Michael Lacey needs computer consultants with people skills as well as technical skills. "Ninety percent of the time, when a client has an issue with a consultant, it's [related to] soft skills," says the founder and CEO of St. Louis Park, Minnesota, Digineer Inc., a 53-person technology consulting firm with about $7.5 million in 2005 sales.
While it's relatively simple to determine an employee's technical skill level, Lacey, 37, finds evaluating the soft stuff more slippery.
As part of employee performance appraisals, Lacey sends surveys to customers and colleagues, asking questions about consultants' friendliness and technical expertise. But performance evaluations still aren't cut and dried. "You can collect all the data, but you have to sift through it with a keen eye for the whole situation," Lacey says.
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This dilemma applies to most service-sector entrepreneurs. For many, it begins with realizing they can't completely rely on throughput, reject rates or other tried-and-true tools used to evaluate manufacturing employees.
"There definitely is a difference, and not enough companies realize that," says Kimberly King, founder and president of InterWeave Corp., a Tampa, Florida, performance-management consultancy specializing in call centers. Employee behavior is far more important in service industries, along with skills such as communication.
The problem is, entrepreneurs are often confused about how to evaluate behaviors and communication skills. "Typically, we tend to focus on attitudes rather than behaviors," King says. That means that rather than the actual service they perform, for instance, employees will be graded on whether they seem friendly or nice to the evaluator.
To solve this problem, figure out the specific behaviors you're looking for, and measure those: Do your employees make eye contact and smile when greeting customers? Does your receptionist turn away from the computer to talk to visitors? Do your service reps speak loudly enough to be heard? These are objective behaviors, and they can be measured through surveys.
Pick behaviors that are not only measurable, but also meaningful, says Richard Hadden, a Jacksonville, Florida, HR consultant and co-author of Contented Cows Give Better Milk. "The question has to be, 'In this business, what makes us money?'" Hadden says.
Watch out for cases where the employee's behavior isn't the key variable. Customers may be dissatisfied because of failure elsewhere in the organization or uncontrollable factors. "You can't hold the reservation agent responsible for bad weather," Hadden says. Also be careful not to evaluate employees on behaviors that might subjectively be tied to race, gender or age.
Lacey has a full-time employee to manage employee appraisal surveys. He estimates he spends more than $100,000 a year on the whole task. But it's worth it, he says: "You have to make an investment in your people."
Mark Henricks writes on business and technology for leading publications and is author of Not Just a Living.