HR Evaluation

The latest trend: What is the right HR Evaluation System for global success?

An appropriate HR Evaluation System is indispensable for the fair treatment and development of human resources. An impartial or incomplete evaluation may lead to a decline in employee motivation or a rise in turnover rate. For companies considering overseas expansion, it will be necessary to consider implementing an HR Evaluation System which is sensitive not only to human resources in Japan, but also to the local human resource.

We will outline the latest trends in HR Evaluation Systems, focusing on overseas cases. It is important to understand the fairest HR Evaluation System to adopt before implementing it on a global scale.

The purpose of HR Evaluation Systems and the target of evaluation

The purpose of HR Evaluation Systems is to manage human resources effectively. Specifically, there are three points: clarification of treatment, human resource development, and improving employee morale.

"Treatment" refers to promotions, pay raises, bonuses, or work assignments. The accurate and objective understanding of each employee's work performance, ability, behaviour, and treating them in a way that is not unfair to others is required. It is necessary to provide a basis to convince employees not only when an evaluation is positive, but also when it is negative. HR Evaluation Systems exist to be an objective and fair indicator in those situations.

If we can evaluate the current performance and abilities of employees with appropriate HR Evaluation Systems, we will be able to develop human resources based on their characteristics. Suppose the employees did not reach the level desired of them, one will probably analyse the cause and flag it as an issue. Once employees’ evaluations have reached the desired level, a new target for further improvement can be set up. In this way, HR Evaluation Systems can diagnose the characteristics of employees and help them improve their abilities.

Another purpose of HR Evaluation Systems is improving employee morale by assessing salary and treatment incentives according to performance and capabilities. If employees feel their effort was recognised, they will be more motivated to work.

As described above, HR Evaluation Systems have a role in managing employees through appropriately grasping the current situation in order to raise the level of the organisation as a whole. Therefore, the target of the evaluation should be the person's achievement and effort, and it is better to eliminate the subjective and emotional feelings of the evaluator.

HR systems that draw on employee potential

In American and European companies, it is believed that evaluations are generally performed according to the output of work in a performance-based approach. However, this method is not as widespread as expected. The strict, performance-based evaluation applies mainly to white-collar managers, and in many employees’ cases, evaluation is organised according to their duties. The performance-based approach does not always spread throughout the entire organisation.

There are many companies that value not only achievements but also potential. For example, General & Electric (GE), one of the leading companies in the United States, uses an evaluation indicator called 9 Blocks. The idea is to evaluate employees by dividing performance into nine quadrants with performance on the vertical axis and potential on the horizontal axis and plotting the employee somewhere within the grid.

GE abandoned this evaluation system around 2014 and ushered in a new evaluation system called PD @ GE (Performance Development at GE). With this, employees can prioritise their work on a mobile applciation and receive feedback from their colleagues or boss at any time. Real-time evaluation is expected to proactively and constructively improve behaviour.

European and American companies are not simply focused on performance. The trend is towards more diversified and continuous monitoring of employees.

Five specific HR Evaluation Systems

Here are five ways to get started with the newest HR Evaluation Systems:

Competency evaluation

Competency refers to the behavioural characteristics of high-performance people. By observing the behavioural characteristics and know-how of people with high performance in the company, we extract competencies which denote high performance. Competency evaluations aim to improve the quality of employees.

Management by Objectives

Management by Objectives refers to an HR Evaluation System which is based on the degree to which set objectives were achieved. It is said to have been advocated by Peter & Drucker, a world-famous management scholar. The evaluator and the employee reach an agreement on goals or objectives in advance and if said goals are achieved, the employee will receive a good evaluation. Otherwise, it will be a poor evaluation.

Although many companies advocate the performance-based approach, it is structurally difficult to achieve preliminary results by which to make comparisons during an economic downturn. Therefore, we believe that a multifaceted evaluation incorporating action evaluation (competencies) as well as short-term numerical goals is necessary.

Multifaceted evaluation (360°evaluation)

Multifaceted evaluation (360° evaluation) is a way to evaluate human resources not only from the boss' perspective, but also from various stakeholders such as colleagues, subordinates, business partners and customers. It is based on the idea of achieving a fair evaluation by eliminating bias subjectivity.


No-rating is the abolition of performance-based evaluation ratings. The example of GE above is also an example of no-rating. Some companies are starting to adopt No-rating after they found that performance-based evaluation had not actually improved performance.

Many companies adopt a system in which managers give out feedback in real-time instead of ratings at the end of a quarter. GE is leading the way in using apps to enable multi-faceted evaluation.

Check-In system

Adobe Systems, a global software company, has been running its own HR Evaluation System called Check-In since 2012. Check-In refers to an ongoing 1-to-1 session system, where employees and managers set their own priorities based on their own workloads, give feedback to each other, and aim for continuous career advancement. The format and the frequency are completely left to the manager's discretion.

Not only performance-based, but also multifaceted human resource evaluation is needed

The latest HR Evaluation Systems are shifting from a results-based approach to identifying the big goals, evaluating talent through achievements, and engaging in more frequent feedback. Like GE, it is possible that there will be moves to use apps in future evaluation systems.

Achieving not only results, but also diversified human resources evaluation may become the goal of the HR Evaluation System in many companies.
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