Compensation and Performance Evals at Arrow Electronics
What can you say about this case study except that it’s another example of the fatally flawed business process we call performance evaluations. In the case of Arrow Electronics it’s perhaps not enough that we call out the offending process, as in my estimation Arrow took the insanity of the evaluation process to a whole new level.
We’ve all been there, either giving or receiving the “New Performance Evaluation” that promises to weed out the bad, and incent the good employees. The new system will be easy to enact, easy to use, and will give us a greater understanding of those people we call our employees. The problem is they don’t work. I’ve never seen a performance evaluation system that wasn’t totally without merit. A good evaluation system is at least as rare as a bona fide sighting of the Loch Ness Monster. In my 20 odd year career, I’ve seen it done many ways, and every single one of them left me wishing people would just give up on the idea. It’s not that I’ve had bad evaluations, quite the contrary. But maybe that’s the point, everyone gets good reviews or management forces artificial numbers into the equation.
That’s what happened at Arrow. The CEO’s response to everyone getting a good review was to force artificial ratings in order to make the reviews meet his expectations of what the numbers “should be”. So let me get this straight, not everyone can be good, so the answer is to force the numbers to show that either X percent of employees are bad or every employee is bad at something. That makes no more sense than everyone being good. Where was he pulling these numbers from? Any guesses?
The problem with employee evaluations is employees. Managers don’t want to confront marginal workers because they still have to work with them. Also, people by nature have favorites. Is it possible that a manager gets along good with an employee who doesn’t do as good a job as someone else? Yes! Is it possible that the manager IS THE BAD EMPLOYEE? Yes! I’ve never known a single person who wanted to give or receive a performance eval. There is always some numerical falseness to them: either the bell curve of good to bad employee ratios, or the number swag determining which employees get a raise. At any rate, nobody is ever happy with these things so why do we waste our time doing them? The answer to that is because we’ve always done them………….
Sins of Commission: Be Careful What You Pay For, You May Get It
Have you ever heard the old adage that “What you incent get’s done”? It’s kind of funny the way that works out sometimes, which is really the point of the case study. Individual incentives seem to be the wave of the present as far as businesses are concerned. You hear terms like “Pay for Performance” and other similar expressions on almost a daily basis. The problem isn’t that companies have gone to this model, but rather that they’ve been short-sighted in rolling out these incentive programs.
One example used in the study was garbage collection in Arizona. Since the city was spending a lot of money on overtime, they decided to incent the drivers to get their routes done on time. Yes, that’s all they incented. They didn’t incent getting their routes done on time and ensuring ALL trash was collected. This became a real problem. We see examples like this all time. Poorly worded and poorly executed incentive plans end up costing businesses more than what they were spending before they came up with a “cost cutting” incentive plan.
As the article pointed out, “Ironically, the very thing that is necessary for incentives to guide behavior-simplicity-is the same thing that defeats the effectiveness of such plans except in the simplest of business cases.” Sadly every time we incent a salesman to sell our products, we may be incenting him to ignore customers who may not be buying immediately. We all know that this leads to the customer never coming back, but we continue to do it anyway. Perhaps it’s time to go back to the simpler model of paying someone a fair salary for a fair day’s work. If they don’t get their job done to our satisfaction, we stop paying them. Simple.
A main point of the article revolved around whether or not people are motivated by money. I believe to a certain extent people are motivated by their pay. But people are motivated by other things too, as we’ve seen throughout the semester. Good jobs in good companies are far more motivating that incentive programs. People want to be valued and treated like a member of a team. If you provide that environment, employees will work hard for you. Lacking that, the incentive programs just give people the blueprint to do the bare minimum in every area that isn’t specifically incented. Remember, what get’s incented gets done. If you’re incenting people to sell, then they will sell, and damn the details.
What get’s incented gets done.