The study: Performance evaluation practices in Latvia and Lithuania are off-target

According to the “Contemporary Performance Evaluation Practices Survey 2019: Latvian and Lithuania Editions,” led by Prof. Dr. Isabella Grabner and Dr. Aleksandra Klein (class 2010) of WU Vienna University of Economics and Business and supported by Fontes and Stockholm School of Economics in Riga, most of participating organizations reveal that their performance evaluation processes fail at meeting their strategic objectives.

Drawing on a similar study conducted in the US, the research team aims at building the body of knowledge for performance management in modern organizations in the Baltics and helping organizations orient themselves on the way to better performance evaluation practices.

87% of survey participants agree that performance evaluation process plays an integral role in meeting corporate strategic goals. Still, about one-fourth of surveyed companies reveal that they are not effective at this.

As WU Professor Isabella Grabner explains: “While there is a common understanding that performance evaluation is an essential cornerstone of performance management process, eventually leading to organizational success, companies find themselves in a significant gap between this realization and actual effectiveness of performance evaluation practices. My colleagues and I have found it in our US study, and similar is observed in Latvia and Lithuania.” Moreover, she highlights that “on top of falling short on organizational goals, this mismatch can also have many undesired ‘side’ effects, such as disorientation among employees or weakened organizational culture.”

 “Above all, companies miss out on talent,” stresses Dr. Aleksandra Klein. “Vast majority of the surveyed companies set talent management as one of the key strategic objectives of performance assessment process. However, almost half of survey participants admit that current performance evaluation practices are ineffective at attracting, retaining, and motivating employees. Furthermore, more than one-third of participating companies struggle with human capital management, due to the insufficiencies in their performance appraisal system.”

Overall, performance evaluation process in most companies reinforces organizational goals, core values as well as employee retention and development. However, diversity and inclusion in the workplace are often not in scope of the performance evaluation process.

Grabner and Klein underline that this laxity seems particularly evident in Latvia, where about two-thirds of all respondents do not consider diversity and inclusiveness at work as important constituents of performance evaluation process. Authors note that these findings reflect “rather conservative social norms and inequality, be it class, race, gender, or ethnicity, which, unfortunately, are still observed in some European countries.”[1]

Anta Praņēviča (class 2009), Fontes Board Member, notes that “the situation for gender equality in Latvia still can be improved. According to Fontes’ General Compensation Survey, the gender pay gap in Latvia was 4.7%, when we compare men and women with the same job; women are still paid less than they male counterparts. Good performance management system is organizations can help decrease the pay gap.” Ieva Pecukevičiūtė (class 2017) from Fontes’ Lithuanian team adds that although similar trends are still observed in Lithuania, “the real gender pay gap is slowly decreasing.”

Despite the outlined inefficiencies of the performance evaluation process, authors of this study assure that “there is a silver lining to this situation.” As Dr. Klein explains: “With increasing awareness of flaws in currently installed performance evaluation practices, companies might consider turning to more contemporary approaches to performance management, e.g., use of alternative raters or calibration committees. For instance, participating organizations that have calibration committees (26%) enjoy more transparency and consistency in their performance evaluation process and increased efficiency in promotion and staffing decisions. Similarly, most organizations using alternative raters indicate that these are especially useful for talent management, bias mitigation, evaluation consistency, and staffing.

About the study:

Led by Prof. Grabner and Dr. Klein of WU, this study was launched in 2019 as a new cooperative research project “Contemporary Performance Evaluation Practices Survey” between WU, Fontes and SSE Riga. The survey is based on existing research in Management Accounting and HR Management [2] on the topic. In the core part of the survey, participants were asked to consider the performance evaluation process for their company's largest core group of mid-level employees.

The full report of the survey study