Business strategy drives three-pronged assessment system - Eastman Chemical Co.'s performance assessment system - Performance Appraisal

HR Magazine, Dec, 1993 by Robert C. Joines, Steve Quisenberry, Gary W. Sawyer

By eliminating formal appraisal categories, Eastman expects its new system to develop team-oriented, highly motivated employees.

At Eastman Chemical Co. (ECC), we have many managers and employees who did not like our former performance appraisal system. The system focused on categorizing performance rather than improving it and did not support change. Therefore, when we began our effort to change the company's culture in the early '80s to a more team-oriented focus, we decided we needed a new way to assess employees. We formed a design team that included people from all four primary ECC functions: manufacturing, research, marketing and human resources. A manufacturing line manager was the leader.

Why change?

There were several reasons for designing a new performance assessment system. We needed a system compatible with our desired culture, one that would stress team management, teamwork and more open and trustworthy communications.

The old system, under which employees were competing for a few top ratings, pitted team member against team member instead of encouraging them to work together.

We believed that employees need to feel like winners. They need to have positive self-esteem and have trust in the systems that affect them. Both employees and supervisors thought that the old system was subjective and biased and that expectations were not the same for all employees.

In addition, we wanted to increase the focus on employee coaching and development, which, we believed, would improve employee performance.

Our knowledge of statistical principles also directed our desire to design a new performance appraisal system. We found that it was hard to explain and justify small differences in ratings among employees. When rating employees, you find a great deal of variability on a short-term basis, but not as much in the long term.

Time is needed to properly evaluate variability. Some factors are uncontrollable and it is hard to tell if observed differences are due to the individual or to the system. Assignments that employees receive are different, their training may not be the same, and individual employees do not always get an equal amount of cooperation from their fellow employees.

Finally we have the 80-30 dilemma. Research shows that 80 percent of us believe that we are in the upper 30 percent of performers. One study shows that in the area of interpersonal skills, all who were surveyed believed that they were above average in the use of interpersonal skills. One fourth of those responding to the survey thought they were in the top 1 percent.

When asked about leadership skills, 70 percent believed that they were in the top 25 percent. Only 2 percent of those surveyed thought they were below average in leadership skills.

This is not rational thinking, but feeling and feelings aren't rational. This aspect of human nature is a major reason why performance labels or categories can be a demotivating process. It is important to people's self-esteem for their boss to recognize them both for the good job they are doing (even if it isn't the best work) and for the improvements they are making from year to year. It is also important--for ECC's future--for our employees to take ownership in our business, have trust in our systems, feel like winners and continually improve their performance.

For these reasons--employee self-esteem and ECC's culture and future--we at ECC decided about four years ago to discard the old appraisal system and design a new one.

The new system

To find out what employees wanted in an appraisal system, the design team surveyed approximately 10 percent of ECC's 17,750 employees through focus groups and interviews. We asked: What is wrong with our current system? What is right? What features would be desirable in a new system?

We got the following feedback:

* Eliminate forced distribution. (Only 20 percent to 30 percent of employees could be placed in a superlative category.)

* Eliminate performance categories. (There were six.)

* Obtain input from sources other than the supervisor.

* Enhance coaching and development.

* Minimize individual performance and teamwork conflicts.

* Identify only extremes in performance.

* Separate the systems for handling selection, compensation and coaching.

After reviewing this feedback from our employees, the design team decided that the key to change was this truth: Self-esteem is critical to motivation. To maintain self-esteem, employees need to believe that they are above average and are growing and improving from year to year.

Appraisal systems that are brutally frank in describing employees as average risk damaging self-esteem and demotivating people. People get upset and ask, "Why didn't I get a higher rating?" That type of environment isn't conducive to development and improvement.

Our new system emphasizes coaching and development. It is known as the employee development system (EDS) and comprises three segments--development and coaching, compensation and selection. Each segment requires a specific assessment. Development and coaching. The design of this segment is based on these seven principles: