From graded evaluation to self-determination

I was convinced that a staff evaluation system based on grades was the way forward. I have never been so wrong.

In 2010, we devoted 1,500 working hours to develop a brand new evaluation system. I had just taken over the responsibility of human resources in the company, and I was keen to get going in my new role. Making Waves had grown from a small group of entrepreneurs to over 200 employees and the financial crisis was still looming. It was important to take charge of the ship, and I thought that I had found the perfect system, used by many large consulting companies in America. We were going to introduce a performance management system with grades from “much better than expected” to “weaker than expected”. Talent Maker, we called it. It was a great thing that would give us great results, I was sure of that.

All employees had gathered in the auditorium, and I had just finished my carefully planned presentation that explained all the clever ideas around performance management. Now, any questions?

I saw a hand waving eagerly at the back of the venue. Then Lene stood up and asked the question that everyone, apart from us who had developed the system, wanted the answer to: “Have you considered the negative consequences of such a system?”


My grand plan had crashed. Our staff had a completely different perspective compared to the managers. “This is monitoring, the opposite of working together», my colleague Helge said. “Will I be reduced to a number?”, others wanted to know. If I had followed this through, it would have meant a radical change of our ideas of a flat structure and broad consensus on the choices we make together as a company.

Together with the management team, I decided to put everything we had worked on so hard on the shelf. It was not an easy decision, but with the response we received, we had no choice. Instead, I started to think of solutions at the opposite end of the scale. Lene, who had articulated that crucial question in the auditorium, joined the group that started to develop an alternative.

The following year, we noticed a clear reduction in turnover of staff, far below industry standard, while we managed to deliver solid financial results. There may be several reasons for this, but there is no doubt that one of the most important decisions was to abandon the performance-based grading system.

Instead of monitoring our staff, we chose a system that is based on the employees’ motivation and needs, the so-called “self-determination theory”, or SDT. The HR strategy we follow today rejects control mechanisms and puts the employees in the centre:

The Making Waves People Philosophy is the people-centered approach that permeates both our company vision and beliefs, while simultaneously comprising the heart of our business methodology. All our deliveries to clients are first and foremost user-oriented. In the same way, all People & Processes’ deliveries to Making Waves’ employees are user-oriented. This alignment of inner and outer values and research-based methodology ties everything solidly together and creates our unique company drive.

Rather than handing out grades, we focus on how we can improve our working environment. There are no fixed targets that staff are measured against. Our employees are responsible for defining their own goals. An example of such a goal is to become the company expert in an area where others can turn to for advice. Another colleague wants to get better at managing his own time within his projects. Not surprisingly, people have a completely different relation to a target they have set themselves than one that is decided by a manager.

Our feedback is strength-based and forms the starting point for personal development. Instead of correcting “wrong” behaviour, we try to provide specific feedback on good behaviour and performance. Being specific, rather than simply providing general praise, gives us an opportunity to become even better.

In our experience, a senior manager who is rarely present is not the best person to provide useful feedback. It works much better when teams – the people who work together daily – evaluate each other through dialogue. Here is our checklist on how to give better feedback:

  1. Take your time
  2. Be consistent
  3. Be specific
  4. Comment on the action, not the person
  5. Ask questions and turn the feedback into a dialogue

Some of our best projects are the ones where our customers also start to follow this behaviour.

We believe that grades can only categorise people, not motivate them. To hear that you don’t deliver according to expectations is unlikely to motivate the employee to anything other than quitting. Retrospectively, I see that the management philosophy that guides us today is closely related to the values that characterised us in the beginning – enthusiasm and determination. We are in this company together and it is important that our employees are not assessed against each other.

When I read in the papers that companies like Telenor, Statoil and Schibsted grade their employees, I know very well where they come from. We were also convinced that it would be a good idea. I presented this idea myself in front of a packed auditorium. Luckily my colleagues were clear in their feedback. My best advice would be to involve your employees earlier than I did. It is the first step towards a solution that will have a widely different result and positive reception within the organisation.

Internationally it is also clear that the trend has reversed. Major companies like Microsoft have experienced that grade-based evaluation can be destructive and prevent cooperation. Research has also shown that other, more motivating ways to provide feedback give better results. In Norway, Bård Kuvaas at the Norwegian Business School has published some valuable insights on the subject.

When we founded Making Waves, our visions were related to results and market position. However if we want to get there, there is one thing we cannot do without: excellent staff who do their best. This is why our vision today is quite simply to be a great place to work. We prioritise our resources and our choice of managers strictly according to that vision. This may be a crass thing for an HR director to say, but I’m convinced that top results are a natural consequence of putting people first.

• According to the American-inspired performance based management system, employees are evaluated five times a year.
• The evaluation should address the employees’ personal characteristics, expertise, profitability and their understanding of the company’s methods and processes.
• Employees are categorised “much better than expected”, “better than expected”, “expected” or “weaker than expected”.
• The evaluation is linked to the employees’ salaries (!).

• Based on employee motivation rather than monitoring.
• Need for competence: Give employees a chance to develop their skills and get specific feedback. Focus on strengths to make the team stronger.
• Need for autonomy: Allow staff to make their own decisions. Remove control mechanisms that suppress individual motivation.
• A sense of belonging. Ensure safety, belonging, interaction with others and a working environment that staff want to be a part of.