Performance appraisal, for those enterprises with more advanced governance concepts, has already been applied with ease. It is also the preferred management tool for consultants helping enterprises build human resources management platforms. However, after so many years of implementing performance appraisals in enterprises, I have found that conducting performance appraisals for functional departments is a challenge, with issues such as difficulty in quantification, inability to reflect workload, and being primarily subjective assessments. Therefore, I have summarized my past experiences in assisting enterprises in implementing performance appraisals and propose a practical guide for evaluating and incentivizing functional departments.
Currently, many enterprises adopt one of the following three methods for evaluating and incentivizing functional departments:
One method is vague evaluation, where an assessment is made based on the supervisor's impression of an employee's daily work performance and the results of employee satisfaction surveys.
Another method involves scoring the completion of daily work tasks while considering work attitude and work ability.
The third method is goal-based evaluation, where key work objectives are established to guide employee efforts, and performance is judged based on the achievement of these goals.
The advantages and disadvantages of these methods are self-evident. Vague evaluations can easily lead to biased employee behaviors, where employees focus more on interpersonal relationships rather than improving work performance. Task-based evaluations cover a wide range of areas and can relatively truthfully and objectively reflect an employee's work status, but they involve a large amount of work and carry the suspicion of subjective judgment. Goal-based evaluations require high managerial capabilities for implementation. If complete quantification is pursued, only measurable indicators can be broken down, which may result in a bias in goal setting and potentially misdirect employees' work. On the other hand, if quantification is not pursued, it may fall into the trap of subjective assessment.
So, how should we evaluate functional departments? I suggest that enterprises borrow from the philosophy of goal management, adopt a task-based evaluation format, and combine this with competency assessments for functional positions to comprehensively carry out evaluation and incentive programs.
Functional department work has characteristics such as poor planning, many temporary tasks, frequent coordination and organization, and poor controllability of work outcomes. If purely using the goal management approach, it is difficult to clearly define all work objectives at the beginning of the evaluation period. If purely using a task scoring method, it is hard to highlight key tasks. Therefore, combining the advantages of both is the best choice.
Firstly, borrowing from the philosophy of goal management
Goal management is when a company, based on the internal and external situations it faces, sets overall goals for its operations within a certain period. Then, each department and employee determines their own sub-goals based on the overall goals and actively strives for them under appropriate resource allocation and authorization, thereby achieving the company's overall goals. The achievement of these goals serves as the basis for evaluation.
The philosophy of goal management has a guiding nature, emphasizes self-control, encourages managers to delegate process management authority, and evaluates achievements based on the quality of the results achieved. This is particularly suitable for functional departments with clear work objectives and diverse work paths. Through goal management, employees are guided to self-plan their work, unleashing each employee's initiative, and collectively promoting the development of the company's strategy, technology, quality, human resources, administration, culture, and other management works.
For example, in recruitment work, the company requires hiring a sufficient number of qualified personnel within the desired time frame while keeping recruitment costs as low as possible. This expectation can be converted into clear, measurable goals:
Goal Evaluation Criteria
Complete recruitment work by the 10th of this month, with 3 R&D engineers on board:
A: Completed ahead of schedule, 3 personnel fully meet qualification requirements, assessment results all above 80 points, user department satisfied.
B: Completed on time, 3 personnel fully meet qualification requirements, assessment results all above 70 points, user department satisfied.
C: Not completed on time.
Recruitment cost controlled within budget:
A: Below budget by 10%
B: Within budget
C: Exceeds budget
Under this goal guidance, the recruitment specialist can self-plan the recruitment work, seeking suitable recruitment channels, communicating with the user department to adopt effective assessment methods, and controlling direct and indirect costs incurred during the recruitment process. For the company and managers, there is no need to micromanage every step of the recruitment specialist's work; instead, focus on monitoring key processes and evaluating the results.
Secondly, adopting a task evaluation format
In practice, senior or functional managers often find that much of the work content seems unquantifiable and difficult to measure. Sometimes the work itself is new or experimental, making it hard to establish clear work requirements during its execution, posing a very challenging problem for evaluating these tasks.
For instance, communication between managers and subordinates is quite important. Lack of communication at the middle and lower levels makes it difficult to implement many of the company's business philosophies and management ideas. Therefore, some companies consider including manager communication as a regular task for evaluation and management. However, communication as a task is difficult to measure. Thus, we can evaluate the form and process of communication to assess it. For example, in a company, communication between managers and subordinates often takes place through department meetings, with a requirement of holding at least two internal departmental exchange meetings per month. Evaluating the manager's communication can be done by assessing meeting records. The company must specify clear procedures and content requirements for internal departmental exchange meetings and standardize the format of meeting records. Through meeting records, it can be reflected whether the manager held the meeting, what specific contents were communicated during the meeting, what work priorities and goal requirements were explicitly proposed, how attendees reacted, and whether the company's requirements were met, among other things. These contents can demonstrate the quality of the manager's communication. To avoid bias, attendees can be required to co-sign and confirm the meeting records.
For experimental work, such as changes in management models or the development of new technologies, due to the lack of historical experience, it is difficult to clarify what level this work might achieve or what goals could be reached at the time. Therefore, post-assessment methods can be used. Summarize the process and results of the work, analyzing from aspects such as cost, progress, outcome, short-term and long-term value to the enterprise, etc., and form an evaluation team composed of relevant leaders within the company to give a relatively reasonable evaluation based on comprehensive opinions.
Task evaluation methods can also serve as a supplement to the philosophy of goal management. An important aspect of goal management philosophy is the 80/20 rule, meaning that simply using goal management can only consider a portion of the core work of functional personnel. Other work may also occupy a significant amount of time and energy of staff but does not appear in evaluations. This part of the work includes some non-periodic routine work and temporary tasks that functional personnel often face. On one hand, the quality of this part of the work still needs attention; on the other hand, staff also hope that their work will have some recognition after it is done, otherwise, a sense of unfairness may arise. Therefore, it is necessary to list these routine and temporary tasks at the end of the evaluation period and have the manager summarize their work quality.
Combine competency assessments to comprehensively reflect the competence of functional personnel
The work of functional personnel is often easily disturbed by various external factors. Therefore, on the basis of evaluating objectives and assessing responsibilities, competency assessments can be added to comprehensively reflect the competence of functional personnel. At the same time, through competency assessments, their strengths and weaknesses in work ability, work attitude, and conceptual awareness can be objectively reflected, helping employees improve their work methods and enhance their performance levels.
In summary, the purpose of corporate evaluation and incentives is to achieve the company's business objectives. Regardless of whether the company adopts goal management or objective assessments for evaluations, the aim is to guide employee behavior towards the company's overall objectives, ensuring that functional departments can more accurately provide management and services. By enhancing the efficiency of functional management activities, the company can increase its competitive strength and create overall performance.