An Annual Necessary Evil – The Performance Evaluation

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We all dread the annual performance evaluation process whether we are a Sourcing or Supply Chain employee or a manager. It seems like the same old process year in and year out, used simply to justify compensation increases or not. If the performance evaluation process is part of an integrated talent management program, it doesn’t feel that way. In most cases the measures are tactical in nature and measure activities as opposed to value added outcomes. The measures are seldom tied to the strategic objectives of the company and in many cases drive behavior that is detrimental to achieving those strategic objectives. Your development plan (if there is one) usually lists a variety of training classes you can take individually to improve your individual skill, often ignoring the required organizational competencies that help drive real value for the company. This process should be ongoing and not just annual, but at most companies it is not.

Performance evaluation can be one of the most powerful tools in Competency Based Talent Management (“CBTM”) but it must have a well-defined competency model at its core. It should also be integrated into the other four phases – recruiting, training / development, career management and succession planning. Here is how this should work:

  • Define the role of the Sourcing / Supply Chain organization and the individual job roles in a way that supports the strategic objectives of the company.
  • Determine the competencies (behaviors – both strategic and functional) necessary to be successful in the defined roles. This is your competency model.
  • Use the competency model to:
    • Determine the skills / competencies required when recruiting
    • Determine the skill / competency gaps to drive your training / development program AND the individual development plans as part of performance evaluation
    • Determine the metrics / measures that will be used to drive the performance evaluation process and career management
    • Drive your succession planning

When performance evaluation is supported by defined competencies the process takes on richness for the employees that helps them understand the behaviors (much broader than activities) that are required to be successful currently and those required to move forward in their careers. In addition, competency based performance evaluation helps managers / employees to identify gaps in strategic competencies (e.g. communication, collaboration, teamwork, change leadership) which are less “measureable” but are as, or more, important than functional competencies. If evaluating performance is focused solely on building functional expertise, as opposed to the critical business skills that make a successful business professional, then the organization will have a difficult time moving employees into future leadership roles (career management and succession planning).

Performance evaluation must also focus on demonstrated competency, since having competency that is not being utilized is of no value to the organization. As such, competency based performance evaluation should be structured such that employees are incented and rewarded (compensation $$) for acquiring and demonstrating new competencies and managers should be held accountable to ensure that employees do so. If you think about it, competency building clearly helps the employee build their individual skill set but also helps to build overall organizational competency. Competency based performance evaluation will make it easier to differentiate between high performers and everyone else since the evaluation process will be less about “what you know” and more about “what you do with what you know”.

Lastly, a critical outcome of performance evaluation must be an improvement plan. Here again, the focus should be on identifying gaps in demonstrated competencies and creating strategies to close those gaps. The improvement plan should be mutually agreed upon and managers should be measured on creating opportunities for their employees to acquire and demonstrate new skills.

In summary, a well-defined competency model is a powerful tool when used throughout the talent management lifecycle, particularly performance evaluation. If you don’t have one for your Sourcing / Supply Chain organization, it is a necessary investment in your most critical asset — your people.

If you are interested in getting involved or would like to follow this topic further, here are a series of critical activities coming up:

  • Major research project geared towards not just identifying the problem but to identifying Next Practices to solve the problems
  • White Paper to focus on Next Practices in Competency Based Talent Management
  • A webinar discussing our findings in detail

Please share your thoughts and challenges regarding Talent Management below. We would love to hear your insights.



Reposted on Sourcing Innovation.

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Anne Kohler
Anne has been leading consulting and financial management organizations for over 25 years. She has extensive expertise in Strategic Sourcing, change management, contracting & contract management (both the buy side and sell side) organizational design and supply chain management. Anne has a passion for collaborating and educating her clients while helping them to uncover hidden value in their organizations. In addition, Anne has been named by Supply & Demand Chain Executive as a “Top 100 Provider Pro to Know” every year since 2007 and a 2013 Top Female Supply Chain executive.

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