Performance Appraisals and Their Impact

I could write forever about the value of performance appraisals. Or, about how they are needless morale busters. Or, how necessary they are to document performance in the event you fire someone. Or, whether the best format is closed-ended, open-ended, or both.

I’m not going to write about any of that. Rather, check out this series of articles. What I enjoy the most about them is that they go through the owner’s need to do the appraisals to learn more about his business, the steps in choosing an approach, the impact of the first appraisals (after not doing them for a while) and the second ones. There is a bit of a cliff hanger about what happens next.

Throughout you can sense the author weighing the positives against the negatives and his apprehensiveness about the effect the process will have on productivity and culture. One could not help but to be impressed with the owner sticking to his initial reason for implementing the program and staying with it. He wanted to find out where the problems were, even if he did not really want to hear about them.

My biggest takeaway was how the organization continues to evolve and change during the appraisal process. We frequently think of the ratings as something that takes place in a vacuum. The reality is that performance is a moving target—both for the organization (sales ebb and flow) and the employees (new people are hired, others change roles, etc.). The changes affected his approach to the ratings and what he hoped to learn from them.

You may be doing performance reviews because you have to or choose to. Regardless, when have you analyzed their impact on performance or your culture? I’ll bet that the reviews have the most positive impact on your best performers (good performers get that way by seeking and accepting feedback) and the most negative impact on your second tier of performers (“What do you mean I’m not in the top band?”). Believe me, your bottom tier performers know who they are and are unlikely to change for you.

The impact on your culture comes down to whether you are evaluating people on things that are seen as important by them and management, the process is transparent, and, if rewards are given based on the appraisal, are seen as unbiased (fair is a completely different topic). If any of these pieces are missing, you’ll breed more cynicism than necessary in the process and make it even more painful than necessary.

What are your goals in the performance appraisal process?

For more information on effective performance appraisal systems, please contact Warren at 310 670-4175 or  [email protected]

Job Tryouts: Good Idea, but Are They Worth the Cost?

You know what would be the best way to select candidates? Have them work for you for about a year, evaluate their performance, then turn back the clock and make the right hire. However, that only happens in HR science fiction.

In this post I read about how a business uses job tryouts. This, of course, is not uncommon. Many large firms use internships to help determine who they will hire. Tests, assessments, and interviews can give you a sign of whether a person can do well on a job, but seeing him or her do it would really be the best predictor. Of course, this isn’t always practical due to safety, training, and other factors.

One of the most interesting quotes in the article is, “[organizational abilities are] very hard to suss out in the interview process,” which is true. However, there are ways to measure it (and other complex skills and abilities) without putting the person on the job. And the kicker? These kinds of assessments are designed to have the look and feel of the job. They are called Assessment Centers.

From an ROI perspective, you need to balance accuracy with cost. Yes, a job tryout can be very accurate (assuming what you have the person do is typical of his/her duties) but expensive (probably around $10,000 for three months for the type of job described in the article). Using a valid assessment upfront to screen people out (and to reduce the 50% washout rate of those in the tryouts) would be closer to $500. Sure, it’s not as accurate as the job tryout, but it isn’t 95% worse.

What the article really points out is that very creative business owners refuse to apply that thinking to hiring. The only choices for evaluating skills and abilities are NOT interview or 90 day probationary period.

What are your creative ideas for evaluating candidates?

For more information on legal pre-employment testing, skill assessments, and Assessment Centers, please contact Warren at 310 670-4175 or  [email protected]

Big Data, Evidence Based Decision Making, and the “Golden Motion”

The term “Big Data” really means nothing more than doing a deep analysis of the information you have. It’s “big” because we have more data than we used to have (bigger data would actually be the better term). The analytics really have more to do with being able to answer questions more reliably due to the larger number of data points. Evidenced based decision making really asks, “How can previously analyzed data help us make the best choice here?”

In this article, the author does a very good job of describing “big data” and how it can practically be used to solve business problems. Boiled down to its essence, he uses the information to find the one nugget (or more) of information that leads to improved business performance. When referring to something done by a user, he calls this the “golden motion,” or, what the customer does that leads to higher sales. When using the information to make smart business choices, it’s using the evidence to make decisions.

We can apply the “golden motion” and evidenced based decision making to HR as well. Here are a couple of examples:

1)    Signing up for benefits. Presuming that you have a self-service model of employees signing up for health care, 401(k) contributions etc., have you looked at you web portal stats to see which behaviors directly lead to more signups? Is it going to a particular FAQ? Or, a page which contains a specific graph?

2)    Are employees engaged? While engagement surveys are normally anonymous (and they should be), you can still look at the behaviors of groups which tend to be more engaged than others. Do they have more/less meetings than other groups? Do they do more organized “fun” things together? Do they ask for more/less input from executives? What behaviors do their managers exhibit?

3)    What are the best predictors of job performance and/or turnover? Have you analyzed your pre-employment and current employment data points to see which ones are truly indicative of superstars or those who left too soon? What are some of the things that top performers do (besides doing their jobs well)?

What “big data” does is get us to think about is the hidden side of things. And you probably have the data.

For instance, employee engagement underlies productivity and profitability. According to Gallup’s employee data from 2010-2011, “organizations with an average of 9.3 engaged employees for every disengaged employee experienced 147% higher earnings per share than their competition.” Understanding the drivers of engagement can help you increase it to the benefit of your bottom line. But, you need to dig into the data to find these nuggets.

But are you asking the right questions to find the “golden motion”?

For more information on using employee engagement and pre-employment testing data to improve profitability, please contact Warren at 310 670-4175 or  [email protected]

The Odds Are…

I was reading yet another article about hiring better using only interviews (when will these supposedly smart CEOs ever learn?), when I saw the author stumble upon an important fact about selection: No one (or methodology) is perfect. She accepts an 80% success rate as good (nor surprisingly, based on a gut feeling and not any data). I’m not going to challenge the specifics of that here, but the point is a good one.   Selection is the science of risk assessment and doing a good job of it increases the probability of success.

Improving your odds of making a good hire starts with developing quality applicant pool. The greater the average talent of your candidates the higher the probability that you’ll make a good hire. You can stack the odds in your favor by writing job postings which all people to select themselves out of the pool. You do not necessarily want a large group of applicants. Rather, you want a qualified group of applicants. If you have a talented applicant pool even randomly choosing from it will lead to better than a 50% success rate.

When it comes time for assessment, I am often asked what my success rate is. It’s an interesting question because it is such an elegant one, but at the same time it is an oversimplification. It implies that someone is either good or bad at their job and there’s no middle ground. The better question is, “What percentage of the people who score high on the test turn out to be among the best performers on the job?” There are steps you can take to ensure that this number is high, or, if you’d prefer, the risk of making a bad hire is low. These include:

1)    Validate your assessments. If that is impractical, use those which have been validated for similar jobs. Without this kind of data, you don’t know if you are improving your odds of hiring high performers.

2)    Use assessments (tests and interviews) that measure varied valid attributes rather than measuring the same thing multiple times.

3)    When setting passing scores, consider your risks. The higher the passing score, the more likely that you’ll be hiring excellent performers, but you might miss out on some of them. A lower passing score will capture nearly all of the excellent performers, but you will be letting in some poor ones. In a vacuum, the former is always preferable.

When evaluating the success of your recruitment and selection practices, keep track of whether the performance of new hires meets your expectations based on their scores in your process. This will allow you to have the answer when your boss asks about your success rate. And you will know by how much you are beating the odds.

For more information on pre-employment testing and skill assessment systems, please contact Warren at 310 670-4175 or  [email protected]

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