An objective performance evaluation is an illusion, but many leaders haven't realised it.
Many leaders live under the illusion that performance can and should be measured in simple, mechanical and objective ways. It is not possible. There wil always be subjectivity, whether we like it or not.
A key element in the performance management process at Statoil is what we call a “Holistic performance evaluation”. “Holistic” means not only applying a 50/50 weighting between “Delivery” and “Behavior” (as defined by the Statoil Values), but also “pressure testing” of business performance as measured on both financial and non-financial KPIs before drawing any conclusions. The “I” in “KPI” stands for “Indicator”, they are not necessarily telling us everything. There is a reason why they are not called KPTs, Key Performance Truths. This evaluation concept is described in more detail in a story which I shared on MIX a few years ago, "Taking reality seriously".
We do have some in-house critical voices. Some leaders find this kind of performance evaluation more difficult, because it involves assessment and not only measurement. Yes, it is more difficult, but leadership is not meant to be easy! Others complain because they find it involves too much subjectivity. They would rather see performance as being about hitting a fixed target only, which they regard as something much more objective.
Really? Think about it. What happened at the time when such a target was established? Then, in the autumn the year before, we were trying to describe what good performance looks like 15 months down the road. We did this surrounded by a lot of uncertainty, forcing us to make a lot of assumptions. Should the number be 8? Or 10? Or maybe 12? When we finally conclude on 10,3 (a decimal or two makes the whole exercise look more scientific), it is a relief. Soon, all that uncertainty and all the subjectivity we just applied is behind us and forgotten.
But we have just been forced (we have no choice) to be very subjective at a point in time when it is actually quite difficult, due to all the uncertainty forcing us to make all those assumptions. Why on earth should we then forego the opportunity to also be subjective afterwards, when uncertainty has become certainty, and we have so much more information and hindsight insights about whether hitting 10,3 was great performance or not?
True objectivity is wishful thinking. There will always be subjectivity up-front, and ignoring this fact does not make it disappear. Yes, it is easier if we don't have to repeat it again afterwards. But again, leadership is not meant to be easy. If performance evaluation is only about adding up the number of green and red KPIs and conclude, then the only qualifications needed is basic math (or a calculator) and not being colour blind. Shouldn’t we have somewhat higher expectations towards those doing this important job?