to effectively and systematically calculate raises based on company criteria and link the results to your budget planning.