Incentives drive behavior. This is so much the case that our “Leadership in Organizations” Professor repeatedly stated that incentives are among the strongest levers to changing culture. And, as we discussed incentive systems, we discussed the issues with the traditional tier based evaluation systems.
Most companies have some variant of a system that grades people above or below target/expectations relative to their peers. We discussed a couple of issues with this –
1. Peer based evaluation systems often lead to unhealthy competition
2. Telling someone they were really close to the next tier actually causes a lot of unhappiness. Our Professor had done research on Olympic medal winners and found that Silver medalists were more unhappy than Bronze medalists. While the Bronze folks were just happy to be on stage, the silver folks were generally unhappy at missing the elusive Gold.
So, what’s an alternative solution? We discussed a 100 point scale with 20 questions scored for 5 points each. These 20 questions could be divided into 4 areas – e.g. task performance, leadership, culture, and teamwork. And, each question would drive to specific questions about how a team member performed. Of course, the manager(s) would need to substantiate each question with clear examples.
Why would this be better? First, it eliminates tier regret. Your yearly evaluation is a score out of a 100. Second, it focuses competition on yourself. The relevant question here is – how did I do versus my performance last year? Third, it encourages self reflection and alignment. Each employee should do a self evaluation and compare notes and points of difference with their managers. And, finally, it provides more granular feedback on performance versus a couple of letters and bullet points.
We discussed almost a year ago now and it is clearly one of those discussions that has stuck with me. I’ve been looking for counter points nearly every time I’ve thought about it. And, I’m yet to find too many. So, here’s to giving it a try.. someday.