It has been many years since we last commented on the simple and complex “rating systems” employed by the many Performance Evaluations we have seen in both insurance companies and insurance agencies. Sometimes their motives are great – to identify the employee’s strengths and weaknesses to progress career. Other times the motives for the evaluations are genuinely CRASS, to somehow calculate an employee’s “worth” for the purposes of benefitting or penalizing the employee’s in their pay raises.

It has always been Agency Consulting Group Inc.’s opinion that evaluations are important ONLY as a development tool for an employee. It is further our opinion that one can only evaluate performance that can be controlled by the employees, themselves. This requires the standards of performance to be known, to be written and to be acknowledged by the employee.

To that end the specific standards of performance for any job should be described in that job’s Position Description. For that reason all of the Position Descriptions that we write (from President, Chairman and COO to file clerk and receptionist) are functional in nature with the top four or five functions of the position succinctly described to include the standards of that function that would define a “good” job. General standards of performance as an employee can be spelled out in the Employee Handbook of at the least in a series of procedures and guidelines that are given to every employee (with signature and date acknowledgement).

We have seen hundreds of rating forms that try to give a numerical identification describing how well an employee performs a specific function of the job. Who decides whether the employee rates a 3, a 4 or a 5 for that function? Why is it important? If the Position Description or the Handbook properly describes the standard defining successful attainment of that function there are only two possible answers to an evaluation of that function. Either the employee has successfully achieved the appropriate performance level for that function or (s) he has NOT. No performance level, acceptable or unacceptable remains at the same level consistently. There may be times that even the best performer slips and fails in a standard. That doesn’t mean that the employee should be criticized as failing to achieve acceptable standards. And even a blind squirrel finds a nut once in a while. That doesn’t mean that an employee that can’t seem to get a function right qualifies as an acceptable performer just because they have done the function right ‘occasionally’. The importance of the Evaluation is to gain agreement on the general level of performance of the employee and how to correct any deficiencies and develop that employee further during the next rating period.

This leads us to the most important part of any Evaluation, the Development Plan. In our evaluations, the historical performance to standards forms 50% of the employee’s rating and the achievement of the last development plan forms the other 50%. In the businesses that we serve, no employee is retained (or promoted or given raises) for simply doing a good job in the same position without any form of evolution or improvement. No, not every employee strives for higher positions. It is perfectly acceptable to find one’s niche and become ever more competent and valuable within that role. However, too many employees who have been with a firm for 10 years actually have one year’s experience (the year they were hired and learned their job), simply repeated 10 times. This isn’t a valuable employee, it is a drone. Few insurance businesses are large enough to warrant any “drones” in their employ. Every agency, and most insurance companies, recognizes that to pay their employees more each year, they are required to be more productive for the Company every year. Productivity can be defined as production and it can be defined as handling an ever-growing book of business. But it can also mean growing more competent and more efficient in whatever role the employee plays to permit him/her to take on more responsibility and make himself or herself more valuable for the employer.

The order of a normal evaluation is the evaluation of current functions, the success or failure of the prior period development and the new development plan that illustrates both function improvement areas and career development expected in the next rating period.

The development plan MAY illustrate further function development, even for functions that the employee successfully achieved in the rating period. Many employers use this time to evolve Position Descriptions. In our view, Position Descriptions should always have an “expiration date” of one year in order to force the employee and manager to review the Position Description for accuracy. We know that jobs change. Position Descriptions (including the functions and the standards for the functions) should evolve as the jobs change to always be current. The Evaluation is a great time to conduct that review, change the Position Description to the agreed upon role of the employee and consider the development areas that would permit the employee to successfully perform his/her role in the next rating period.

In addition to the development of the job and of the functions, a key in most organizations is how the employee will develop him (or her) self to become more valuable to the Company within the next rating period. That is a shared development plan that the manager and employee create during the evaluation to prompt the evolution of the employee in the next rating period. The employee knows that they will be supported toward this development and that it will be included in the employee’s next evaluation as well.

With all of this being said about Evaluations, I cannot leave the subject without commenting on the fact that pay raises should NOT be coincidental with evaluations – EVER. If the employee is expecting a pay raise, they hear nothing during the evaluation either before or after the disclosure of how much they are to receive as a raise. Either they are pleased and disregard any negative comments thereafter or before in favor of the good news of the raise – or – they are disappointed and do not hear any positive comments or constructive criticism because they are upset about the amount offered to them.

The best result is achieved by having a pay raise considered three months after the evaluation. In this way, if the evaluation is not sufficiently glowing to warrant the expected raise, the employee has several months (including interim evaluations, if desired) to work their way up to the performance justifying the raise. If their evaluation is glowing, they understand that if their performance slips in the interim, it could still affect their raise. And, if the evaluations are given twice each year, there is never a period of more than six months between raises and evaluations, causing the employee to consider performance during their work efforts if either the appreciation of their employer or money is their primary motivator.

All of this discussion is meant to support the frequent evaluation of employees, but not by a scale or measuring-stick evaluation tool. Let the evaluation be a tool that the employee and the employer use to determine how well they do the job for which they are hired and how they can improve themselves to either make more money or to gain a higher profile in the company.