Most workers, whether managers or employees, hate performance reviews. Nevertheless, 90% of companies hold them annually. Part of the problem is finding employee performance measurement tools and techniques that give good results. A quantitative performance evaluation uses analytics and metrics rather than the manager's subjective view of performance.
A quantitative performance evaluation relies on numerical measures to rate employees rather than subjective standards. Examples of quantitative measures in business include the number of sales closed, the number of defects in products and the number of units produced.
Annual job evaluations typically require the manager to appraise employees' performance over the past year, pointing out where they can improve and recommending an appropriate raise. Assessing the employee can be done with either a qualitative or quantitative measurement of job performance or a combination of both.
- Qualitative evaluations are based on the manager's observations. Examples of qualitative measures in business would include "communicates effectively," "doesn't collaborate with team," "good problem solver" or "doesn't adapt to change." Qualitative goals are equally subjective, such as "respect co-workers' opinions" or "communicate better with customers."
- Quantitative measures involve numbers. For a recruiting firm, for example, a quantitative performance evaluation might be the number of successful placements a recruiter made over the previous year. For a medical intern, it might be how many of his diagnoses are accurate. Teachers can be measured by student performance on standardized tests. Quantitative goals usually involve improving the numbers over the coming year.
Whichever method a business uses, it's important to make it clear to employees. If they assume they'll be judged by clear numerical metrics, they may feel that rating them based on manager observation is unfair and biased.
Qualitative reviews can evaluate soft skills such as communication and team spirit better than crunching numbers can. Nevertheless, it has its limits.
- Even an observant manager can't notice everything. It's quite possible that the manager missed the employee's most outstanding moment of the past year or didn't detect an egregious screw up.
- Managers have biases. If they get along well with a subordinate, they may assume that the employee's people skills are awesome.
- Some managers suffer "recency bias", being more influenced by what the employee did the week before the review than her year-round performance.
- A likable employee may seem more competent. Customers, managers and co-workers may be very satisfied with an employee who is outgoing and friendly even if the employee's skills aren't the best.
This doesn't mean an appraisal should be a quantitative performance evaluation and nothing else. Despite bias, a good manager is often a good judge of people. Some businesses counter bias by using some form of peer review in addition to the manager's judgment.
Quantitative benchmarks can measure work quantity, work quality or work efficiency among other things. Quantitative performance measure examples include:
- Product defects. This is usually easier to gauge objectively than product quality.
Number of errors. In some fields, this works like measuring defects
for example, when writing software code.
Number of sales closed. When sales are complex, some companies use the number of sales calls made or the number of active leads.
Number of units produced, or in software, the number of lines of code written. For call centers, the speed with which complaints get settled or the number of callers who get their problems resolved the first time they call are standard quantitative metrics.
Deadlines. Do employees deliver on time, or are they consistently late?
Absenteeism. Does the employee miss a lot of work days?
Some companies use tools such as customer surveys that assign employees a numerical ranking. These appear to be quantitative even though the results are often subjective.
Just because the quantitative performance evaluation focuses on numbers doesn't mean it's automatically a more objective measurement of job performance than qualitative evaluations. There are several things that can skew a quantitative review:
- The standards are too high. If management sets sales or revenue targets that aren't attainable, employees will fall short, but the problem isn't with the staff.
- The company measures the wrong things. Ranking manufacturing employees purely by the number of finished widgets, for example, gives them an incentive to slide on quality.
- Measuring the wrong things. If an employee does exemplary work telecommuting from home, it may be unimportant that she doesn't show up at the office enough so that the manager knows her face.
- Bad comparisons. Judging a news salesperson's performance by comparing her to an old hand with lots of contacts isn't fair. It is better to measure newbies against other newbies.
- Managers don't consider the reasons the numbers are bad. For example, suppose a hospital has a high death rate compared to others in the chain. That could be because the hospital practices poor infection control or that it receives a higher than usual number of patients needing critical or intensive care. The two situations require different plans for how to improve.
Some business gurus argue that qualitative vs. quantitative is not the issue and that companies would be better off ditching reviews altogether. Critics of employee evaluations offer a number of reasons for abandoning the process.
- Most employees believe they have done great work and expect to hear praise at their review. If the review focuses on where they're not doing well enough, employees are likely to resent it. The company, however, may expect the manager to find a list of flaws that need improvement and judge the manager harshly if he gives completely positive reviews.
- If the manager has to struggle to come up with a list of performance problems, it's hard for him to inspire the employee to fix the problems.
- Once an employee passes the initial phase of learning the job, feedback doesn't have a significant effect on improving performance.
- Peer review may generate so many different responses that the employee can't learn anything. The employee may decide to believe the most positive feedback and ignore the rest.
- Managers may prefer to give employees a positive review because that reflects well on their leadership and keeps their staff happy. This leads to situations where most employees in a company get above-average ratings.
- Even positive reviews may not motivate employees if they're followed by minimal raises.
To make an effective quantitative performance evaluation, management needs to think about the process in advance. For example, what does the company really need to achieve, and what do they require from employees to get there? The company also needs a way to measure employee progress, or setting quantitative goals won't produce many results.
- What metrics benefit the company? A manufacturer that sells cheap, mass-produced plastic toys may find that it makes sense to focus on speed and not on achieving a Six Sigma level of product perfection.
- What problems need to be fixed? If the company has a high rate of returns, is the issue with the manufacturing process or sloppy assembly line workers?
- How will the company measure employee performance? A call center, for example, could judge employees by successful resolution of complaints.
- What does the employee have the power to change? A store employee may be able to upsell customers into buying more merchandise. If the products are defective, salesclerks can't do much to prevent returns.