THOUGHTS ON PERFORMANCE EVALUATION AND LEAN MANAGEMENT

Annual performance evaluations are an institution at most large companies, but are they an ideal complement to Lean management? At certain locations, including TMMK in Georgetown, Kentucky, Toyota no longer performs annual evaluations. Instead, an “Individual Development Plan” is used to review employees’ contributions to Toyota and position them for professional growth.

Like TMMK, your company or facility may be poorly suited for a traditional review process. Take Toyota’s example as motivation to look deeply into how you evaluate employee performance.

Why Should Companies Reexamine Performance Evaluations?

According to recent surveys, nearly half of employees today feel disengaged from their jobs. Because employee engagement correlates strongly with company performance, Lean managers should take these figures seriously and move to change factors limiting employee engagement. A Lean culture depends upon broad buy-in from employees, who must accept the philosophy of continuous improvement and integrate it into their daily tasks. Improved performance review processes can increase employee engagement while improving the success rate of employee advancement decisions.

performance evaluation

 

Evaluation Options to Consider

 

A traditional evaluation, conducted annually, may be the right choice for your company. If so, your employees will, by and large, report feeling fairly treated in annual reviews. If that’s not the case, your current performance evaluation structure may be less than ideal.

An individual development plan like Toyota’s may be a better selection for companies that (like TMMK) do not tie annual evaluations to compensation, whether by choice or because economic factors currently do not permit merit increases. If you use an IDP, take time to learn about each employee’s goals for both personal growth and career development. Direct managers to construct development plans that position each employee to set genuine self-directed goals and achieve them.

360-degree evaluations are another possible alternative to the traditional process. In this model, each employee is evaluated by managers, peers, and (if applicable) subordinates. Apply this structure to Lean management by encouraging evaluators to focus on contributions to team efficiency and value.

 

Performance Evaluation Mistakes: What Not to Do

 

Annual evaluations and other performance review processes are important and valuable, but bungled reviews will rapidly demotivate a team. Strive to avoid these all too common mistakes:

Detailed reviews with no rewards. Rewards do not have to be in the form of pay increases. Advancement, responsibility, prizes, bonuses, time off, and internal awards can all be incorporated into the review process. Do not subject employees to detailed evaluations that will not affect their compensation in any way.

Excessive subjectivity. All performance evaluations will be to some extent subjective, even those ostensibly based entirely upon verifiable metrics. However, review structures primarily or entirely dependent upon subjective opinions of employees’ performance will be demotivating and encourage employees to interpret a poor review as “politics” rather than a cue to change.

Individualized reviews focusing on team performance. If individual employees’ contributions cannot easily be separated from the performance evaluation of their teams, structure evaluations to focus on teamwork and collaborative results.