Why performance evaluations are bad….again

Arrow electronics is having problems because they feel that their performance reviews are not representative of the actual production of their workforce. They think this because of the results of the many reviews they have given.  The first time everyone’s evaluations seemed to be too high.  The second time they were all grouped around 3 (out of 5).  many other problems eventually arose; such as lower performing branches giving themselves higher evaluations, or bosses giving higher scores to workers they knew personally.  This problem was magnified as Arrow grew by leaps and bounds.  Eventually the company grew to a size where it became impossible for management to know every employee and have an idea of their work habits.

This is the same type of problem we have seen so many times in this course.  Companies try to evaluate employees based on one meeting that they have with a supervisor who probably wants to just get through it so that they can go back to their real work.  It seems like they could actually just  base pay raises on group performance.  it is much easier to objectively and accurately track the performance of a branch.  Why not just give the biggest raises to the most successful branch?  If there was some way they could base the raises on merit, and not subjective evaluations, they would certainly be better off.   For example, their sales force is compensated on their value to the company (mostly measure in the amount of commisions they bring in).  It would not be impossible for the company to create a set of metrics with which to measure all employees.

That is not to say that the way they pay their sales force is perfect.  In fact it is quite the opposite.  The problems they have with high turnover and having to pay graduates more to create loyalty are huge problems.  However it seems that it might be worth it for a company to pay to insure that they have and maintain the best employees.  The CEO even admits this later.  What Arrow needs is some new tool with which they can measure the performance, and potential of their employees.  In this way they would be able to identify the best employees early and work hard to keep them.  An incentive to the managers doing the evaluations would be to give them a minimum number of employees that had to succeed and eventually be promoted.  This way the managers would have incentive to give the best employees the best reviews (which would thereby put those employees up for promotion) in order to keep their jobs.

This is not a perfect strategy.  But it seems to me that after eight weeks of this class, when it comes to performance evaluations, there is no perfect strategy.

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