The reason why performance evaluation can help companies gain a competitive advantage is manifested in two ways. First, it monitors employees' actions to ensure the realization of organizational goals (supervisory function), and second, it leads employees' actions to serve the organization's goals (inducement function). Therefore, the most important task of performance evaluation is to effectively coordinate these two functions, giving employees pressure while also making them feel convinced and allowing them to gain from the performance evaluation.
Year-end evaluations directly correspond to promotions and salary adjustments, which are the basic means of motivation we often refer to: position and money. Since they involve gains and losses, employees generally pay special attention. It's not the multitude that is feared but the lack of fairness. To achieve fairness, the accuracy of the evaluation becomes fundamental. If the evaluation criteria aren't based on value judgment, the evaluation results cannot be objective, rewards and punishments will lose fairness, diligence won't be praised and laziness won't be criticized, excellence won't be rewarded and poor performance won't be punished, making it hard to convince others. On one hand, this may lead excellent talents to join competitors, and worse, the value judgment standard of employees remaining in the company will change. They will no longer work hard but instead figure out how to slack off and deal with their leaders superficially. This will cause the company's creativity to dry up, execution ability to decline, directly affecting the company's profitability and even survival capabilities.
To achieve accuracy, it is essential first to ensure there are indicators that accurately reflect performance and as many quantifiable standards as possible, and these indicators and standards must be widely recognized after discussion by everyone. In many companies, the evaluation indicators are set by the human resources department, who do not fully understand the business. These indicators are general and may not measure performance well, the standards are vague, and operations are complex and difficult. In the end, everyone just muddles through, and the accuracy and fairness of the performance results cannot be guaranteed. Using these results for salary increases and job adjustments will inevitably cause dissatisfaction among employees; if yielding to popular sentiment, the performance results cannot be linked to promotions and raises, losing the guiding and motivating role of performance evaluation. Not only does this add unnecessary workload, but it also fosters formalism.
Secondly, accuracy also depends on the technical skills of each level of management in human resource management (this relies on the daily training and education provided by the HR department), the processes and systems of evaluation, data and forms, and the control of non-quantitative indicator assessments, etc. Relevant standards and norms need to be established. If the standards are not unified, even if the indicators and standards are clear, different evaluation subjects with different standards will make the performance results varied, making it difficult to unify and compare them. Of course, now there are tools in performance management that can adjust differences in evaluators' standards, but adjustments cannot completely eliminate discrepancies. Any carelessness can lead to inaccurate results.
Thirdly, it is necessary to strengthen the training of managers' awareness of performance. Performance evaluation is an important tool for managers to effectively motivate subordinates. It helps managers at all levels improve subordinates' skills and performance levels through communication, guidance, and evaluation. If managers at all levels do not realize this, have ambiguous understanding of the importance of performance, or even misunderstand or resist it, no matter how the evaluation is conducted, it will be difficult to achieve ideal results.
Finally, it is necessary to enhance the construction of performance culture. Performance culture relies on the corporate culture of the company. For managers who only focus on individual abilities and do not value team building, or organizations where corporate culture focuses more on individual performance rather than team culture, practices like seniority-based promotion and fear of being replaced by subordinates (Wu Dalang opening a shop) prevail. In such cases, it is difficult for managers to have an objective attitude in evaluating subordinates, and it is also difficult to objectively implement relevant standards and processes of performance evaluation.
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