The REAL Reason Companies do Performance Evaluations

by on June 5, 2009 · 0 Comment POSTED IN: HR Info Center

Performance Evaluations are not about salary adjustment or legal protection

So when it comes to performance evaluations, the ultimate question is, “If everybody hates performance evaluations, employees don’t like them. Managers think they’re a waste of time. Why is everybody doing them?”

It’s not just HR that makes you do it. That’s where it starts. But there are people behind HR that encourage us to do this kind of thing. But there are two big reasons the big companies do performance evaluations. Smaller organizations do performance evaluations because they’re copying the big guys.

One of the big reasons is that a performance evaluation is ultimately tied to salary administration.
In other words, if we’re going to give somebody a raise, then how are we going to justify how much we give them? Well, it ought to be based on their performance. We think therefore we ought to document how we came to that conclusion. And a performance evaluation tends to be the most popular way of doing this.

The second major reason that even underscores that first one, we do it to protect ourselves.
If you ever go to a lawyer and say, “Help me. We’re being sued”, any good lawyer worth his salt will say, “Well, show me the file. Go get me the file.” In the file they expect to see performance evaluations, documentation about why this person has failed. That’s why they say you ought to do performance evaluations to protect yourselves.

Here’s the thing. The number place your raise comes from is not last year’s performance. This year’s raise is not directly connected to last year’s performance, never has been, never will be.

The first place you start when you look at any individual salary increase has nothing to do with last year’s performance. It has to do with your ability to pay.

Let’s assume you have money. Normally, when you have money, it’s not particularly a lot of money. When you’re doing an increase, you have 3-5% for the total budget for your company. So that means by definition, any individual’s increase is going to be small.

Secondly, when you know how much money you have, you got to look at what you’re paying somebody already relative to his or her market value. The percentage of their pay relative to the midpoint in the market for their salary grade for what you should be paying somebody to do what they do is called comparatio. And that comparatio is the second most important thing in determining anybody’s salary treatment. Only if you have money and they have room, then this whole subject of performance and potential ever come up.

The second biggest thing we do performance evaluations for is supposed to be to protect ourselves. But talk to any lawyer practicing employment law or labor relations and they will tell you when an employee takes you to court, it’s the employee who’s most likely to introduce your performance evaluations into evidence first. The system that you’re doing primarily to protect yourself does exactly the opposite.

Lawyers keep saying that if managers and supervisors would grow a spine, you wouldn’t be having this problem. They lack backbone. They need to buck up and tell these people they’re lousy years ago when they started to be lousy instead of suddenly at the eleventh hour telling them this. Secondly, you HR people out there, you don’t train your managers properly because if you trained your managers properly, they would grow spines either way. You could hear them washing their hands off the whole experience. It’s not their problem. The tool is neutral to the process. Don’t blame the lawyers. Blame the people using the broken system.

Edited remarks from the Rapid Learning Institute webinar “No More Performance Reviews! – A Revolutionary Approach to Performance Feedback” by Gary Markle

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