Finding Goodness in the Dreaded Performance Evaluations

Posted by: Steve Hamm on September 04

The annual performance evaluation is like A) Root canal B) Getting your hand stuck in an InSinkErater C)Listening to a Sean Hannity rant D) All three at once.

There’s a lively debate about the usefulness—or not—of performance evaluations in BusinessWeek’s Debate Room, and on the Blogspotting blog. I’m no fan of performance evaluations. At several times in my career when I was a manager, I dreaded the process. These days, as an individual contributor, I find it only slightly less odious. BusinessWeek used to have a system that was fairly useful, but a couple of years ago we switched to a new corporate system that makes no sense whatever. The topics and goals are so general as to have no value.

So I was skeptical a couple of days ago when people came to meet me from SuccessFactors, a software-as-a-service provider of talent management software. I looked at them like they were peddling some new torture device. But Paul Albright, the company’s chief marketing officer, started talking about their products as “business execution software,” and I got curious. His pitch: If all the employees in a company, from top to bottom, are hooked up in an electronic network and can use it to align their goals and understand each others’ roles and contributions, the organization can be self aware and react quicker and better to changes in the business environment. Unlike traditional performance evaluations systems, this application is constantly updated and referred to by employees and managers alike. “Talent is 70 percent of a company’s assets. It’s also very expensive. If a workforce is 25 percent more effective, it’s a very big deal,” he told.

I was still skeptical, so I asked to be introduced to a company that was getting this kind of payoff from SuccessFactors’ software. Yesterday, I talked to Rob Katz, CEO of Vail Resorts Inc., the company that owns and operates some of the premier ski resorts and lodges in Colorado and California. Vail started using SuccessFactors a year ago, and it came in handy when the recession hit full force. Katz and his executive team saw that they would have to cut costs, and the 15,000—person workforce was a fat target. But they resisted the conventional impulse of slashing 5% or 10% of headcount across the business units.

Instead, they did a deep analysis of their staff using the SuccessFactors tool. “We could see what a person was doing and what we’d lose. It allowed us to be careful and considerate. We ended up defending a lot of a jobs—not because were altruistic but because we could see what we would lose,” he said. Rather than firing a lot of people, they fired a few people (about 100) and achieve much of the required cost savings by instituting an across-the-board salary cut ranging from 2 1/2 percent for the lowest level employees to 10 percent for executives.

Katz feels like the moves that Vail made in the dark days of December and January have set up for better days ahead. Its competitors cut a lot of people to make their numbers. Because Vail still has most of it’s people, it can put them to work preparing for the turnaround. “We feel like we’re heading into the upcoming cycle in a very aggressive position. Others are focusing on stability. We’re going on the attack.”

That’s pretty convincing testimony. I’m still having a hard time figuring out how companies avoid getting bogged down in the details of updating the system day to day. But I’m convinced of one thing. When used intelligently, systems like this can have a profound positive effect.

I’m going to be doing some more reporting in this area. Cognizant, the IT outsourcing company, has created software internally that does some of the same things. If you’ve got thoughts or information about business execution software, please weigh in.

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