4 Tips for Evaluating Employee Performance the Right Way
June 3, 2020
With an increasing number of architecture and engineering (A/E) firms having some or all of their employees working from home in the wake of COVID-19, there’s never been a more challenging or more important time to conduct accurate employee performance reviews—especially assessments that address the financial aspect of a person’s performance.
What we’re hearing from many firms is that working from home is enabling employees to be much more productive. With no need to get dressed for work, commute to the office, leave the office for a lunch break, etc., and fewer interruptions (in theory) during the work day, people are able to get more done. And that’s a good thing. Of course, it’s just a surface-level assessment. What’s critical is that firms be able to go a little deeper and ensure they are seeing an employee’s true output and its impact on the firm’s results.
A History of Incomplete Assessments
The A/E industry has a history of failing to do holistic assessments of the financial side of employee performance. Billable hours and utilization rate have been used almost exclusively to measure what a person is doing to help the firm meet its business objectives. This is largely because those are the only numbers that firms feel they can capture cleanly about a person’s activity.
However, as we’ve blogged about in the past, utilization rate is a very poor predictor of financial success. Consequently, it’s necessary to bring other key performance indicators (KPIs) into evaluations, and that isn’t easy with most business management software packages. In fact, many firms will claim it’s impossible to do a better job of evaluating employee performance because there are too many variables that are outside of the person’s and the firm’s control. They fear that the process will be unfair and that employees will be angry or demoralized by their review, and consequently, firms just throw up their hands and say, “We’re not going to do it.”
If you ask firm principals about this, they’ll admit it’s a bit of a cop-out. And it may have been one that was relatively harmless in the “old normal,” when managers and other reviewers could glean enough information about employees’ activities simply by wandering around the office and observing them. But in the “new normal,” with its emphasis on the distributed workforce, that just doesn’t cut it anymore.
Plus, it’s important to note that in firms that have created a culture of accountability, high-performing individuals (i.e., the kind a firm needs in order to be successful) want to have the financial aspect of their performance closely scrutinized. They’re doing their part to help the firm succeed, and they want their efforts to be recognized! In fact, not analyzing their performance can be very demoralizing to them.
What’s more, the reality is that firms have always had the ability to more closely control the variables that affect employee performance. They’ve simply chosen not to approach them in an intentional way that would enable their accounting system to contribute good data to reviews. Instead, the system was implemented by accounting staff without much (or any) thought given to how the data could be used to assess employee performance.
"What’s critical is that firms be able to go a little deeper and ensure they are seeing an employee’s true output and its impact on the firm’s results."
4 Actions That Enable Better A/E Firm Employee Reviews
By doing the following, firms can get better control of those “uncontrollable” variables and use the data to provide fair, in-depth, helpful employee evaluations.
- Assign as many specific tasks to specific people as far out into the future as possible. While you may initially set up projects with types of people rather than actual team members, the sooner you can assign the tasks to specific individuals the better. One of the variables that affects a person’s job performance is being pulled from one project to another, and spending all their time fighting fires. You can also help keep them focused on one project by defining tasks simply and broadly, rather than in very small parts. While accounting likes small tasks, as they feel those tasks provide very granular information, managing tiny tasks becomes a nightmare for team members. A better approach is to set your system up for time entry not by task but by phase. Not only does that make it easier to do time entry, it makes it less likely that time will be applied to the wrong item since there are a small number of items to choose from. The goal of all this is to balance the utilization measurement, especially since interruptions when working at home are personal, whereas those at the office are business interruptions and more likely to be logged as non-billable time.
- Track the achieved multiplier on projects carefully. If a person puts in more billable work than a project can afford, their utilization goes up but the achieved multiplier goes down. And the multiplier is used to calculate the KPI called revenue factor, which is a very important number. There are many ways to compromise the multiplier (putting additional people on a project to keep them busy, for example), but awareness of these issues helps keep the calculations accurate. Ultimately, discipline in the scheduling process and in how resources are managed can provide clarity on who the multiplier belongs to. And while the calculated revenue factor will never be perfectly accurate, it can provide valuable insight. It’s important to “not let perfect be the enemy of good enough.”
- Pay close attention to additional services. Factor AE allows you to create new tasks/phases easily when additional services are requested by a client. That helps prevent a situation where work from an out-of-scope task gets applied to something that’s in-scope, thereby increasing utilization but potentially pushing a project over budget. Recognizing these situations requires 1) employees who understand the “big picture” of a project, and 2) a firm that’s willing to loosen its grip a bit on project information and on the creation of new tasks by team members. Ultimately, this becomes a self-supporting system: Employees know that they’ll be evaluated, in part, on their awareness of project parameters, so they pay more attention, and as they do, out-of-scope services are managed properly and revenue factor increases.
- Bring the various pieces of “performance” together for a holistic perspective. If the person you’re evaluating has a utilization rate that’s in line with their job description, is producing a revenue multiplier that’s at or above budget, and is paying attention to out-of-scope services and setting up tasks and phases to handle them properly, you have everything you need to properly and fully assess their contribution to the firm’s financial performance.
Certain financial aspects of performance (accounts receivable, the management of budgets for subconsultants, etc.) are, of course, outside the scope of Factor AE. But the metrics that the system can help you track and measure are very helpful for conducting non-manager employee reviews.
Setting Your Firm Up for Success
By knowing which metrics you can and cannot use to gauge employee performance, and setting your project management system up to deliver those metrics, you can greatly simplify the review process while also making reviews more beneficial. There’s effort involved up front, but our experts are happy to provide setup guidance, and the payoff down the line in terms of improved employee performance can be significant.
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