Joe DeVito had a problem with the way employee evaluations were conducted at Baldwin & Lyons Inc., because the level of depth provided in these performance appraisals varied quite a bit from one department to the next.
“It was really dependent on the management team’s style and approach,” DeVito says. “It ranged from a very formalized review process with very objective and measurable goals to those who simply gave folks a short, one-paragraph verbal evaluation based upon, in many cases, subjective analysis.”
That wasn’t good enough for DeVito, who had spent more than two decades with the company before becoming president and chief operating officer in February 2007. The disparity in performance evaluation protocol didn’t give upper management a good sense of who the high performers were in the company and made it hard for the weak performers to improve.
DeVito wanted to make sure each employee was getting a good, thorough appraisal of his or her job performance, no matter what part of the company the person worked in.
It would be a challenge to shake things up, because the company’s annual revenue had been consistently greater than $200 million in recent years. After hitting $213 million in 2006, it was going to be tough to make the case to some people that change was necessary.
But DeVito was confident that if this issue was not addressed soon, it would eventually create trouble for the company and financial performance would be affected.
“It took awhile to prove to all of them that this vertical integration was the best way for us to embark on a pattern of growth,” DeVito says.Get your idea out there
The first thing you need to do when considering a major change in your organization is to show that you have a plan to implement it and be able to show why that plan is needed. DeVito had to show his people that a better performance evaluation system was something the company had to have in order to be successful.
“You have to be honest with people,” DeVito says. “You have to have a plan. You have to be able to demonstrate to them that you truly believe in this yourself. You have to show confidence. You then have to be technically sound enough to create a dialogue so that you can explain to them very clearly how they and their department will be involved.”
As great as you think your idea might be, it should never go straight from your imagination to official company policy. It might be a revolutionary idea that will change the world. But it still needs to be bounced off a few other people and kicked around in a couple meetings, at least, to make sure it’s the right thing to do.
“You can’t ever believe that everything you believe is the only right way to go,” DeVito says. “Someone once said, ‘You learn the most after you believe you know everything there is to know.’ I’ve always tried to keep that in mind. There’s always a danger that when you believe you’re right, you’re not. So I think you always listen to people who have a different approach.”
DeVito met with each of his department heads and explained what he planned to do and why he believed it was crucial to have a uniform performance evaluation system.
“I wanted to make sure that I did hear from them,” DeVito says. “You can’t always have complete consensus.”
You’re not asking for approval to make a move with your business. Rather, you’re showing your leaders respect and showing the employees who work for you respect by demonstrating that you value their opinion in helping you to make the business successful.
DeVito knew that some people had grown used to doing things their way and were comfortable with the evaluation process as it was. But he felt there were others who were seeking change.
It was this dichotomy that DeVito wanted to erase.
“You have a number of people that are fully aware that they haven’t been working to their capacity or effectively,” DeVito says. “So they are fearful of the process. You have a large number of employees that ask, ‘Why did it take so long? Now I will finally be recognized for the contributions that I make to the company.’ Then the widest range is a group of people who are clearly open to evaluation but need to be shown that the evaluation will be objective and fair. Those are the challenges.”
DeVito explained to company leaders that a streamlined evaluation protocol would make the company even better and that it was worth the effort to implement it. He wanted them to be part of the solution and be part of making it work, rather than bystanders who just did what they were told.
“We created an environment in which they had some input into the strategy,” DeVito says. “We also admitted to them they would have more authority, but each of us would have to accept absolute responsibility for our decisions and our actions. So they were willing and ready at that point to assume more responsibility and to take more responsibility for their actions. That was a good mix and a good way for them to have some input into the emerging strategy and changing culture.”Start putting it together
Despite your best intentions, a major change is going to generate resistance. This is especially true when your company doesn’t have any glaring weaknesses or obvious reasons to shake things up.
It was no different for DeVito at Baldwin & Lyons with his plans for consistent performance evaluations.
“There’s a minority of folks that are concerned about the evaluation in general, from a number of different perspectives,” DeVito says. “‘Will it be fair?’ ‘My job can’t be evaluated.’ ‘My contributions go beyond what you can identify.’ Those types of things.”
It’s a battle you have to fight over and over again when you’re making a change that isn’t obvious to everyone. You need to convince people that while it may be easier or more comfortable to maintain the status quo, the effort to make a change will be worth it.
DeVito tried to conquer this resistance by reiterating to his leaders that he didn’t want the new evaluation system to be dictated from his office. He wanted input from all levels, including the employees who would be evaluated.
“You allow folks to have input at every level with their own supervisor, their own manager and with their department vice president and with me,” DeVito says.
To help drive home his message about the importance of consistent individual measurement for everyone, DeVito presented a scenario to all his employees at a company meeting in which he was the manager of a baseball team.
“I have two of you that are both competing for the second base position, and I am telling you we’re going to keep score of the game, but we’re not going to keep track of any of your individual statistics,” DeVito says. “I’m not going to tell you what your home runs are, how many errors you’ve made or how many walks you have. You’re just going to have to trust me that I’m smart enough to evaluate and make the right choice. Would you agree that’s appropriate?”
The employees DeVito met with responded that this would not be appropriate and that they would want their individual statistics to be recorded.
“So now we agree that we have to measure at the individual level,” DeVito says. “Now that we agree we have to measure at the company level and the individual level, most of the battle has been won. Now let’s work together to create some objective measurements. Let’s start by having you tell me which measures I should use to evaluate you.”
At that point, the dialogue began between employee and direct report throughout the organization as to what were appropriate metrics to be measured by.
“It’s really not that tough when you start to boil it down to day-to-day operations,” DeVito says. “The biggest task is to have people actually sit down and list their responsibilities. You could probably do it in your job as to what you think are the most important aspects of your job and what you do and how you do it. That process takes place. Then it’s just a matter of monitoring and understanding that the organization is changing and making sure that there are changes in the evaluation process.”
To further emphasize his hands-off approach to evaluations, DeVito didn’t put restrictions on the number of metrics employees and supervisors had to come up with.
“That’s where you can get yourself in trouble is by putting limitations on what is the appropriate measurement,” DeVito says. “In sales, you may decide you are measuring a salesperson on one thing and one thing only. How much did you increase sales? What was the total dollar amount in revenue that you generated? From a programmer’s standpoint in IT, you may have to develop a very complex matrix in which there are 20 or 25 measurements that all relate to how well they are doing their jobs.”
By being clear with the foundation, that he wanted everyone to have a set of metrics they had to follow, things began to take shape at the company.
“Through an awful lot of communication and some confrontation, we were able to develop a series of protocols and objective measurements that everyone agreed to,” DeVito says.Make it worth it
The final piece for DeVito was giving his employees a benefit beyond more knowledge about their performance. He wanted to give them a tangible reward for buying in to this new evaluation system.
“You must link the objective measurements to compensation,” DeVito says. “You must not do anything different from department to department. We set a very strong companywide guideline. We laid out a matrix and went out and found the best practices that we could find, benchmarking salaries for every job, categorizing every job and created a range for every job. Then we created a scale for performance that was above, within or below and utilized a consistent link of compensation to performance across the company.”
Employees who do their job right need to be recognized for it. And employees who do something that benefits the company as a whole must also be compensated for that. Your system needs to take into account what the employee’s impact is on your organization.
“If your daily responsibilities can significantly impact the overall company results, then there is a mix between company and individual,” DeVito says. “But if you are an entry-level person and most of your work has an impact on your own output and it’s a long way removed from ultimate company profitability either because of the nature of your job or the extent of your responsibility, then there is a heavier weighting for the individual goal.”
You need to focus on objectivity in measuring the performance of an employee and whether he or she has met the standard.
“The more subjective your process is and the less frequent your communication is, the more surprised an employee can be when you ultimately explain to them that their performance is not adequate,” DeVito says. “Quite frankly, without objective measurements, I’m not so sure how accurately and honestly you can assess that.”
It’s a good idea to put someone in charge of monitoring the evaluation process and making sure that it’s continuing to be done effectively and consistently throughout, even after the newness begins to fade.
“Our HR director owns that responsibility,” DeVito says. “It is the HR director’s responsibility to assess the quality of the performance-based management criteria, communication and objectives during the course of every year. That is one of his goals to make sure that the process is fair and make sure it’s communicated effectively and make sure it’s linked fairly and transparently to compensation.”
After dropping a bit in 2008, registering $156.9 million in revenue, Baldwin & Lyons bounced back in 2009 with $232.7 million. It’s your ability to keep pushing an initiative forward, while tweaking it with feedback from your team, that leads to successful change implementation.
“It’s absolutely important that people understand you have a principled approach to making decisions and solving problems,” DeVito says. “You certainly accept input, but at the end of the day, it’s important that you’re decisive. You listen to everyone, but ultimately, you make your own decisions.”
How to reach: Baldwin & Lyons Inc., (800) 644-5501 or www.baldwinandlyons.com