Working In Uncertainty

Guidelines for managing uncertainty/risk when evaluating performance and deciding rewards

Introduction to the guidelines

These guidelines are to be used when thinking about how to evaluate performance and decide rewards. The guidelines concern only managing uncertainty/risk so they should be considered alongside any other guidelines or suggestions based on other factors.

The guidelines are designed to apply to any situation where performance evaluation is done at a level where an agreed approach is considered worthwhile. They are worded very carefully to be as widely applicable as possible and that means they are not always as short as they would be if you were just writing for your own organization. Consequently, you may need to read each guideline more than once, carefully, and read any related examples, explanations, and even other documents referenced from this page. A lot of knowledge about how to manage risk has been condensed onto this page.

Usually it will be easy to think of ways to follow the guidelines but sometimes, if your situation is demanding, it may require quite a lot of thought and experimentation. What should not be difficult is justifying the guidelines. As far as possible, these are guidelines that most people think are obvious good sense.

The scope of ongoing performance evaluation and deciding rewards

Evaluating performance is a common activity in organizations and is done to evaluate people, suppliers, projects, products, technologies, and so on. Evaluating performance usually influences decisions on rewards, even if not explicitly.

Performance, which reflects effort and skill, is usually distinguished from results, which are driven by performance and circumstances.

Guidelines

The approach to evaluating performance and deciding rewards should meet the following practice guidelines (in bold):

1. Managing in an objective, open-minded, and rational way is rewarded, while managing in a biased, over-confident, irrational way is not rewarded.

   Note 1: This guidelines is relevant to the current desire for a good 'culture' in organizations that will promote good management of risk.

   Note 2: 'Rational' is meant in the widest sense and does not imply a special focus on money, reliance on mathematics, or a reliance on methods that ignore the cost of thinking itself.

2. Evaluation reflects the extent to which results are only loosely related to performance by including assessment of behaviour as well as results, and by considering actual circumstances rather than those anticipated in advance.

   Note 1: The less consistent the link between performance and results, the more important it is to assess the extent to which behaviour has been appropriate. Conversely, if results always reflect performance reliably then behaviour is only relevant to evaluation because of the possibility of cheating.

3. Evaluation is based on rich, relevant information whose uncertainty is understood and presented explicitly.

4. Evaluations explicitly represent uncertainty as to true performance for as long as reasonably possible.

Made in England