“Human Capital”
Performance: Measuring to Empower
The consistent exercising of a performance evaluation process provides a significant competitive advantage to the company in pursuing its business objectives. However, these processes are often undermined by biases that greatly constrain their effectiveness. So much so that many question whether, in most cases, performance evaluation is stigmatizing Human Capital instead of empowering it. In this brief reflection, I will focus on this organizational process with a view to optimizing it in the context of the company’s life.
Several experts, such as Idalberto Chiavenato, place the origin of the systematic performance evaluation of a member of an organization in 1842, when the U.S. Federal Civil Service created annual reports assessing the activities of its employees. In 1898, the U.S. Army made a significant contribution by implementing a routine for assessing the performance of soldiers in its ranks. The beginning of the 20th century saw an important metamorphosis in performance evaluation when, in 1918, General Motors added a behavioral component to its exclusively technical measurement scales for evaluating executives. In 1954, academic Peter Drucker introduced the goal dimension into a performance evaluation methodology, a model that would be of great importance for the boom of the 1980s when new models and approaches to employee performance evaluation proliferated.
Today, the importance of performance evaluation for Human Capital planning and management is undeniable. The variety of models available on the market reflects the dynamic nature of organizations, their specificities, and their uniqueness, highlighting that the choice of these models should be the subject of careful and thoughtful consideration. Among the main types of tools, the popularity of technical-behavioral questionnaires is now essential for managers in all sectors.
Also, the 360-degree evaluation process, created in the 1950s by a team of engineers at the Esso oil company, quickly spread due to its ability to aggregate various sources of information in the performance evaluation process.
Without aiming to list or compare the numerous existing performance evaluation models, I cannot help but make a final reference to the 9-Box Grid, developed by McKinsey consulting firm in the 1970s, which systematizes different types of employee performance, enabling a strategic analysis of their potential development path within the organization.
The existence of technical, behavioral, and team development potential performance indicators is essential for effective management of the organization’s life. Managing a team, whether in operational positions or leadership roles, can only be done consistently through an objective awareness of the value each employee adds to the whole. Decisions related to internal mobility, external transitions, reconfiguration of the organizational structure, or even functional changes, should be based on objective performance data from a reliable assessment process.
It is precisely when the evaluation process succumbs in terms of suitability that not only do the potential benefits of it nullify, but it also opens the door to potential harmful consequences for the company. And what biases are these? I will list the four most frequent dangers to a correct performance evaluation process.
What about Training?
In the midst of the hectic pace of organizations, it is all too common to undervalue the training effort needed to equip team leaders with the necessary skills for the performance appraisal process. From the basic usage instructions of the tool in use to the weighting of professional ratings, it is essential that the team responsible for the assessment does so consistently and appropriately.
Statistical Abnormality
Even when the tools are mastered, it is common to find the absence of median scores. According to the statistical concept of the Gaussian curve, the majority of the evaluated population should center on the median score (normality). However, one of the great biases in performance evaluations is precisely the polarization of scores at highs and lows, labeling professionals as either “excellent” or “terrible.”
The Dreaded Punishment
One of the great distortions of the performance appraisal process is its transformation into an instrument of punishment by management, losing its pedagogical character. When the purpose of diagnosing improvement opportunities is neglected, the credibility of the performance evaluation process and its contribution to organizational commitment are called into question.
A Mere Placebo
A common mistake in companies is the use of artesanal surveys to measure both technical and behavioral aspects. The lack of psychometric validity of these tools means that the results are unreliable and do not allow for consistent analysis, encouraging decision-making based on purely speculative indicators.
The benefits of a consistent performance appraisal process for managing the company’s Human Capital fully justify its prioritization by the management. Only in this way will its benefits be maximized, while avoiding that a superficial and biased application generates the opposite effect as intended, becoming a harmful process to the organization.
Written by João Silva Santos
October, 2020
This article was published in Ambitur as part of the “Human Capital” series. You can access the online version here.
