Today I conducted my quarterly Business Review with the leadership at my company and I can tell you I’m happy it’s over.
It’s not that I don’t enjoy them, it’s just that they can cause undue stress on everyone in the office for weeks on end.
You build your deck, rehearse your script and try to prepare as best you can for the unexpected questions. After it’s over you breath a sigh of relief.
As I went through my review today I was prepared and looking forward to it. I crave feedback and I don’t receive a ton of it from my manager, so this was an opportunity for me to receive some much needed responses.
At the end of it I discussed some initiatives that I wanted to pursue and they green lighted two of the three, not bad in my book.
After it was all done I realized that I would actually prefer to have these more often. I read that Goldman Sacks has continuous feedback and it helps associates see where they stand in real time. Maybe that’s a bit much, but more than once a quarter can be good as well.
How do you approach this exercise at work?
If the leadership is positive than I think it’s a good thing. I have seen it skew to the negative, though, when you have a demanding boss.
Are these events even needed? In sales I think so because you have a business to run. Does that apply elsewhere?
On another front, it’s Leadership Development Carnival time and the offerings are excellent. Click on over and I’m sure you’ll find information that will be of active use both at work and in your non-work life.
All companies require performance reviews, yet rarely are people satisfied—even when they are positive. Properly done, a review is a source of satisfaction for both manager and subordinate: A record of growth and achievement, as well as a plan for future growth that inspires the person and the company to ever-greater success.
To achieve this, performance reviews must be thoughtfully and correctly prepared—which means that you must commit adequate time to do it right.
Performance reviews cover two separate areas:
A relatively straightforward analysis of an employee’s performance against specific objectives defined during the previous annual review; and
an analysis of the intangible performance covering things like communications skills, organization of work, attitude, balancing of priorities, etc.
These two types are combined in some ratio to create the total review. For example,
individual contributors, where personal interaction and exercise of management judgment is very slight, might have 90% of the review based on performance against objectives; whereas,
executives, whose exercise of management skill is very important, would have the proportion be more like 60%.
It’s difficult suggest the proper mix of objective and intangibles since even jobs at the same level can be vastly different in the needed mix of management and technical skills. However, the important thing is that the employee understands the ratio at the same time as she receives the objectives.
Companies frequently review employees on their anniversary dates, but for the purpose of calculating salary increases and stock options, people need to be compared against their peers to achieve a proper ranking.
Everyone looks great when viewed in isolation and most people achieve something during the review period; managers are human and want to be liked, so there is a tendency to view these too positively. It’s only when everyone’s achievements are viewed against each another that weak achievements are noticeable and extra effort is clearly seen.
Since employees are hired throughout the year, you need to plan to bring their reviews onto a calendar year basis with all other employees.
If an employee’s first review is on his anniversary date, his second review would be at the end of the year immediately following along with the other employees.
In most cases, people hired before June 30 have enough time to perform, show what they are capable of doing, and be reviewed at the end of the year with other employees. Salary, bonuses, and stock options are prorated to fit the actual period covered by the review.
The work of newly hired knowledge workers usually requires at least six months to evaluate properly, so a person hired after June 30 (for a calendar year company) should not be reviewed at year-end— instead, the first review should fall on her anniversary date. This is the sole exception to the rule that employees should all be reviewed at the end of a year.
Reviews are best linked to the company’s annual operating plan, budgets, and objectives (PBO) so that everyone’s individual goals and objectives for the coming year flow naturally from it. Since the budget also provides for salary increases, managers will have a specific raise budget target to meet as they complete their reviews.
The typical timetable for companies operating on a calendar year basis is:
the next year’s PBO is completed by mid-December;
reviews completed by mid-January for the previous calendar year;
salary increases and stock awarded shortly thereafter, but retroactive to the beginning of the year.
Summary:
All employees should be reviewed at the same time;
goals and objectives tie directly to the PBO; and
salary increases, bonuses, and stock options awarded within 30 days after reviews are approved.
If the employee’s objectives have been generated and updated as described in the previous years PBO, it’s a simple matter for the manager to complete the portion of the review dealing with performance against objectives.
A negative review about the person’s shortcomings that is objective, fair and unemotional is usually received with full comprehension and is seldom resented.
In fact, it is entirely realistic to allow employees to review themselves. Most people are harder on themselves than their managers would be!
Too often, managers write a flowery, positive review of the employee, but give out a below average increase of salary, bonus, or stock. This is the action of a weak and underhanded manager.
In reality, the manager is critical of the employee’s performance, but is avoiding the face-to-face confrontation that would result from the discussion of an honestly written review; he’s also setting his company up for a possible lawsuit if the employee is terminated in the future.
Summary:
There should be a perfect correlation between the review and any salary increase, bonus or stock award.
Many review forms have a section entitled “Goals for Next Review Period.” Without PBO, the manager has only the vaguest idea what projects the next year will bring—it’s like trying to tell a football player who to block before the play is selected.
This is one of the greatest causes of unhappiness with reviews, since the manager may later have to give an employee new goals that are contradictory to those previously discussed. This opens the door to disagreement as to whether the employee actually performed the assigned tasks.
Worse, without PBO-based goals, an employee can be left with an objective, but no budget, and so no way to achieve it.
Summary:
If there is no overall goal setting procedure for the company, trying to specify an employee’s goals during a review is almost impossible.
Career development is often ignored during reviews, much to the detriment of the employee, manager, group and the company’s retention efforts.
Personal development is intricately tied with improving the company’s efficiency, achieving its goals, and reducing its turnover. Success depends on employees acquiring new skills and improving existing ones. For example, does a technician want to become an engineer? Or does she want to join field service? During the review, she and her manager should discuss and agree on her career direction since both need to take action to achieve it—the tech needs to take classes or other training recommended by her manager, while the manager can provide simple projects to help the tech develop her new skills.
Summary:
Career goals, and the action items needed to achieve them, should be spelled out in the review and quantified for that year.
Managers at all levels are responsible for the company’s success.
The company’s success is dependent on its people and their ability to achieve their full potential.
Therefore, facilitating that development is a major managerial function, and performance reviews are a critical tool in that development.
You can protest and procrastinate—or use them wisely and well.
Developing the knowledge and skill to give a disciplinary performance review is an important part of being a good manager, although, hopefully, it will be the most infrequent skill you use.
A true disciplinary review should never come as a surprise to the employee; rather it’s the final chance to turn around performance/behavior issues that have been previously addressed at length in both informal and formal reviews.
For the best chance of success, you need to stay calm, unemotional, and very factual, while understanding that the recipient may become extremely emotional.
The entire disciplinary process must be in writing. Good sense, backed by employment law, requires that a written disciplinary notice must precede the dismissal of any employee for failure to perform their job after their initial probationary period has ended.
Write the review ahead of time with the same attention, and willingness to rewrite it, that you would accord a presentation to a major client. This is not something that you can dash off during your commute, or knock out five minutes before meeting with the employee.
The review has three main sections:
1. Why: The reasons for the disciplinary notice must be clearly stated, contain no ambiguity and have been previously been brought up in both written and oral form, so nothing comes as a surprise to the employee.
2. Mitigation: The requirements for correcting the problem(s) must also contain no ambiguity. Just as with any objective, there must be clearly measurable goals and a specific completion date. When dealing with performance deficiencies, it may be necessary for you to develop task(s) that will measure the employee’s ability to improve to the desired minimum performance level required and beyond.
People respond more positively to quantified objectives that they understand and are achievable. Setting the person up to fail with unreasonable objectives that are beyond, or different, from what other people in the group are asked to do, is not only a formula for employee failure, but also one that encourages lawsuits.
Just as important to the objective is time allowed for delivering change or accomplishing given tasks. Again, unreasonable time frames may encourage litigation. This interval is called the disciplinary period.
3. Consequences: What happens if the person fails to meet one or more objectives must be accurately spelled out in no uncertain terms. Consequences are the stick (since carrots haven’t worked), but you don’t necessarily want to use a bludgeon (termination), when it’s not warranted (and may not stand up in court). Here are several consequences that have been used successfully by other managers,
demoted with a reduction in salary;
suspended for two weeks without pay;
receive zero salary increase;
and the ultimate warning when it’s warranted
subject to disciplinary action up to and including termination.
When warranted, a disciplinary notice may state that no further warning is necessary and that committing a similar violation at any time in the future would be grounds for dismissal without additional notice.
This is important since, without such a clause, it could be argued that another disciplinary review and disciplinary period would follow a repetition of the offense.
In order create a stronger positive motivation, you can also provide a reward if the employee performs at a higher than expected level during the disciplinary period. For example, if failing to meet the objectives results in a zero salary increase, an employee who not only met, but also significantly exceeded, the objectives during the disciplinary period might actually receive a small increase.
Make no mistake; a true disciplinary performance review is a turning point for any individual. Clarity will avoid a lot of unpleasantness and maybe even a lawsuit. Although it’s very stressful on managers, handling performance deficiencies correctly often demonstrates to the employee the truth he has been hiding from himself and forces him to conclude that he cannot perform at the required level.
At that point, he will either resign or ask for reassignment and the company can avoid an awkward and unproductive disciplinary period.
Better yet, the kick in the pants given by a disciplinary notice may actually shock the person into turning his performance around and becoming highly productive.
At executive levels (Vice President and above), individuals may be disciplined for differences in policy with their superiors without any prior notice and written warnings about performance failings in job content frequently aren’t given, for example, a Vice President of Sales need not be warned in writing that he’s liable for dismissal if he continually fails to meet sales quotas. However, CEOs who don’t at least issue verbal content-failing warnings may quickly get a reputation for being arbitrary and unfair.
This is not true for overt actions. A Vice President of Sales making racial slurs, engaging in sexual harassment, or similar violations, should go through the same disciplinary process as any other employee.
Even at executive level, disciplinary reviews involve a defined process (see above) that protects everybody—the employee, the manager, and the company.
BW has an excellent cover story on the difficulties of terminating employees in a litigious society. Let me say that neither the article nor I are referring to terminations for reasons other than real merit/performance issues.
The article also points out that “it’s often the supervisors themselves who bear much of the blame when HR says someone can’t be shown the door. That’s because most fail to give the kind of regular and candid evaluations that will allow a company to prove poor performance if a fired employee hauls them into court. Honest, if harsh, reviews not only offer legal cover, but they’re also critical for organizations intent on developing top talent… Frequently, the work that the manager suddenly claims is intolerable is accompanied by years of performance evaluations that say “meets expectations.””
To really work, performance reviews should not be a once a year occurrence, but rather, at all levels, an ongoing dialog of feedback from supervisor to worker, with more formal, written reviews quarterly.
Most importantly, they must be honest and candid. This isn’t just-in-case CYA, but the kind of feedback that encourages and motivates your people to grow, as well as pointing out unacceptable actions and performance issues that damage the individual, you and, especially, the group.
Suppose that you have an employee who isn’t performing at an acceptable level, or is behaving in an inappropriate or disruptive manner, but short of the actions that are grounds for immediate termination for cause (such as hitting someone). Let’s further suppose that, as a conscientious manager, you’ve been giving accurate verbal feedback and previous reviews have specified the unacceptable behavior and delineated your expectations of change.
Notice the adjectives in the above, they mean that you’ve constructively discussed exactly what the person is doing that’s unacceptable and exactly what you want them to do about it—specific, not general comments.
Although this isn’t the most fun part of your management responsibilities, it’s one of the most important. In case you need some mental spine-starch to persevere, remember that you owe it to your group, whether that’s a small team or the entire company. Poor performers who “get away with it” will quickly become a black hole that absorbs energy and productivity from everyone else.
So, what do you do when all this fails to turn the person around? You need to terminate, but are still worried about legal repercussions.
The next step is a written disciplinary notice and you’ll find that it’s easier, and will yield better results, when you’re calm, unemotional, and very factual about it.
There are no guarantees that prevent someone from suing, but managers who look to HR and lawyers to cover their own performance review inadequacies can (and should) expect a lower performance rating from their own boss!
Love ’em or hate ’em, performance reviews are a fact of life—every employee is reviewed by whoever is one level up.
I’ve read a fair number of articles, arguments and discussions and thought I ‘d share one of the better discussions I’ve seen—better mainly because so much of the discussion comes from working managers.
On November 27 Harvard Professor James Heskett posed the question What’s to Be Done About Performance Reviews? in an open forum in HBS Working Knowledge. He started with an excellent commentary and summation of the practice and questions about it, including forced ranking, then opened the forum to readers.
There are 93 cogent comments, all well worth reading, providing substantial food for thought.
Although I found all the comments of value, it was number 47 that resonated most clearly with me, probably because it played to my own personal prejudices regarding managing.
Maybe it is because my background was as an academic sociologist before I ran a business, but I think this excellent discussion would be strengthened by looking at a “big picture” context. Most comments are looking inside the company/organisation at the performance of employees, but not linking it to wider considerations.
Three things strike me. First, many (not all) of the comments imagine the performance of employees to be a function of their inherent capacity or current motivation. In many cases, however, a poor performer in location X is a good performer in location Y and the difference lies not in the person but in the context and in how she was managed. One of the best Air Force leaders I know told a wonderful story of being a squadron CO of a squadron that was not performing as well as he would have liked. He called his four immediate subordinates in, closed the door and said, “Guys, things aren’t going well. What am I doing wrong?” When a colleague asked about the response, he said, “Well, they spent 15 minutes telling me. Then they spent an hour talking about what they were doing wrong and we never had to have that conversation again.” So the idea that the managers are the first issue and need training, which a couple of people have mentioned, seems to me the starting point.
The second thing, which again only a minority have mentioned, is that the bottom 10 percent of a given organisation might still be outstanding. It is said of the Australian Cricket team, which is ranked number 1 in the world by a long way, that it is harder to get out of it than to get into it, a comment that refers to the enormous stability of the team and the unwillingness of selectors to drop players who are going through a bad patch. In almost every case in recent years, the player going through the bad patch has emerged into good form and the side has won competition after competition.
The third and most important thing, however: Not only is there a “war for talent” going on, but most OECD counties are facing the fact that the population structure is aging and fewer young people are coming onstream to replace baby boomers. In this content, making the primary link between performance reviews and performance improvement, while simultaneously downplaying the link to firing, is likely to be a strategy that will become increasingly relevant.
Stephen Mugford
CEO
QQSR, Australia
Once you’ve read them all, share them with other managers in your company; then, most importantly, set aside enough time to discuss them and create a stronger, more beneficial, review function within your own company.
A year later GE scrapped its notorious rank and yank review system as implemented by then-CEO Jack Welch. A year after that Amazon followed suit. There are still plenty of companies that use the system — whether they admit it or just change the name. Individual managers are also guilty of it no matter their company’s attitude. Be it company wide or individually the effect is the same — higher turnover, lower productivity, decreased engagement, and increasing recruiting costs.
Years ago I wrote about how to make annual reviews painless and effective — more a review of the year’s accomplishments and setting goals for the coming year than a critique of work past.
It worked because mini-reviews, coaching and conversations during the year were frequent.
Typical annual reviews were fraught with fear and loathing.
For decades, General Electric practiced (and proselytized) a rigid system, championed by then-CEO Jack Welch, of ranking employees. Formally known as the “vitality curve” but frequently called “rank and yank,” the system hinged on the annual performance review, and boiled the employees’ performance down to a number on which they were judged and ranked against peers. A bottom percentage (10% in GE’s case) of underperformers were then fired.
Jack Welch championed a lot of very bad stuff (e.g., work/life balance, HR), but the negativity of rank and yank is near the top, if not number one.
(As for GE’s stellar results keep under Welch keep in mind that businesses like GE Financial practically printed money until it all blew up.)
But times are changing.
According to Raghu Krishnamoorthy, the longtime GE exec in charge of Crotonville (GE’s in-house management school) “Command and control is what Jack was famous for. Now it’s about connection and inspiration.”
And to that end, GE has developed a new in-house app that basically does what I and others evangelized a decade and more ago.
The new app is called “PD@GE” for “performance development at GE” There’s an emphasis on coaching throughout, and the tone is unrelentingly positive. The app forces users to categorize feedback in one of two forms: To continue doing something, or to consider changing something.
If you don’t have the luxury of an app you can simplify it even further.
Care about your people.
Interact with your people.
Talk with your people.
Challenge your people.
Help them grow and advance — even when that means they leave for a better opportunity that you can’t provide.
Read what GE is doing and adapt it to your own group — whether your company does of not.
A couple of years ago, in a post citing Robert Sutton’s comments on scaling, I said,
A company isn’t an entity at all. It’s a group of people all moving in the same direction, united in a shared vision and their efforts to reach a common goal. (…)Yes, it’s the people. It has always been the people all the way back to our hunter ancestors.
My e-buddy Wally Bock says bosses need to have a duel focus to be truly successful.
One is to accomplish the mission, make your numbers in business. The other is to care for your people, keep them safe and help them grow.
To that end, I thought I’d share Wally’s review of a book offering guidance on carrying them out.
Book Review: Winning Well
Several years ago at a party, I was approached by a young man who had just assumed his first management job. His name was Carl and he had a simple question: “Is there any company I can go to where I don’t have to choose between getting good results and treating people right?”
I answered Carl’s question with one of my own: “Why not stay where you are and do the job right?” I told him what I learned in the Marines, that you really have two jobs. One is to accomplish the mission, make your numbers in business. The other is to care for your people, keep them safe and help them grow.
It can be done. There are managers all over the world doing it every day. Carl and I talked some more. I tried to give him the basics of doing it right. If we were having that conversation today, I’d suggest that Carl read Winning Well.
“Winning Well means that you sustain excellent performance over time, because you refuse to succumb to harsh, stress-inducing shortcuts that temporarily scare people into ‘performing.’ You need energized, motivated people all working together. Your strategy is only as strong as the ability of your people to execute at the front line, and if they’re too scared or tired to think, they won’t. You can have all the great plans, six sigma quality programs, and brilliant competitive positioning in the universe, but if the human beings doing the real work lack the competence, confidence, and creativity to pull it off, you’re finished.”
The book is divided into four sections. The first covers the basics of Winning Well. Section two is about accomplishing the mission, getting the job done. Section three is about caring for the people, covering how you “Motivate, Energize, and Inspire Your Team.” The fourth and final section is practical advice for getting started, even if your boss doesn’t care about your soul or your team doesn’t care about the work or each other.
Who Should Not Read Winning Well
There are people who believe that all of this caring for the people stuff is nonsense. If that’s you, don’t even bother to pick up Winning Well. Wait until you think there might be something to the caring part of being a manager, then, when you’re looking for the “how to do it” part, buy the book and read it.
Who Should Read Winning Well
You should read Winning Well if you want practical advice for the real problems of getting results without losing your soul. Here are three kinds of people who can benefit from this book.
If you’re a working manager
If you’re a working manager and you want to learn the how’s of Winning Well, you can use this book in two ways. Read it straight through, making notes as you go. Then create an action plan for becoming the manager you want to be. There’s plenty of help in the book and online.
You can also read individual chapters to help you with a thorny issue at work. Dip into the book, get some just-in-time learning, and meet the specific challenge you’re facing today.
If you are a leader of managers
You’ll get a lot from this book and it’s also a great book to share with your managers. Winning Well is about rich, long term success. This would be a great book to stimulate discussion at team meetings or for a book club.
If you think you might want to be a manager
If you’re considering becoming a manager, Winning Well can help you in two ways. You’ll learn how you can be the kind of boss who gets results and builds relationships. As a bonus, the many stories and examples will give you insight into what a manager’s job is all about.
Bottom Line
If you’re a manager who wants to get great results and still have a good relationship with your people, or if you want to become that kind of manager, Winning Well will give you the insight, information, and inspiration to achieve those goals.
For decades, General Electric practiced (and proselytized) a rigid system, championed by then-CEO Jack Welch, of ranking employees. Formally known as the “vitality curve” but frequently called “rank and yank,” the system hinged on the annual performance review, and boiled the employees’ performance down to a number on which they were judged and ranked against peers. A bottom percentage (10% in GE’s case) of underperformers were thenfired.
Jack Welch championed a lot of very bad stuff (e.g., work/life balance, HR), but the negativity of rank and yank is near the top, if not number one.
(As for GE’s stellar results keep under Welch keep in mind that businesses like GE Financial practically printed money until it all blew up.)
But times are changing.
According to Raghu Krishnamoorthy, the longtime GE exec in charge of Crotonville (GE’s in-house management school) “Command and control is what Jack was famous for. Now it’s about connection and inspiration.”
And to that end, GE has developed a new in-house app that basically does what I and others evangelized a decade and more ago.
The new app is called “PD@GE” for “performance development at GE” There’s an emphasis on coaching throughout, and the tone is unrelentingly positive. The app forces users to categorize feedback in one of two forms: To continue doing something, or to consider changing something.
If you don’t have the luxury of an app you can simplify it even further.
Care about your people.
Interact with your people.
Talk with your people.
Challenge your people.
Help them grow and advance — even when that means they leave for a better opportunity that you can’t provide.
Read what GE is doing and adapt it to your own group — whether your company does of not.
Entrepreneurs face difficulties that are hard for most people to imagine, let alone understand. You can find anonymous help and connections that do understand at 7 cups of tea.
Crises never end.
$10 really does make a difference and you’ll never miss it,
A couple of years ago, in a post citing Robert Sutton’s comments on scaling, 
Book Review: Winning Well
