There is an interesting article in the Economist in April that discusses the notion of failing often and learning fast. The story describes how a senior executive at a Ford company asked his executives to admit to their failures. Each executive should colour code their progress reports, green for good and red for trouble, etc. He was amazed at the sea of green reports that came back to him, despite the fact that the company was losing billions of dollars.

The fact is it is hard to evaluate oneself and it is equally hard to be evaluated by someone who is not very skilled at this process. Many managers and supervisors dread the annual evaluation cycle eve as they profess the importance and need for it.

So is there a right way to handle these? I believe the evaluation process is a vital one and can be done well with the right skills, the right environment and the right trust levels.

The right skills means a firms’ managers and supervisors should be trained to do these, and they should trained to use the same methodology. Of course, there will be variation of performance measurements according to personalities; I am not suggesting these can be trained away. But a common methodology does reduce the amount of error here. And I defy anyone to do an evaluation without training.

The right environment means the firm has an expectation that managers do evaluations in a timely manner, and that they start with goal setting. If at the beginning of the year, each employee has had an opportunity to plan their goals for the year with their supervisor, there should be no surprises at the end of the year, come evaluation time. Circumventing difficult conversations by blaming external factors on poor performance simply undermines the whole evaluation process.

Then there is the trust issue. The firm trust the managers to conduct fair and timely evaluations. The employees expect to be treated in a professional and skilled manner. But as the leader or owner of a business, ask yourself why am I doing evaluations? Is it to improve performance? What is the consequence therefore, of the evaluations? What systems do you have in play to provide training for the poor performers, or do you want to remove them? What is the consequence of removing poor performers? It may be better than you think. What reward systems do you have for the high performers? What systems do you have in play for managers who fail to perform their evaluations?

All of these items either foster trust in the evaluation process or undermine it. Evaluations that are handled in the right way can foster the right behaviours you need in your business, but cannot be handled in isolation and must be handled with due care and attention.