Truth and Consequences

Why tough ''360'' reviews and employee ranking are gaining fans.

The average appraisal today aims to do too much. “Feedback, coaching, development, pay decisions, legal documentation: in trying to serve all those masters, it fails,” she says. Unintended consequences include the squirreling away of criticism or praise for months, until a formal review. Evaluations also can backfire as legal tools. “Managers know that appraisals are demoralizing, so they’re lenient,” according to Jenkins. “Unless they want you out the door, you’ll get ratings that are OK.” So if a problem arises, the paper trail suggests the employee was performing well.

The executive team at Glenroy Inc. was so disenchanted that it got rid of appraisals altogether in 1989. Life is fine without them, says James Daugherty, CFO of the privately held Monomonee Falls, Wisconsin, packaging manufacturer with annual sales of $40 million. “Everyone said that legally we’d be in trouble,” he says, “but we haven’t found a downside yet. Those problems just didn’t materialize.”

What has materialized is a corporate culture emphasizing ongoing communication, not once-a-year critiquing. “If you wait a year to talk to someone, you’ll only tell them the bad stuff. You’ll miss the teaching moments,” says Daugherty. “We think it’s more positive to be in a mentoring mode. When things need to be talked about, we talk about them.”

To cover potential employee-discipline issues, he says, managers keep paper records of conversations and actions. Development issues are handled one-on-one with employees through career-goal conversations, or if Daugherty notices an employee skill gap.

Daugherty determines pay levels and raises by researching market rates for a given job, then starts new hires at that rate. Every year, employees get an automatic 5 percent increase until they’re making 10 percent over market. Then the raises stop. To make more, employees must change to a new job with a higher pay grade. Glenroy awards companywide bonuses based on corporate performance.

Employees requiring lots of supervision and hand-holding often don’t do well in Glenroy’s new environment, admits Daugherty, but those who like it stay a long time. And the system motivates him constantly to restructure his relationships with his employees, something Daugherty thinks makes him a better CFO. “If I were just sitting in my office all day,” he says, “we wouldn’t be as good a department as we are when I’m out there talking all the time to my staff.” —K.F.

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