Conducting an unbiased and objective performance review.

In my experience of nearly a decade, I have worked with several organizations both MNCs and smaller companies. As an employee, you are assigned a set of duties to perform based on which your career progression is decided.
When it comes to smaller and mid-size companies (MSME sector) often enough, the process of mapping competencies(functional and behavioral), defining Key Result Area( KRAs) and identifying the impact each role has on the organization’s efficiency is missing or inadequate. In absence of this, several challenges arise during the yearly performance reviews. An employee is expected to perform certain duties however, at the end of the year no one really remembers of what difference and impact was created by him/her and hence the overall process leads to bias, affecting motivation, morale and even exit of good talent.
Below is a comparison chart which demonstrates it-

So the question is, how do we make the performance management more objective? Objective simply means where we don’t question the person but the activities, competencies and highlight the areas which need improvement.
As an Entrepreneur, your people are your biggest strength and managing them systematically should be your topmost priority. Any process or the lack of it shouldn’t add to the stress but make the process energizing and charge you up to talk about the future.
It is not that Entrepreneurs are unaware of it but they simply lack the time and understanding that needs to go in designing them. In MSME companies, where the employee strength is usually between 20-100, a sound and trained HR department is amiss.

They may have an executive or at best a manager to perform some administrative tasks such as payroll, attendance, handling employee queries, policies etc. However, potential of an HR department to enable an organization turnaround and growth is often under-utilized.
Entrepreneurs need not sit and define these KRAs themselves but they should ensure that it is done either through a consultant or the internal HR team.
What I want to stress upon here is the fact that mapping and measuring performance objectively can lead to a healthy competitive environment within the organization, make people more accountable towards their work and help employees progress in their career.
In an organization, there are certain core activities which bring in revenues. People performing those roles often get the most attention and their performance can be easily quantified but challenge arises when it comes to roles which are supportive or operational in nature. With some expert guidance this process can be made easy and objective as desired. Below are some examples from Core and non- core roles which demonstrates the parameters to be measured and the metrics for it.

Positions – Core* Parameters (Only for demonstration purpose)

1. Metrics-

• Sales – Orders and revenue generated

• Client acquisition
• Market Development
  (Dealers)

Nos.

Nos. of dealers , territory
expansion

Production -Product units produced

-Man hours

• Quality
• Costs

Nos.
No. of Hours
No. of rejections
Amount saved

3. S/W Engineers – Project deliveries

• Client Management

Timeline- no. of hours
Retention ratio, appreciation

*May vary from business to business
Now let’s look at some positions which are non- core and operational in nature.
Positions – Enabling/Support Parameters (Only for demonstration purpose)

Metrics-

1. Human Resource – Maintaining Attrition ratio

• Cost saving on hiring
• Talent development
• Process improvement
• Reducing the % of attrition
• % of HR budget
• No. of trainings conducted
  for skill development
• Impact on response time,
  productivity etc

1. Accounts -Maintaining financial data
   -BRC statements
   -Receivables

-Accuracy of data

• Data analysis for decision
  making

When performance metrics are defined, it makes people more accountable and result- oriented. They gain more control over their performance and at the end of the year, this data becomes the base to conduct the reviews instead of perception, memory or plain recommendations.

Here is a step by step process of how you can achieve it in your organization-

1. It all starts from restructuring the Recruitment process. Before hiring anyone, you should
   have clear defined parameters on what is expected from that position (not the person performing it). For eg: If you are hiring an Operations Manager, you should identify the key outputs from that role and not the person who performs them.
   Having this clarity makes candidate assessment more logical and helps in making fitment
   judgments.
2. Aside from listing the duties which is also called as Job Description, you need to define Key Result Areas (KRAs) on which the performance would be measured. KRAs are 3-5 parameters which helps quantify the performance in terms of – Numbers achieved, Impact created and on timelines. For all my clients, having done this exercise had over 30% impact on individual efficiency.
3. Identify what competencies (qualities) the role should demonstrate in order to succeed.
   These competencies should be technical as well as behavioral. A set of 8-12 competencies should suffice.
4. Revise these KRAs every year based on company goals and objectives. As your company
   grows, the results expected from people would also change
5. Create a format( you can use any HRMS tool also) in which people can maintain a record of their work on weekly basis
6. Conduct reviews on weekly, monthly, quarterly and yearly basis
7. Reward based on performance which is clearly visible and mitigate feelings of favoritism,
   bias or any negative perceptions.