What Should be Included in Employee Evaluation Programs?

What are you looking for in an employee evaluation program? Does it really need all those "bells and whistles" you keep hearing companies advertise or does it simply need to be a place where you can write and review an employee evaluation online?

Well, it depends on how successful you want your company to be in the long run. A simple employee evaluation program would serve its use as an assessment tool for such basic decisions as wage adjustments, promotions, disciplinary actions, and terminations.

But, if you look at the bigger picture, you will see that a more robust system that establishes a fully-integrated employee evaluation program company-wide with other performance management solutions, will allow that same company to establish an infrastructure in which they have the ability to gather and analyze employee data in order to make broader strategic company decisions creating stronger potential for long-term success.

So, with this successful "big picture" in mind—what needs to be included in your employee evaluation program?

Visibility

What elevates great employee evaluation software from a basic online repository is how much it brings to the table in assisting management with tactical choices that will affect workforce efficiency and profitability.

An employee evaluation program should include job descriptions that allow the employer to visually assess at-a-glance whether workers have the skills required for their position. Once that is identified, supervisors can create a plan for an employee's further training to enhance their ability in the current position or prepare them for the future. Additionally, there should be the capacity to record special talents, skills, and capabilities of an employee that might otherwise not be noticed or recognized. These tools can be used during evaluations as well as succession planning or even in creation of new positions—an approach that will increase employee engagement and loyalty resulting in higher retention rates.

Rising costs, increased competition and time necessary to hire and train new talent have made retention of top performers imperative to the bottom line. Developing internal talent can be a significant source of savings considering external recruitment and training can be twice as expensive as finding internal successors. Recognizing gaps and developing skills enables managers to properly map out succession plans while the employees are busy developing career paths.

Efficiency

A successful organization is based upon the realization of maximum results resulting from a minimum investment of resources. No one can afford to support an inefficient workforce. Employee evaluations are a way to identify wasteful practices and implement processes to correct the problem.

Also, they can highlight individuals in your organization who may have too much on his or her plate and identify alternative resources to utilize in order towards the efficient accomplishment of the desired goals and objectives. Organizations thrive when employees feel needed, challenged and properly compensated.

Specificity

Every organization requires a system with procedures and information tailored to its individual needs that will continue to evolve as necessary. Along with the specificity of the employee evaluation program is the ability it provides the manager to be unambiguous in the employee evaluation. Most supervisors don't keep track of performance issues on a daily or monthly basis, and may even lose important documentation if it is scribbled on a calendar or scrap of paper to be included into the employee review at a later date. But, with an online employee evaluation program, a manager can create a log or comment section where they can enter explicit information regarding an issue or incident. From a legal perspective, the company is in a much more defensible position, when the evaluation is precise—("Jennifer's financial reports had multiple incorrect entries in January, April and June and I have discussed the importance of error-free financial reports in our monthly meetings" compared to "Jennifer's work sometimes has errors")

This evaluation process can turn out to be a very positive process as the employee may have been previously unaware of how his or her actions were affecting others and causing a breakdown of efficiency. Once known, corrective measures can be put into place that will turn things around and may, as a result, create a new and better working situation for everyone on the team.

Basis for Pay-for-Performance System

Without a formal employee evaluation program, employee perception of a pay-for-performance environment is that decisions are "arbitrary and unsubstantiated". This can affect employee morale negatively. However, the opposite is also true—employees can be highly motivated if their compensation and rewards are shown to be carefully assessed on the basis of documented standards of excellence in job performance. This process is very complicated—even if is easy to separate the "stars" from the "average performers," it tends to be much more difficult to make the necessary fine distinctions among average employees given the complex nature of job performance and subjective nature of many evaluation systems. As a consequence, employees may feel that their ranking relative to their peers is incorrect, undermining confidence in the overall system.

Also, short—and long-term goals and appropriate compensation levels should be taken into account. Taking both short and long perspectives into consideration helps ensure that employees on the extended projects will be rewarded for their achievements to date and not forced to wait until project completion—which may be years down the line. Without transitional reinforcement of progress on these long-term goals, employees might gravitate toward easily accomplished, quick-return goals and neglect the more challenging endeavors.

Case Study: DTS, Inc.

The issue:
For years, DTS used an internal, proprietary system for basic performance and goal management. Due to corporate growth and the evolution of their product line, however, DTS decided it was necessary to adopt a more robust, online system to align their corporate vision with tangible goals, align pay with performance, bridge communication gaps and eliminate the manual review process.

The solution:
DTS used SuccessFactors' Goal and Performance Management, Compensation Management and 360-review modules. Once implemented, DTS tiered compensation levels and efficiently tied bonuses to the process for the first time. 

The result:
While transitioning to an online system obviously made the employee evaluation process streamlined, more efficient and less time-consuming so everyone could focus their time and energies on other projects, additional benefits include:

Upon moving into the digital media and consumer electronics spaces, DTS has used the system to increase the speed, alignment and focus necessary to change how DTS operates on a daily basis to keep up with the faster paced consumer market.

Using SuccessFactors' solution, DTS reviewed their core competencies for areas in which training was necessary. While they found performance was a high core competency, product knowledge was low. As a result, they now have in-depth product training to try and raise this competency.

"SuccessFactors is integrated into our culture and daily practices and has been a positive tool in addressing two key areas for us, goals and compensation. SuccessFactors has opened up lines of communication and helped us pinpoint areas of improvement—As a result, we've seen time savings on the administrative end, and improvement in performance throughout the company."

Sharon Faltemier
Senior Vice President of HR
DTS, Inc.

Conclusion:

The employee evaluation program is a very important piece in the performance management sphere. A company that is interested in retaining its high-performing workers is best served by a formal evaluation program that establishes a pay-for-performance compensation system that is perceived to be fair and equitable. Employees who believe they are fairly compensated are more productive and engaged in their jobs, thereby driving the company's bottom line results.

About SuccessFactors

SuccessFactors is the global leader in business execution software. The SuccessFactors Business Execution Suite improves business alignment and people performance to drive breakthrough results for companies of all sizes. More than 8 Million+ users and 3000+ companies leverage SuccessFactors every day. To learn more, visit: www.successfactors.com.

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