Performance Evaluations Waste Time and Money

Annual performance evaluations are generally useless.

I actually did away with them because I found people would generally work extra hard two weeks before the evaluation, and counted on management not to remember all the things they screwed up along the way.

But if you have an effective daily, weekly, and monthly measurement system, you can evaluate the performance of an individual in near-real time and address almost any issue immediately, and eliminate the need for annual evaluations.

That way, if something goes pear-shaped, addressing it immediately gives you far more successful outcomes than if you wait nearly a year and bring it up at performance evaluation time. Then you’ve both forgotten the circumstances and the outcomes, and it becomes an opportunity for resentment and finger pointing, with the manager coming off as a bully and the associate feeling like an innocent victim.

After all, “if no one has corrected a problem for the last 11 months, how can it be wrong now? You should have said something.”

If this is how managing errors is handled, any major error becomes management’s fault as much as the associate’s for letting it go for so long and costing the company money.

Use Regular Measurement to Eliminate Annual Performance Evaluations

In a previous article, I talked about how we had a problem with invoice accuracy, and that 40% of our invoices always came back with some kind of error on it. These errors rippled throughout the system and affected our inventory, receiving, shipping, and accounting, and we essentially had three times the people we needed to handle these errors.

So we began measuring everything and everybody in the entire process.

We assumed that for every credit we gave, someone had created the initial error that caused the problem. So we tallied that credit against the individual or group that created it. Once we gathered this data over a period of months, we were able to figure out whether the problems were training, competence, or the system in general.

After we had figured out what those problems were, we were able to correct for them, and we were able to easily identify them when they happened again.

If we had to retrain someone, we retrained them immediately. If it was someone who kept making the same errors over and over, despite our training, we let them go.

Now, imagine if we only addressed that problem once per year during a performance evaluation. We might discover the problem and address it, but only after a whole year had gone by. And then if we retrain the person, and they’re still making the same error a year later? That’s two years of unnecessary costs to the company down the toilet.

Finally, by eliminating performance evaluations, we were able to uncouple them from compensation adjustments, because one should not have anything to do with the other. Remember, if people are working their hardest over the last two weeks and the manager forgets all the mistakes over the last year, you reward incompetence. But the person who’s outstanding for 11 months, and has a bad week right before evaluation time could be unnecessarily penalized. Again, this is bad management.

By addressing a performance issue immediately, the individual can self-correct and move on very quickly. You can measure their ongoing performance, find improvements, and base any bonuses and pay raises on their daily, weekly, and monthly performance metrics.

And you can do it all without creating any residual resentment.

I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business. If you would like more information, please visit my website and connect with me on Twitter or LinkedIn.