The Best Performance Review I’ve Ever Seen

Ditch the old way you’ve been doing things and get back to basics.  Performance metrics should set your standard, so people will do the things you actually want them to do.

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Boy, have I seen a lot of performance reviews.  They’re basically the same things over and over.  And we get an inordinate number of questions from clients asking for “a sample performance review template” they can emulate in their own business.  Many executives have always managed and evaluated this way, to say nothing of how we pay and promote.

Yet in the past few years away, there’s been a shift away from performance reviews, which is completely understandable.

Performance reviews don’t work because we don’t ask employees what they do to advance our organizational and managerial goals.  We’re not specific enough.  So maybe I should revise that comment accordingly: Performance reviews don’t work as they’re currently devised.

The Importance of Expectations

My experience is that most e­­mployees do pretty well at hitting objectives if they know the specifics that are expected of them.

But here’s the problem: Managers and executives do a lousy job of setting expectations.

Think about it: If employees are going to be evaluated based on attendance and productivity, they deserve to understand why.  “Why do I need to be on time?  I get my work done, so why does it matter?”

Businesses do a great job of creating volumes of requirements for employees; there’s seemingly a rule for everything.  But why?  How do those requirements help us reach our individual goals?

Subjective vs Objective

The CFOs of the world tell us that performance reviews are necessary because they’re objective. When we attribute numbers to the results, we objectively give raises and bonuses and measure performances.

This ideology buys into what I call The Myth of ObjectivityTM.  Of course, everyone (especially CFOs) would love to see performances broken down into averages, medians, and charts.  But that’s not objective.

When a manager reviews an employee’s performance, what really creates the difference between a 3.5 and a 4.0?

Answer: nothing.  Therefore, the rating system isn’t objective after all.  And since it’s subjective, it basically defeats the purpose of having a performance review to begin with.

(Yes, I know that ratings can effectively motivate salespeople and workers with repetitious jobs such as manufacturing, but the latter will disappear soon, due to AI and robotics.)

The Best of the Best

The CEO of at an insurance brokerage firm in Pasadena, CA, wrote the best performance review I’ve ever seen.  I was sitting in a meeting with the CEO and his executive assistant, and we were reviewing our punch list.  I could tell the CEO was getting a bit impatient, so I made this suggestion: “Let’s take a break. My team can finish everything on our own.”

Greg brightened up after I made my suggestion, and asked his assistant, “Remember what your performance is based on?”  She nodded.

Now he’d piqued my curiosity.  “What’s your performance based on?” I asked her.

“My performance and salary increase are based on the number of times Greg gets to golf every month,” she said.  “If he plays at least eight times a month, I get a good performance review and a 10% salary increase at the end of the year.”

Then it hit me.  It was the perfect performance review!  I know many HR veterans are undoubtedly recovering from their fainting spells, but hear me out:

  • The criteria were clear.

Melissa understood exactly what was expected of her, and she was easily able to repeat her goals.

  • The goal was measurable.

Eight rounds of golf per month (or 96 per year)

  • It advanced the executive’s goals and objectives.

Greg wanted to golf. It was a personal goal, and it was important to him.  [Pro Tip: If you want people to do something, incentivize them.]

  • It allowed a talented person to innovate and work autonomously.

For Greg, it didn’t matter how Melissa got him out on the golf course, just that she made  it happen.  So her performance wasn’t tied up in minutiae; it was solely focused on the end result. In other words, she had permission to do whatever she needed to do to get him golfing.

Melissa became a more effective assistant, because every interaction she had factored into that goal.  And she was a much more effective gatekeeper.  (“Does that person really need to have a meeting with Greg, or can I handle it?”)

Summary

Rethink your 15-page form for performance reviews.  What do you truly want that person to do?  What’s the end goal?  Can’t we simplify things, and make our objectives attainable, measurable, and real?  The answer: Yes, we can.  But then the question becomes, “Are we willing to break through the mentality that We’ve always Done It This Way?”

Over the next decade, businesses who are willing and able to change are going to become winners. Your formula for success doesn’t involve being stuck in the past.

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Why Experience No Longer Matters

It’s almost comical.  I’m referring to the amount of money businesses globally are spending to streamline resume reviews – reading bots, artificial intelligence, and the like.  The idea is for the bot to scan resumes looking for keywords – college degrees, or at least 5 years as a software engineer, for example.  The bot then ‘approves’ selected resumes for follow up by HR or the appropriate hiring manager.

Everyone likes having the newest technology, and every company looks for efficiencies – but really?  In hiring?  As Jack Welch used to say:

What could possibly be more important than who gets hired?

And the kicker is – everyone’s doing it wrong, because experience no longer matters.

Yep, I went there.

Most businesses still look at employees and job candidates through the same lens as they did two or three decades ago. They review résumés and interview using the same old, tired questions. They look for experience and technical competency as if these are the only criteria needed in this world of massive and constant change.

Today, we are confronted with a multi-cultural and multi-generational workforce with investors and shareholders demanding more profits, lower expenses, and better efficiency. In an era of social media, every employee and every customer are broadcasters, having the ability and ease to shout their complaints or problems to millions of people.

Today’s employees are significantly different from those who came before, and employers have significantly different needs from what they ever had before.

There are two major excuses offered by companies who wrongly insist that experience is the most essential factor in hiring.

  • Because that’s the way we’ve always done it. A bank in the southeast U.S. asked me to help with an issue with their tellers.  Seems that they were having a problem hiring and retaining bank tellers.  It took me 5 minutes to spot the issue – a college degree was required.  Really?  For a $10 an hour bank teller position?  Turns out the CEO liked having employees with college degrees – that was the way it was done when his father (and grandfather) ran the bank.  But the insistence there be a college degree was the reason many potential applicants declined to interview, and also why existing tellers bolted when the first better offer emerged.

It took 5 minutes to find the issue and about a month to talk the CEO into changing the policy.  A college degree is a piece of paper and proves many qualities, but being a great bank teller isn’t one of them.  I instead re-focused the bank’s hiring managers into looking for a genuine customer service orientation; a values system aligned with the banks culture; and a hunger to work at the job.  Desire and passion are very good motivators.  By opening the position up to a larger pool of candidates, turnover decreased and hiring became easier.  Within a year, there was even an uptick in customer satisfaction!

  • So the new employee can ‘hit the ground running’. This is code for “I don’t want to spend time training this person.”  Yet there’s going to be a significant amount of training no matter what.  A CPA firm I work with requires of its newly hired CPA’s to have at least 3 years of experience in a certain software program.  The problem is that the software dramatically changes every few years, so there inevitably must be significant training or re-training anyway.  And why 3 years of experience?  What’s the difference between 1 and 2 years or 3 years?  Very little, in my opinion.

I learned the lesson about over-relying on experience nearly 20 years ago.  I was managing a sales and service operation for an insurance company – about 30 employees.  I was having problems hiring an inside sales representative.  After 6 weeks, my boss called and told me he’d hired a person for me.  I thanked him and asked for her resume and when I would get to interview her.  He indicated I’d forfeited that chance – I’d meet her when she completed corporate training.

When I met finally met her, I was impressed by her desire, and during the first day our client clearly responded to her positive and friendly attitude.  So I called my boss and asked to (at last) see her resume.  Turns out there wasn’t a resume.  She was the checker at his grocery store.  He’d been going there for years and was impressed by the way she remembered his name and her friendliness.

And my boss was right: no way I would have even interviewed her, because I wanted insurance “experience”.  I missed out on a whole number of great potential candidates because I over-focused on experience.

I’m not saying to eliminate experience and education entirely (you wouldn’t want a high school student performing your brain surgery); but I am saying you need to re-think exactly how critical (and how much) is necessary for your hire.  Experience only proves the past – attitude, agility, and alignment predict the future.

Artificial Intelligence might be able to screen for attitude, agility and alignment in the future, but they can’t and aren’t doing it now.

Hiring is critical. Not only do you want to hand-select employees who are likely to stay on board for more than a little while, but you also want employees who will blow you out of the water in terms of performance. You need to find employees who have the intangible values and characteristics that your company needs, and you must also find those who will flourish in the face of change.  You won’t find that reading a resume.

 

Annual Pay Increases – What Is “Fair”?

20150908162833-one-dollar-money-woman-ceo-bossI recently received an e-mail from a client.  They’re in the service industry with about 250 employees and multiple departments, located in the Pacific Northwest.  The COO was frustrated because the board of directors, at the urging of some department heads, wanted to give all employees the exact same percentage raise.

Here’s her question:

Can you reach out and try to explain the downside of across the board raises just because someone lasted another year.  One or two departments are trying this approach and it may undermine the salary and wage plan we are trying to implement with top performers getting more, average performers getting less and non-performers getting zero.

Someone has to be a #1 and someone has be the bottom of each department.

And here’s my response:

One of the first things a business must do is set a compensation standard for the entire organization.  It is counterintuitive to have one department doing one thing and other departments doing another.  It lacks cohesion but more importantly it lessens the overall culture and direction you’re trying to establish for your organization..

So my first recommendation is that it’s one overall compensation and workforce strategy and plan for the entire business.  Successful businesses are run this way; unsuccessful businesses are not.

The second recommendation takes more time.  And it is essentially – should we do across-the-board raises – the same percentage – for everyone or should it be a merit-based program?

The rationale for across-the-board raises is that everyone is treated the same; we’re all one team and, candidly, it’s a lot easier for lazy managers to implement.  There isn’t any complaining, no thought needs to go into it, and we can get it over with.

This was the thought of businesses until the late 1980’s, and it worked until then.  Treating everyone the same created harmony and dis-incentivized weaker performers from complaining to their lawyer, or anyone else around them.  Also there was thought that it increased the “we are all one big team” mentality.

This theory is now widely discredited by forward moving organizations and by leadership thought leaders globally.

We are in an era of “one size fits one”, not “one size fits all”.  Across-the-board raises discourages your top performers and encourages mediocrity among the team.  Businesses are trying to do more with less, and implementing pay-for-performance, or merit pay, is the principal way of accomplishing this.  Progressive organizations identify their top performers then find out what they want and give it to them.  And they weed out poor performers.

A great deal is made of the employment practices in Silicon Valley – Google, Netflix, Yahoo! and all of the others.  We read about flexible workplaces, catered sushi lunches, and free dry cleaning on premises.  But what you don’t see is the expectations associated with all of those perks.  The Netflix Culture Code – a document I recommend to every business owner, CEO and future leader – is a perfect example of this.

Do you know what Netflix’ thinks of mediocre performers?  It’s on page 22 of their code: Adequate Performance gets a Generous Severance Package.  They don’t even pay average performers less than top performers – they get rid of them.  In this way, they maintain their standards of excellence.

I know lots of CEOs who regret keeping marginal performers on too long; I know none of them who regret letting them go too quickly.

So in ‘the real world’ today, poor performers aren’t just paid the same as everyone else – they’re eliminated from the organization!

Merit pay incents top performers; it motivates marginal performers to either improve or find employment elsewhere.  And most importantly it sets a standard that you expect excellent performance at all times.

I would like to find out from the department heads what their compelling reason is to do across-the-board raises.  I’m willing to bet it’s a self-serving reason, from “we’re just one big team” to “I don’t want to create discontent.” That’s yesterday’s thinking and a guarantee that mediocrity will continue.

We talk all the time about eliminating an entitlement mentality and creating a culture of accountability.  How on earth can that take place under a one-size-fits-all mentality?

And the “one team” argument is ludicrous.  Look at professional sports teams.  Do they all get paid the same?  No.  Do they all get the same percentage of raises each year?  No.  Everyone knows who gets paid what, and everyone knows that the best players get the most pay.  That’s the way it works.  And somehow those “teams” still have that “team mentality”.

Focus on moving forward.  Leadership takes courage.  But the drive to be great needs to be self-evident.  Right now, the evidence is that your managers don’t really want to lead.

"Winning" An Employment Dispute?


Just look at the headline of this article:

“Wal-Mart Workers Win $62 Million”

What is wrong with this headline and picture?

Everything.

“The Lotto Mentality” has officially infected our business culture, to the determent of business owners and to the employees who truly deserve compensation for wrong.

The Importance of Your First Job

The first job a person gets is, in many ways, the most important job you’ll ever have.  If – that is – you look upon it as what is should properly be – a learning experience.

Never, ever look down on any work you do thinking it is beneath you or will have no value you to you in life.  Every task and opportunity can be a learning experience if you make sure to look at it that way.
Take a look at me, for example.  During my last year in college (and for a couple of years after), I worked at a restaurant.  I started out busing tables, then waiting on tables and bartending and eventually participating in buying wine for the restaurant.  This was a moderately upscale seafood restaurant.  Twenty five years later, I can tell you it was the greatest learning experience I’ve ever had, with better “real life” training for my career than any college course or seminar I took.
One day, I’ll write an article that will be called, “Everything I Know About Sales I Learned From Waiting Tables.”  Think that’s not true?  I learned about multi-tasking, and customer service, and that different people need to be treated different, with varying levels of urgency.  I learned how to upsell, and look for signs that a patron was looking for something better than the house white wine.  That meant learning about my products and understanding what they mean to people.  The restaurant offered an incentive for additional wine sales, and that was my first experience with commissions.
Working with different types of people in different positions, and treating them the way they prefer to be treated.  Not just clients, but the restaurant management and ownership; chefs and busboys and cocktail waitresses and hostesses.  One of the first great leaders I saw was the owner of the restaurant, who saw something in me and encouraged my development.
It’s only a crappy job if you view it as a crappy job.  Everything is an opportunity to learn.  And in life, learning ultimately is everything.

Employees First

Dave Berkus is an accomplished speaker, author and angel investor.  He provides common sense advice to all businesses through his blog, Berkonomics.

His recent post deals with the frustrations of business owners who perceive that government regulations always favor employees.  His advice?  Recognize the realities of the times.

He’s right!

Workplace Litigation Trends Report

This is the 7th year that Fulbright & Jaworski has surveyed senior corporate counsel regarding litigation.  I’m focusing on the responses that affect businesses – and selecting those answers.  The results are illuminating!

In which area is there the most litigation pending in the U.S.?

Contacts: 53%
Labor & Employment: 49%
Personal Injury: 27%
(participants could pick more than one type)

In which area has there been the greatest increase in multi-plaintiff cases whether they be class, collective action, or significant multiple plaintiff action?
Wage & Hour: 46%
Labor Union: 13%
Age: 11%
ERISA: 10%


[What types of cases] will see the greatest increase in 2011?
Discrimination: 39%
Wage & Hour:35%
Labor Union: 17%

ERISA: 5%