Grade-based performance

rmassey

Senior employees are outperformed by their subordinates all the time. Use metrics to reward the doers and identify the dead weight.

The subject of compensation is a challenging and emotionally-charged issue. It affects all of us: our staff, our families, and our organizations. During the process of annual performance reviews, we as supervisors know that subjectivity is our menace and we need to be uniform in our approach to the evaluation of staff. As leadership, we also recognize the need to provide young professionals with a defined pathway for salary advancement. And as shareholders, we want a mechanism for identifying the people in our firms who are not contributing at levels commensurate with their salaries. We all want a compensation program that is consistent in its application, equitable in its distribution, and transparent in its implementation – one that maximizes our individual and corporate potentials for growth.

As supervisors and management, we’re all looking for quantitative systems that can quickly provide consistent, equitable, and measurable standards for:

  • Benchmarking performance
  • Encouraging effective performance
  • Retaining talented employees

We get together in conference calls and meetings to discuss:

  • How general performance guidelines/expectations could be tied to individual job classifications?
  • How could these tools be used to standardize a means of driving effective performance and identify unacceptable performance?

We all seem to agree that every employee, young and old, should know exactly what is expected of them, and that those expectations should be embodied among the fundamental building blocks of our firms’ career frameworks.

With this introduction, what follows is a discussion of how rolling financial metrics within any given job classification or labor category could be used to help drive individual and corporate performance, provide a pathway for salary growth and career advancement among our hard-working professional-technical staff, and serve as justification for corrective action among our under-performers.

Grade-based performance goals (professional-technical staff). In nearly every A/E firm I know, you’ll find supervisors, leadership, and shareholders expressing concern that their review processes don’t necessarily provide consistent, equitable, or measurable standards to benchmark performance. And, nearly all of them say that their review practices generally fail to address concerns about long-term, underperforming staff, particularly those at more senior levels with higher compensation. In fact, I’ve heard many front-line managers say that some of their processes not only fail to recognize hard-working employees, but continue to reward less productive employees.

That said, the following example demonstrates how using three-year rolling financial metrics, such as those associated with labor revenues stemming from an individual’s project management and/or marketing efforts (PM/ME) could provide a quantifiable, equitable, and consistent basis for rating the performance of professional-technical staff, advancing careers, and driving shareholder value.

Assimilating and analyzing the data. Each year, as part of the budgeting process, many A/E firms will generate financial statistics associated with the PM/ME contributions of its professional-technical staff. These data serve two key purposes: First, it enables management to look back at what was, thereby helping them to forecast what can be, and second, it enables supervisors to compare and contrast the contributions of individual staff. However, many firms will take this process a step further and publish three years of these data sorted by the individual job classifications or labor categories of their professional-technical staff (e.g., staff types or grade-levels).

The annual average PM/ME revenue contribution for this three-year period is then calculated within each labor category. (This can be done for any desired financial metric.)

The resulting data are often graphed to illustrate individual staff performance within each labor category (see the graph above). These graphs will typically demonstrate that performance is diverse within individual labor categories (e.g., not everyone performs equally), and that some staff within lower labor categories are out-performing other staff within higher labor categories. (This is not unusual.)

Note:

  • On average, G26 staff are outperforming G28 staff

Using the data to establish performance criteria. Further analysis of these data sets can be used to divide the overall performance of each staff type or grade level into any number of intervals, with each interval representing some percentage of the annual three-year average. Each of the intervals can then be assigned a corresponding performance criterion, such as outstanding, commendable, satisfactory, needs improvement, and unsatisfactory. (See example below.)

Rating

% of Annual 3-Year Average (PM+ME Lbr. Revenue)

Outstanding:

≥125%

Commendable:

≥110%

Satisfactory:

≥90%

Needs Improvement:

≥75%

Unsatisfactory:

≤75%

These criteria can then form the desired revenue goal within each labor category and can be used to justify reviews and promotions, and to identify and address issues of underperformance.

Summary. Clearly, grade-based performance goals such as these shouldn’t be the only metric against which individual performance of professional-technical staff is measured. This example simply demonstrates how general performance guidelines/expectations can be reliably linked to individual job classifications; and how a comparison of rolling averages can aide the justification for promotion, or the grounds for corrective action. However, we as supervisors and leadership also need to remind ourselves that young employees today want to know what they have to do to advance in terms of their careers and in terms of their compensation. There’s little tolerance for ambiguity or the appearance of favoritism or bias commonly associated with subjective performance reviews, and there’s even less with respect to promotions. Therefore, while having a financial-based metric that helps drive performance towards what is seen as gainful for a firm’s economic success, doesn’t preclude us from still incorporating less quantitative factors into the overall review process. It could very well mark a cultural shift in your salary administration policy; one that promotes the alignment of individual and corporate goals. One where hard-working employees can be rewarded, and habitually underperforming staff (both junior and senior) can be easily identified and corrective actions justified.

That said, the effectiveness of using grade-based performance goals such as these depends on their being adopted as policy, such that their implementation can ensure uniform, equitable and measurable standards for benchmarking performance, establishing a pathway for career advancement, and corrective action across an organization.

Marc Florian is vice president for Environmental Consulting & Technology, Inc., a professional consulting, engineering, and scientific services organization serving clients and markets throughout the United States and on four continents. He can be reached at mflorian@ectinc.com.

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