The philosophy of performance evaluation

When engineering company revenues decline the typical reaction is to cut costs. At engineering companies, that means layoffs because the primary cost in engineering is staff salary. Work is priced with salary costs as a foundation. Other costs-indirect, overhead, and general/administrative-are layered on to generate the multiplier that determines the cost of each hour charged to the customer. So cost cutting begins with payroll and the inevitable performance evaluation or forced ranking. At its core, competitive evaluation based on costs often denies the employer and the employee the benefits of the potential collaborative value creation in a team and pits one individual against another, placing an inherent limit on cooperation. To be fair and to minimize abuse, the process must be as objective as possible. Results should not be a surprise to those being ranked who are aware of criteria. To be valuable, however, it must allow some subjective assessment of value creation but provide enough subjectivity in a ranking process to identify and consider the value of creativity that opens it up to potential compromise. Too often the mandate to cut costs is used to justify targeting those who have fallen from grace in their managers' eyes, and such a ranking process becomes the tool of choice.