1000 Business Lessons Every Businessman Must Know

Chapter 47 Performance Appraisal: Its essence is to make the best use of talents (2)
Performance appraisal is the basis of salary management, and the salary level of employees depends on the results of performance appraisal to a certain extent.Modern management requires salary distribution to follow the two principles of fairness and efficiency, which inevitably requires the correct measurement and evaluation of each employee's labor results, and pay according to work.For example, employee bonuses and performance wages are assessed based on the results of performance appraisals.Only when the results of performance appraisal are linked to the level of remuneration can it have an incentive effect.Performance appraisal and salary management are the main means of incentives. Performance appraisal defines the goals and directions of incentives, while salary management strengthens the role of incentives.Higher-performing employees get higher remuneration, which is the company's encouragement to employees' behavior and results, and employees feel fair evaluation and are encouraged.Therefore, companies should determine bonuses, salary increases, and salary levels based on employee performance.

2. Training development

Training and development needs are determined by the results of performance appraisals.Training and development is an important way of investing in human resources. It can increase the value of human resources, so it is a strategic task for enterprises.Training and development must be targeted in order to get twice the result with half the effort.The role of performance appraisal is that through performance appraisal, companies can understand the problems existing in employees and what areas need to be improved, which makes it clear whether employees need skill training or attitude changes; through performance appraisal, companies have a comprehensive understanding of employees. According to the understanding of employees' strengths and characteristics, they can be trained and developed in some aspects.

3. Personnel changes
Personnel changes such as promotion and transfer of employees are also based on the results of performance appraisal.Performance appraisal can provide employees with work information, such as work attitude, knowledge and skill application degree, etc.High-performing employees are often perceived as having greater ability and greater potential, so qualifications for higher positions depend on continuous levels of performance.Because of this, the selection of talents for higher positions and the ability of employees are judged according to the performance appraisal, and the adjustment of positions is also determined according to the characteristics of the employees learned from the performance appraisal.

[-]. Select the specific method of assessment

For different employees, the assessment content and assessment methods are different, and various forms of assessment can be used.This can measure and assess a person from many aspects, which can effectively reduce the assessment error and improve the accuracy of the assessment.The following are several commonly used assessment methods:

381. Rating scale method

The rating scale method is the most common method used in the assessment. The assessor evaluates and scores each assessment item of the employee according to the scale. A 5-point scale is commonly used.As shown in the following table:

Example of Rating Scale Method

382 Individual ranking method

The individual sorting method is also called the queuing method, which is to arrange the employees in order from good to bad.For example: To evaluate the employees of the financial department of a certain company, first of all, list the employees of the financial department, a total of 10 people.Then, find the worst employee A from the list and write "10" next to his name.Then find the best employee F from the list of the remaining 9 people, and write "1" next to the name.Then find the best employee G from the list of the remaining 8 people, and record "9".This is repeated until all the names are marked with numbers, and then the order of the employees' pros and cons is sorted out.As shown in the following table:

383. Paired comparison method

Match each employee with every other employee and compare them individually.For each comparison, record "+" for the employee who performed well, and record "-" for the other employee. After all employees are compared, count the number of "+" for each employee, and evaluate the employee's work performance accordingly.As shown in the following table:

384. Character Comparison

Before the assessment, an employee is selected first, and other employees are assessed based on his performance in all aspects.

Using the character comparison method can often stimulate employees' enthusiasm for work more than other methods. Frederick Taylor, known as the "father of scientific management", once conducted a pig iron shipment experiment.

He started by asking workers to hunk 92-pound lumps of pig iron onto railroad wagons, and those workers could load 12.5 tons a day.

Later, Frederick Taylor found a strong man.After training, he can load 48 tons per day.Taylor used him as the standard to assess the workers and pay them wages.As a result, the productivity of workers has been greatly improved.

385. Plovst Law
This is an assessment method created by the American Plovst.The essence of this assessment method, there is a common saying in management circles, that is, "the examiner only needs to know the facts about the examinee".The specific operation steps are as follows: the first step is to formulate a comparative participation form, and carry out item-by-item verification according to the work facts of the examinee.As shown in the following table:

386. Key event record evaluation method

Co-founded by American scholars Flanagan and Baras, it is to record the "key" facts about the success or failure of the job through observation, and evaluate employees accordingly.Such as "physical condition", "body coordination", "arithmetic operation ability", "knowledge and maintenance of machinery and equipment", "productivity", "ability to get along with others", "cooperation", "work enthusiasm", "Comprehension" and so on.Then, the front-line foremen of the factory were asked to describe the key facts of their subordinates’ recent work behavior according to the following requirements:

- the background before the fact.

— the situation when it happened.

- the fact that the act is valid or invalid.

— the extent to which the factual consequences are under the individual employee's control.

For example, a foreman recorded the "collaboration" of a subordinate employee in this way:
Effective behavior: Although Zhang Li did not have the turn to work overtime today, he still took the initiative to stay and work overtime until late at night, and assisted other colleagues to complete a proposal, so that the company could successfully sign the contract with the customer the next day.

Ineffective behavior: The general manager came to inspect today. In order to express himself, Zhang Li pointed out the mistakes of Wang Tong and Zhao Jian in public, which caused tension among colleagues.

387. The Balanced Scorecard Method

The Balanced Scorecard integrates the strategic goals of the organization with the needs of employees.This approach requires managers to focus not only on economic indicators that describe past conditions, but also on the strategic direction of the organization.The information on the Balanced Scorecard communicates the strategic goals of the company to employees and motivates their development and change.This method helps to determine the success rate of the compensation package designed by the company for employees, and helps employees better understand the strategic framework of the company.

1. Four perspectives:

(1) Financial (such as cash flow, return on investment)

(2) Internal process perspective (such as unit efficiency, on-time delivery)
(3) Enterprise learning and development perspective (such as project development, innovation)
(4) Customer perspective (e.g. customer surveys, focus groups, market share)
2. The basic idea of ​​balanced scorecard
On the basis of traditional financial evaluation indicators, the balanced scorecard also takes into account the performance reflection of three other important aspects:
(1) Customer perspective - how do customers see us?In order to obtain long-term financial benefits, enterprises must create products and services that satisfy customers.The Balanced Scorecard provides two levels of performance appraisal indicators. One is the various goals that enterprises must accomplish in terms of customer service to achieve performance, mainly including market share, customer retention rate, customer acquisition rate, and customer satisfaction.Instead, aim at subdividing the objectives of the first level layer by layer, select specific evaluation indicators, and form a specific performance evaluation scale.

(2) Internal process perspective - what must we be good at?This is one of the notable features of the Balanced Scoring Method breaking through the traditional performance appraisal.Although the traditional performance appraisal has added assessments such as production lead time and product quality return rate, it often stays on the performance of a single department. Renovating these indicators alone can only help the organization survive, but cannot form a unique competitive advantage for the organization.From the perspective of meeting the needs of investors and customers, the Balanced Scoring Method analyzes the internal business process from the value chain and proposes four performance attributes: quality-oriented assessment, time-based assessment, flexibility-oriented assessment and cost index assessment .

(3) Learning and development perspective - can we continue to improve and create value?This perspective provides the means for performance breakthroughs in other areas.One of the purposes and characteristics of the implementation of the Balanced Scoring Method is to avoid short-term behavior and emphasize the importance of future investment. At the same time, it is not limited to traditional equipment transformation and upgrading, and pays more attention to investment in employee systems and business processes.Pay attention to the analysis of the gap between the ability to meet the needs and the existing capabilities, and focus on internal skills and capabilities. These gaps will be filled through employee training, technological transformation, and product services.Relevant indicators include new product development cycle period, new product sales ratio, process improvement efficiency and so on.

(4) Financial perspective - how do we satisfy the owners of the business?As market players, enterprises must take winning as the basis for survival and development.Improvement in all aspects of a business is only a means to an end, not an end in itself.All improvements in the business should ultimately be attributed to the achievement of financial goals.

3. The basic procedures for introducing the balanced scorecard:

To establish an enterprise's performance appraisal system based on the balanced scorecard, it generally needs to go through the following four basic procedures.These four processes work individually or together to link long-term strategic goals with short-term actions.

The first process is visioning, which helps managers agree on the organization's mission and strategy.

The second process is communication, which enables managers at all levels to communicate strategic requirements up and down the organization and link it to departmental and individual goals.The Balanced Scorecard enables managers to ensure that long-term strategy is understood at all levels of the organization and that departmental and individual goals are aligned with it.

The third program is business planning, which enables companies to integrate business planning with financial planning.When managers use the goals established for the balanced scorecard as a basis for allocating resources and setting priorities, they will only adopt and coordinate new initiatives that will advance their long-term goals.

The fourth program, Feedback and Learning, empowers companies with a capability called strategic learning.Existing feedback and review procedures focus on whether the company, its departments, and employees are meeting the budgeted financial targets.When the management system is based on the balanced scorecard, the company can monitor short-term results from the other three perspectives (customers, internal processes, and learning and development), and evaluate strategies against recent performance.Thus, the Balanced Scorecard enables companies to revise and adjust strategies to reflect learnings over time.

(End of this chapter)