Subjective Evaluations

Fakultät Wirtschaftswissenschaften Lehrstuhl für Personalwirtschaft

W2149 Leadership in Practice

WHEN DO SUBJECTIVE PERFORMANCE EVALUATIONS (IN CONTRAST TO PURELY QUANTITATIVE EVALUATIONS) MAKE SENSE?

Submitted to: Prof. Dr. Martin Schneider

Submission date: 14 December 2012

Submitted by:

André Saltão Daniel Lopez Valencia

Course of study: Leadership In Practice Matriculation Number: 6728964 Matriculation Number: 6728810

EXECUTIVE SUMMARY

In the world of business, performance evaluations are one of the pillars for success in the firm. The idea for performance evaluations is based on the fact that an employer has to offer an incentive to get the employee to work. To determine the right incentives, the employer needs to evaluate the work of the employee. However, performance evolutions are difficult to do effectively as employees can work in groups, or performances can be purely based on luck; also they can be very expensive and time consuming as collecting accurate performance metrics can take substantial resources. Nevertheless without performance evaluations, firms would not be able to compensate their employees or improve the working environment of the firm. A quote that explains how important measures are comes from Lord Kelvin, “When you cannot measure, your knowledge is meager and unsatisfactory” (Lazear and Gibbs 2009). What this quote means in relatedness to evaluations is that if an employee does not know what he/she did wrong, then they cannot learn and grow as an individual. The key to a successful reward system and high employee motivation is to know when and which performance evaluations to use. The two main types of evaluations are quantitative and subjective performance. Quantitative evaluations are numeric calculations such as hours worked, products sold and even stock price. Quantitative metrics are widely used in organizations because they are fairly easy to measure but it has it pitfalls. The other evaluation in which...