Question

In view of the performance management framework, discuss the processes, if any, does the organization follow for evaluating individual and organizational performance? Are performance evaluations primarily objective, subjective or mixed?

Answer 1

Solution:

Robust performance management frameworks are critical to ensure the retention of top talent and organization success.

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Following are some of the best practices for individual performance evaluation:

1) 360-degree framework

In this method, the employee does a holistic evaluation of self-performance through the following five methods:

• Self-appraisal - Employee evaluates own performance concerning targets.
• Manager review - The supervisor reviews the self-appraisal and provided feedback.
• Customer feedback - Feedback from the client on the expectations.
• Peer review - Peers review employee performance and share feedback.
• Subordinate feedback - Feedback from employee's subordinates.

2) Management By Objectives (MBO)

In this method, the employee and the manager work as a team to develop and monitor a performance plan periodically, such as a quarter, half-year, or annually. As part of the MBO, the employee received feedback from the manager. MBO is more suited for senior executives.

3) Psychological Appraisal

In this method, a psychologist evaluates the employee through interviews and discussions to identify the individual's future growth potential. This method is more relevant for evaluating senior executives.

4) Cost-Benefit Analysis

In this method, the Human Resources team typically compares the cost of retaining the employee as opposed to the earning that the employee generates. This method is more relevant for evaluating employees in a small start-up.

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Following are some of the best practices for organization performance evaluation:

1) Realization of Organizational Goals

Every organization sets some critical goals for its annual revenue, annual profit, headcount, Innovation, Cost control, and Order-book value. Useful performance evaluation techniques would cascade these organizational goals to its leadership team and then to subsequent levels.

2) Competitive Performance

In this method, the organization benchmarks itself against its key competitors in terms of market share and valuation.

3) Customer Experience

In this method, the organization gathers feedback from its clients about how well the products/services meet the customer's expectations.

4) Employee Experience

In this method, the organization gathers feedback from its employees about how well the processes and frameworks enable the employee to perform most efficiently.

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Performance objectives are usually a mix of both subjective and objective factors; for example, revenue generated is an objective measure, but the quality of revenue (short-term or long-term) is subjective. Organizations use a mix of both subjective and objective measures to evaluate performance both for themselves and their employees.