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Performance Evaluation: The best practices and the 3×3 matrix to measure employee performance

Performance evaluation or performance review is a process that almost every company conducts, for measuring their employees’ performance. However, it is common to hear that employees are not satisfied or not happy with this entire process at their organizations. As Robert Half famously said:

”There is something that is much more scarce, something rarer than ability. It is the ability to recognize ability” — Robert Half

A structured, unbiased, and objective method of performance evaluation is every employee’s dream. Doing it right, so that the deserving employees get their due reward and recognition is every employer’s dream.

Topics covered in this article:

1. The 3×3 matrix or the 9-box grid model for measuring performance evaluation
2. 5 best practices for an effective performance evaluation
3. Sample performance evaluation appraisal form


Let us start with the 3×3 matrix or the 9-box grid model used for employee performance evaluation in an organization.

Performance Evaluation
3×3 matrix or the 9-box grid model

Employee Performance Evaluation- 3x3 matrix or 9-box grid

Click here to download the above Employee Performance Evaluation 3×3 matrix or 9-box-grid in Microsoft Powerpoint (.ppt) format.

Let us look at the results of the above employee performance evaluation in detail and what can be the possible plan of action-

  1. STAR– A star employee excels both in his/her performance and behavior. They consistently show strong performance and deliver outstanding results in various challenging situations. Additionally, they always keep the best interests of the company first and uphold its values. The company’s hiring strategies have paid off!

    Plan of action: Organizations need to develop them for leadership roles. These employees generally have the potential to be the future Business managers, General managers, or the CEO of the company. Once identified, companies should properly train and groom them, and the senior management needs to engage with them more.
  2. HIGH POTENTIAL– These employees have an outstanding score on either performance or behavior and a very good score on the other. They have the potential to be future stars!

    Plan of action: Put them in the same teams as the star employees, who can help fast track their growth. The objective is to groom and polish them. Also, make them attend specific pieces of training, which can help them with their missing skills or improve their behavioral cognizance.
  3. KEY RESOURCE Key resources are right in the middle, who have decent performance levels and exhibit good behavior. These employees are competent at their jobs and form the backbone of the company. They are usually efficient in their work, are loyal, and serve the company for many years.

    Plan of action: Some of the key resources have the potential to become Stars with the right guidance and support. While some of them remain content with their current jobs and have limited ambitions. Most of the key resources do well in mid-level managerial positions. The company’s responsibility is to identify the high potential ones, motivate them, and transform them into future stars!
  4. SPECIALIST AND EXPERT– These are employees with a medium to strong performance, with low behavior. Low behavior does not necessarily mean bad or negative behavior, it may mean employees who are satisfied with the knowledge and skills they possess. Additionally, these people are not ambitious and have mostly reached their potential in their jobs. They are satisfied with a stable income.

    Plan of action: Each organization naturally has some experts and specialists who are good at what they do, without much ambition to learn or do more. They are in their comfort zones but perform well in their current jobs. The problem arises if there is a big change happening in the company, like installing a new ERP system or a new Sales management system. They resist change and may have difficulty in adapting to the new technology. The company must ensure that their domain knowledge stays up to date, and they are ready to accept change if it’s necessary for the business.
  5. POTENTIAL GEM These employees exhibit an uncommon combination of traits, low performance but high behavior. It means that s/he seems to have a lot of potential, but is currently performing quite poorly.

    Plan of action: This may happen for a couple of reasons- one if the employee is in the wrong role in the company. Example– an employee who is technically very sound, but is working in the sales department. Sales might not be his/her cup of tea and s/he may do well in the production or R&D department. The second reason may be that s/he is very new in the role and needs time to learn the skills and adapt to the job. The company needs to identify what is the actual reason for the poor performance, and take corrective action immediately (like putting on a PIP).
  6. RISK AND INCONSISTENT These employees raise big concerns for the company. They are bad at both performance and behavior. They usually have problems working in teams. Therefore, the company sees them unlikely to be able to perform as per their expectations or uphold their values.

    Plan of action: Some organizations put these employees on a Performance improvement plan (PIP) and give them 3 to 6 months’ time to show improvements. For smaller companies where budgets are limited and team sizes are small, such employees are often asked to leave.

Best practices for an effective performance evaluation


If the question is what is the ‘best’ way to do the annual performance evaluation, unfortunately, there is no ‘best’ way of doing it.
Let’s acknowledge that each company is in its own stage of success and has its own objectives. Hence, it is absolutely normal for each company to customize its performance evaluation methodology. However, there are some best practices, which can help any organization to make the most of its process:

1. Define objectives clearly and right at the beginning


These are the 2 most important things which managers and business owners alike need to do correctly, let’s look at these both:

a. Define objectives clearly: Example- An employee in the sales department reports that ‘my manager had asked me to improve the sales of this product line’. I worked very hard on it over the year but he has just given me an average rating in my performance review’. This is a classic example of objectives not being defined clearly.
The objective could have been- ‘You need to improve the sales of this product line so we can achieve the sales target of USD 20 million which is our annual budget. Additionally, you need to add at least 3 new customers from Europe, as this is the focus region for the company this year. This objective or goal is clearer and easier to measure. Hence, it will be easier to rate the employee in the performance evaluation.

b. Objectives to be set at the beginning of the year or the project: Do not wait until the middle of the year to tell employees what are their objectives on which they will be measured. The earlier they know the better!
If you work on projects, let employees know the critical objectives right at the start. Example– We need to deliver this project on 30th June, so we have exactly 120 days. Also, the client uses XXX ERP, so the software and apps we develop should be able to integrate with it seamlessly.

Dick Grote author of How to Be Good at Performance Appraisals published by Harvard Business Review, suggests holding formal ‘performance planning’ sessions with each of the employees reporting to you, at the beginning of the year. He then goes on to say something very relevant:

“You’ll see an immediate improvement in performance because everyone knows what the boss expects”. “And it earns you the right to hold people accountable at the end of the year.”

2. Define the main factors for performance evaluation


Most companies use ‘Performance’ and ‘Potential’ as the 2 factors on which they measure their employees. I recommend using ‘Performance’ and ‘Behavior’ instead. Why? It is easier to measure an employee’s behavior and rate it. Potential is more subjective and hence, difficult to measure and rate.

Employee Performance Evaluation template

Let us look at a sample employee performance appraisal form where some traits are used to measure Performance and Behavior. It is a weighted average method using some sample traits. These traits can be replaced depending on how the company wants to measure these 2 factors internally.


Click here to download the sample employee performance appraisal form as an image (.jpg).
Click here to download the sample employee performance appraisal form in excel (.xlsx).

The total of Performance and Behavior scores then need to be plotted on the above 3×3 matrix or 9-box grid for each employee in the company. This will give clarity on where s/he lies with respect to others in the organization.

3. Make it a continuous process and not a ‘once a year’ task


People have bad memories. Some have worse. After all, we are all humans.
Let’s take an example- ‘John is an excellent salesperson. From the company’s point of view, he is a ‘Star’.
He has an outstanding performance in the first 3 quarters, where he exceeds all his targets. However, in the last quarter, he faces some personal problems which affect his work. He takes several leaves during this period and eventually does not achieve his quarter target. This leads to a shortfall in the department’s overall annual target.

At the end of the year, his manager is asked to rate him on the attribute ‘dedication towards work’ and he gets a 3 out of 10. Ideally, if the company did this review every quarter, John’s manager may have given him a 9 for the first 3 quarters and say, 3 for the last. His average rating would have been 7.5 instead of 3 that he has currently.

It is very important that evaluations are a continuous process and done several times during the year. For a sales or finance function, it can be done every quarter. For a department that handles projects, it can be done at the end of every project or quarterly for long term projects.
The objective is to measure an employee several times during the year and use them to make up the final annual rating.

4. Structure and Consistency


Another important measure of a good performance review process is that it should be unbiased. Unfortunately, it is easier said than done. Many studies have shown that without a proper structure, people are more likely to rely on race, gender, implicit biases, and other stereotypes when making their decisions.
So, how structure and consistency can help?

For open-ended questions like ‘Describe his/her quality of work’ or ‘How dependable is the employee?’, it is difficult to get the correct answers. Why? ‘Quality’ can mean different things for different people. The manager rating it may define quality very differently from the company’s objectives. Similarly, ‘dependability’ can mean different things. This leads to ambiguity which opens the door to bias.

The solution is to define fixed criteria for every question. For example- a particular company can define the quality of work to be measured by their client’s rating. A 5-star rating may imply excellent quality, a 4-star rating may imply very good quality and so forth.

A rubric can be a great way to bring structure and consistency to performance appraisals. Prepare them in advance with inputs from the managers and then make it compulsory to use them. In short, by using a rubric, you are making the managers think the way the company wants them to. This results in their rating to be more objective and consistent across all employees.

5. How to get the best out of the ‘face to face’ meeting with the employee


The face to face meeting is a great chance for both the managers and their employees to openly talk about their state of mind, expectations, ambitions, and problems.

a. Plan it well: To get the most out of this meeting, it needs to be planned well. Let us assume it is a quarterly performance appraisal. The manager should give the employee sufficient time to list down his/her achievements and areas of improvement for the last quarter’s work. Similarly, the manager must take time to recollect what was done well by the employee like over-achievement of the target by 20% or acquisition of 2 new clients. Also, where the employee faltered like missing an important deadline. Planning well lays the groundwork for an effective conversation.

b. Be very specific in your feedback: The biggest problem of a performance appraisal is that it is almost always a mixed package of- compliments, criticisms, and some formal talk. However, this can be very confusing to employees. Unknowingly, it may demotivate the ‘Star’ employees or falsely encourage the ‘Zombies’.

The rule of thumb is to be very specific in your feedback. If an employee has done well somewhere, mention, recognize and appreciate it. Don’t mince your words. If s/he has not done well, do not sugarcoat your words. Be straightforward in your criticism. Example- If someone has done well in sales- be specific ‘You have exceeded your sales target by 20% which is excellent, keep up the good work’. or if someone has not performed you can say ‘You need to pay more attention to acquiring new clients as you have achieved only 40% of your target this quarter, which is way below the expected performance’.

c. Coach for the future, don’t get stuck in the past: If you have to talk about the salary raise or promotion of an employee, do it at the beginning of the meeting. Do not wait until the end. This way the entire focus of the meeting will shift to the ‘future’ and not be stuck in the ‘past’.

In the end, the objective of this meeting is to pave the way for a better future. Hence, focus on how to improve future performance.
Example- While talking to a poor performing International sales manager you can say ‘You have achieved only 40% of your last year’s target. Unfortunately, you will not be eligible for a salary raise this year. I believe you can improve by increasing your travel, and meeting at least 9 new customers next quarter’. Or to a high performing International sales manager you can say something like – ‘You have exceeded your annual target by 20% last year. This is an excellent performance. If you can repeat the same this year, I will put in a recommendation to promote you to Senior manager’.

Conclusion


Dick Grote author of How to Be Good at Performance Appraisals said:

For most employees and managers, the face to face performance evaluation is one of the most difficult conversations that they have in the entire year. Why? Because a performance review invariably requires one person to judge the other. And deep inside, it’s quite uncomfortable for both of them.”

However, if the best practices mentioned above are followed, it can be made the most interesting and productive conversation ever! The results of the evaluation using the 3×3 matrix can do wonders for the company, only when the right action is taken on it for each type of employee.

We hope you liked the article. If you have any questions, feel free to leave a comment below.

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