What we can do (pt 4)

“Appreciate everything your associates do for the business. Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They’re absolutely free and worth a fortune.” – Sam Walton

In the past several blog postings we have explored the failings and impact of the current approach to performance management through the performance review and compensation management practices in place at many companies large and small. We found that many businesses are stuck in the past using an approach that is over 35 years old and repeatedly failing to produce the results that the business needs.

We have cited study after study from leading authorities on performance management such as Harvard Business Review, Deloitte, McKinsey, Gallup and well-known thought leaders including Dr. W. Edwards Deming, Marcus Buckingham and others to clearly conclude that the current approach is not effective. After reviewing all of the evidence we presented and much more that is available through other sources, we can safely conclude that the current process is a waste of time, expensive and counterproductive.

So given that the current system is broken and we have a pretty good idea of how it should work, what do we do? In reality there are basically two approaches, confront the issue head-on and openly push for change or to live within the present system and adopt tactics to minimize the damage.

Head-on Approach

Let’s start with the head-on approach and openly push for change. First of all, let’s be prudent and recognize the current environment and risks. For many reasons it is difficult to challenge the current system while being subject to the impacts of the system. Many business leaders have thrived under this system. If they have usually been on the top end of the curve, they may not really understand the true impact that the system is having on the success of their business. If they have been part of an enterprise that was perceived as successful and the annual review and “stack and rank” process was part of that culture, they my not be inclined to change the “formula for success”.

There may be a perceived risk in changing the status quo; after all business has been doing it this way for years with little blowback and significant litigation (until recently). The current approach is packaged and sold as being fair, identifying high performers as well as those who need to find other opportunities, and staying within a budget. If we change, will that be admitting that the past practices were flawed and open to criticism and litigation? There will be all kinds of reasons that try to defend that the current practice is the best practice. The review process has been this way for over 35 years and it will not change easily.

It is important that we are smart about proposing this change. If we focus on the flaws in the current system those currently in-charge may be concerned that it reflects poorly on their leadership. In a twisted sort of way, if we are not careful it may get turned back on us as a performance issue if we are not careful about proposing a change. Exposing issues around systems and policies that impact compensation, retention, and advancement opportunities needs to be done thoughtfully.

The best way to avoid this dilemma is to take the high road. When discussing the need to change current policies and practices in this area, focus on the future state. After all the future state is a better place to be. Focus on the benefits of the new approach and explain how it will better serve the needs of the business (reduced waste, better feedback, higher engagement, true meritocracy).

When needing to point out the shortcomings of the current position, try not to pin those shortcomings on those currently in charge, but refer them to the work of experts in this area. Point them to the blog post on SkipGilbert.com and other authorities referenced in the previous posts. Let those authorities speak for you. We should help others stay focused on the positive. Remember the Change Formula, a strong vision and practical first steps. It will work well for you in this situation.

Also consider timing in proposing the change. A point in time that may have significant leverage will be just after completing the current review and compensation cycle. It will be fresh in everybody’s mind just how bad the current process is and how unfair their rating was, not to mention how they felt selling the results to their direct reports. At that point most people will agree that something needs to change and there is time to get something new in place before they have to do this again.

Another great time to introduce the subject of change is after the annual engagement survey results are received. Typically, as part of the survey follow-up process teams are asked to review their results and propose solutions to overcome the areas of concern. This is a great opportunity to raise the issue at the grass roots level. If this shows up in enough of the responses, it may prompt a greater awareness of the need to change.

Working Within the System

Most of us are not in a position to change the performance review and compensation management systems, policies and practices. But that does not mean that we are helpless victims of the shortcomings of the current process.

There are things we can do to minimize the damage to the performance of our teams.

Here are four things you can do right now to move in the right direction:

1) Weekly Check-ins– Start the process of having a brief conversation with each person each week. In that conversation we quickly engage in a conversation that includes the key questions, 1) What are you working on this week? 2) Is there anything you need from me? 3) We let the associate know if they are meeting our needs and 4) Ask if they are getting to use their strengths everyday? Be sure you make a quick note of the conversation so that you build a rolling accomplishment and feedback process.

2) Revise Goals as Needed– Often goals are so broad they make little sense at the individual contributor level. Furthermore, even corporate goals change over the year. Spend the time and effort to resolve goals to meaningful challenges. Measuring individual performance is extremely challenging anyway; make it easier for the associate and the manager to align on the day-to-day work. Make the goals SMART and revise them as the challenges change.

3) Minimize the Effort on Stack Ranking and Rating– If forced to stack rank and rate try to keep the end point in mind and remember the power law distribution curves (Pareto, 80/20…). What we are really trying to identify is the 20% that contribute the majority of the progress. Focus on making the case for those that have made the biggest contribution and minimize our efforts on differentiating the performance of those in the middle of the pack. Through the weekly check-ins, we also know who is performance challenged and we have been engaging in weekly conversations with them. They will not be surprised to find that they are not meeting expectations and you will have a solid record of conversations and gaps to support your conclusion.

4) Take Every Opportunity to Appreciate Our Team and Deal with Each Person as an Important Individual– Treat everyone on our team as an important individual. Give each individual the opportunity to do their best and reinforce every time they meet or exceed our expectations. Build-up and support each member so that they grow and prosper. Be a strong leader that provides a vision and direction. Become a high performing organization and then stand your ground at review time. If your organization does not recognize the superior results, find another organization. Your time is too valuable and life is too short to work for ineffective leaders.

The current performance and compensation management process is severely broken. It has been for over 35 years and that is reason enough for a change. There is ample evidence to support the need to change. It is now up to us to move the issue forward in a smart way. If you need help with this, please contact me.

I am very interested in hearing your stories around the annual review and compensation management process. Is it broken, do you see signs of progress, do you feel trapped? Let’s discuss.

Thanks,

Skip Gilbert