Focusing a Wide-angle Lens on Performance Assessments

Assessments of talent are important, impactful decisions. Whether they’re used to support work assignments, performance appraisals or succession planning, judgments by others on the measures of our work can leave us either motivated or miffed.

Employees expect, and deserve, performance assessments that are accurate, honest, and provide valid and balanced feedback. But with cross-functional project teams and remote work assignments being the norm today, it’s challenging for managers to have a complete and current view of an individual’s performance at all times.

Using a multi-rater, 360-degree feedback process can equip managers with a wide-angle lens to more effectively evaluate employee performance. A 360-degree appraisal collects information from a variety of people with whom the employee has frequent contact, and assesses the skills, behavior and knowledge of the employee. The insight can then validate, or present contrary evidence to, the manager’s own view of the employee’s performance.

Most talent management experts agree that including a 360-degree feedback process can be a positive addition to a company’s strategy of performance management. But before you swing into action and start soliciting performance feedback, there are best practices to consider — and, of course, land mines to avoid. A 360-degree feedback process that isn’t carefully introduced and implemented has the potential to backfire and deliver a negative blow to employee morale.

Consider the following best practices when designing a 360-degree feedback process for your organization:

• Involve senior leaders — gaining their support to champion the process will build a strong culture of communication and trust.
• Marry the process to the culture of the company — decide early on whether feedback should be open and transparent or remain anonymous.
• Invest in training — for managers and employees alike, be sure everyone understands the process and expectations up front.
• Bridge to development — beyond performance appraisals, link 360-degree feedback to individual development planning.
• Size matters — include enough raters — ideally six, but no more than 10 — to provide a complete and balanced perspective.
• Summarize — if you’re using an anonymous process, provide the employee with broad themes of feedback rather than specific comments.
• Automate the process — an automated 360-degree software solution can bring added efficiency to the entire process.

The Cost of Turnover

Some turnover of employees is normal and expected. When it becomes excessive, it costs a business a significant amount of money. There are tangible and intangible costs associated with employee turnover. As a general rule of thumb, we believe that the cost of turning over one employee is roughly 25% of that employee's annual wages and benefits. For an employee earning $30,000 (includes benefits), this would amount to $7,500 of "cost" associated with that employee leaving the company. For example, suppose a company employing 100 people turns over 25% of its work force annually. In this case 25 employees leave the company every year. Assuming all 25 employees were earning $30,000/year, the total approximate cost of these employees departing is $187,500. If the turnover rate is reduced to 10%, the total approximate cost would fall to $75,000. Obviously it is important to take steps to control employee turnover. Are you taking those steps?

The Struggle Between Efficiency and Effectiveness

Business books, magazines and newsletters are full of recommendations about becoming more efficient. They talk at length about the importance of the bottom line and incremental gains from reengineering and total quality efforts. And they talk about how technology can provide a real boost in efficiency.

But with all this talk about efficiency, are we losing something in terms of being effective? To distinguish between effectiveness and efficiency, a brief definition should help. Effectiveness is doing the right thing. Efficiency is doing things right. These simple definitions point to a clear distinction that has major implications for businesses of all sizes. The implications arise from the difficulty in balancing both efficiency and effectiveness.

With the pressure to constantly be as efficient as possible, an organization can get caught up in focusing too much on reducing process time and/or the number of employees and not enough on what makes sense for the organization. For example, suppose a distribution company decides that it is taking too long to process orders because there is an additional review step in place to ensure that the order is accurate. But often times, orders get backed up slightly for shipping because the people doing the additional accuracy check on outgoing orders fall behind. So the decision is made to eliminate this additional step and at the same time save some money by eliminating two positions. This is done in the name of efficiency because orders will go out faster which has some real merit. But the result of eliminating this additional step is a significant increase in incorrect orders being shipped. The impact of this is additional time dealing with more customer complaints, additional picking and restocking time, additional costs of returned shipments and, above all, customer ill will.

This example illustrates how doing the right thing is often overshadowed by doing things right. What employees often view as being efficient can many times impact the company negatively. This is why it is important for management to create an environment where employees are encouraged to look for ways to become more efficient, but do so without degrading the level of customer service and quality.

Bringing a balance between efficiency and effectiveness is one of the critical jobs of any owner or manager. In the above example, the company might have been realizing a competitive advantage because it was shipping orders with a higher degree of accuracy than its competitors. When it decided to save some money by streamlining a process and eliminating some positions, it lost that competitive advantage. And in terms of saving money, any savings realized from the streamlining were in all likelihood given back several times over.

It is important for businesses to constantly look for ways to do things right....to become more efficient. But it is equally important that decisions along those lines be made by asking questions about the impact on quality, customer service and employee morale. Bad decisions relative to efficiency can very often have a negative effect on all three of these variables.

With regard to technology and efficiency, does the addition of new technology to any process have a positive impact on these variables? Business processes and what's good for the customer should drive the implementation of technology. Technology should not dictate how a process gets defined. Start with the customer and work backwards. Define the process based on the best way to serve the customer and the best way to accomplish tasks. Once the business process is defined, match the technology to the process. When technology is allowed to drive the business, things tend to get forced to fit and the customer, productivity and employee morale with often suffer.

We can safely say that balancing efficiency and effectiveness is not easy. But it is important for organizations to stay focused on the long-term impact of all decisions. Yes, short-term performance is important, but if it takes precedence over long-term viability it could lead to a decline in performance over time.

Do Your Core Business Well

When a business is initially successful, it is generally in one type of business. That success often leads owners and managers to begin thinking they can make any business successful. They start thinking about diversifying into other types of businesses. The reverse of this is when a business is struggling and the owner or manager believes that the only way to achieve success is to diversify.

In both cases, the core business probably represents an opportunity for additional success if properly managed. But there seems to be something about human nature that draws people away from what they do best and toward something that appears to be more glamorous or more intriguing.

We believe it is important to pay special attention to the core business...what it is you do best...and grow that business to higher levels of success. Business newspapers and journals are full of stories about companies that get outside their core business and fail miserably. And in many cases the core business suffers because resources are drawn away from it.

We think that too many decisions to diversify outside of the core business or strategic outgrowth of the core business are ego-driven. Making diversification decisions to feed someone's ego is simply irresponsible.

Before thinking about moving beyond the core business, ask yourself why you are even considering such a move. Can you grow your core business in a profitable, significant manner? Are you doing a good job with your core business in terms of operating efficiency, customer service, margins, promotion and quality of personnel? If there is room for improvement, concentrate and focus on making those improvements. Your objective should be to maximize the value of the business. Making the core business strong in terms of operations and customer satisfaction and loyalty will enhance value significantly. If you divert resources away from the core business by buying another business or diversifying through product or service development, the core business will not get the attention needed to enhance its value.

In short, focus on doing what you do best. And then try to do it better. However, none of this is to say that diversification is necessarily bad. It can be a very positive step for a business. But the point of this brief is to point out that the core business, assuming it has adequate potential, must have a lot of attention paid to it. A new venture can be undertaken as long as adequate resources and expertise are available for both the core business and the new one.

Refine Processes the Easy Way

What TQM, CQI, reengineering and other process improvement programs advocate is an increase in efficiency through the systematic study and improvement of critical business processes. But what we have found is that many companies approach these programs incorrectly by:

1) selecting unimportant or lower priority processes to study

2) getting bogged down in the analysis rather than focusing on results.

What is a process? Webster's Dictionary defines a process as a "method of doing something will all the steps involved". Businesses are made up of a number of processes, each with varying degrees of complexity in terms of the number of steps involved. These processes are used to carry out functions and activities. For example, something as simple as paying bills or more complex manufacturing or distribution processes are all necessary to keep a business running. How efficient these processes are can have a major impact on customer satisfaction, employee morale and productivity and profitability.

Before proceeding, an organization should inventory all of its important business processes. Once the inventory is completed, the list of processes should be prioritized in terms of their relative importance to the overall success of the company. We believe that the most important processes are generally those that impact customers most directly and most heavily. After the list of processes has been prioritized, begin with the most important process. Select a refinement team of roughly 3 to 7 people. The team should consist of people with and without intimate knowledge of the process. Selecting people without intimate knowledge is important because they can provide a more objective, distant perspective. It is often difficult for those closely involved in a process to "see the forest from the trees". They are often too close to it to be objective or they have such a vested interest in it that they will fight change.

Once the team is in place, have an initial meeting to provide a brief overview of the process and to collectively list the steps (flow chart) the process in question. Have someone record the steps involved in the proper order. That individual will be responsible for preparing a draft of the flow chart and distributing it to each member of the team within a day or two of the initial meeting. Schedule a second meeting that should take place within about a week or so. In the meantime, the team should be individually looking at each and every step of the process and evaluating whether that step is:

1) appropriate

2) necessary at all.

In the second meeting, the group will begin discussing each step of the process. Each member of the team should provide input as to whether that step is correct and necessary or whether it should be modifed (and how) or eliminated completely. The group should reach consensus on each step. Once each of the steps has been evaluated in this manner, a new flow chart should be prepared for the group to review. A final evaluation should take place to ensure that the process will, indeed, do what it is intended and that it has in fact been made more efficient.

With this approach, processes can be quickly and easily enhanced to become more efficient and less cumbersome. While most processes can be refined in this manner, there could be a few processes that are very complex that will require more extensive analysis and measurement. But we believe that over-analyzing simple processes simply ties up people resources and provides little incremental advantage over the method described above.