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August 10, 2001
Performance Reviews Matter Again
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The performance review is back, with teeth, according to the San Jose Mercury News.

The Mercury-News, which serves California's layoff-stricken Silicon Valley, reports that what had once been a benign chat in the garden about goals and achievements is now a day of reckoning. In some cases, it's the first step toward unemployment.

In the manic rush to hire staff during the Internet boom, many managers stopped giving reviews altogether, fearful that any criticism would cause an employee to bolt, according to the newspaper. Now, the kid gloves are off.

"Companies are saying, 'We can't afford low performers,'" said Debra Engel, a former 3Com senior vice president of corporate services who now advises start-up companies. Managers, she said, "are tightening up because they have permission to do so."

And at companies that use rankings, the performance review and ranking processes are increasingly linked.

Firms say many employees welcome a more stringent evaluation, since it lets them measure how they are doing and what is expected. Employees may also want to see justice meted out to incompetent co-workers or the colleague who plays computer solitaire all day.

In employee surveys at Hewlett-Packard during the past eight years, more than 80 percent of employees said the company did not deal well with poor performers, said HP chief executive Carly Fiorina.

"We're going back to performance management the way it was originally intended to be," she said in an interview earlier this year with the Mercury News. "We're going to use these guidelines; they've been around for a long time."

The newspaper says HP representatives have declined to discuss the company's ranking and evaluation processes.

But one HP manager said the new evaluation process is better overall for the company, despite its faults. "The economy is helping us do the right thing," she said. During the boom years, she said, "the knee-jerk reaction was that anyone is better than no person."

Even fledgling companies, which typically don't review employees, are starting to change, according to Susan Jochheim, chief executive and president of Execustaff, which provides human-resource and payroll information to small companies.

One of her clients, a San Jose software company, hadn't given any of its 45 employees a formal review in at least four years. Now, a new executive team has begun to give reviews, partly to prepare for layoffs, she said.

Nothing in the review process upsets employees more than the ranking component, known among HR experts as ``forced distribution,'' or the less genteel "rank and yank.'' While many Silicon Valley companies have ranked employees for years, it was a process employees knew or cared little about, except for its vague connection to their annual raises.

But the process has become the buzz in the valley, as firms classify more workers as dead wood. As of this year, HP mandates that 5 percent of employees will be given its lowest ranking. It used to be around 1 percent, says one HP manager. At Sun Microsystems, a policy put in place in April states that 10 percent will be weeded out if they don't improve their performance.

Human resource consultants say companies are as eager to identify the top performers as they are to flag underachievers. At the same time HP expanded the quota for its bottom ranking, the company increased the percentage of employees who would receive the top rating, from 11 percent to 15 percent.

To view the San Jose Mercury News article, click here.
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