Monday, March 22, 2010

How Good is Your Performance Data?

During a presentation last week on "HR Metrics that Matter," I was discussing the importance of using performance data when analyzing turnover and employee engagement. The premise is that we want to make sure we find out why our top performers leave and we also want to know why our top performers are engaged. (or not)

A very smart young lady asked me, "Well what if all your performance data is skewed and managers give everyone a 3 out 5?" (This issue is known as a central tendency error in which managers tend to rate everyone in the middle). The short answer is don't use that data....yet!

Wow, what a good question and thanks to my colleagues over at Phil Blount and Associates, I happened to know the answer to that question as we are working on competency based performance management systems for some clients. As part of the new performance management system, we have designed training for the Managers and Supervisors (raters).

It is a fact that you can have the best aligned performance appraisal but if your raters do not understand what separates great performance from good performance then there is an issue of reliability. Here is what we recommend to make a subjective rating process more objective:

1) Inter-rater reliability calibration sessions-These session are designed to uncover the behaviors that separate each point on your performance rating scale. So, in this session you would determine which behaviors constitute a rating of 5 out of a 5 point scale, and which ones warrant a rating of 4, 3, 2, and 1. This process make sit easier for managers to delineate between the points of the scale when they have behaviors that are associated with each point.

2) Forced distribution-Publish a guide to managers giving them ranges for each point on the scale for approximately what % of employees should be rated at each level. So for example, on a 5 point scale, where 5 is high, approximately 15% should be a 5 and perhaps only 5% should be rated a 1. (depending on your performance philosophy)

3) Senior Rater-Some companies like to add a senior rater to review all scores to make sure they are supported and distributed correctly. This is just one more check in order to make sure ratings are fair and consistent.

4) Train managers on errors and biases and job documentation so they have the appropriate data to make rating decisions and leave biases checked at the door.

When you have a performance management system that is tightly aligned to organizational goals and objectives AND managers understand HOW to use it and rate employees, then you can do amazing things with the performance data.

How have you made your performance management process more objective? How have you trained your managers on rating your employees?
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