By: Robert J. Herbold
Reprinted by permission of the publisher, John Wiley & Sons, Inc., from What’s Holding You Back?
10 Bold Steps that Define Gutsy Leaders, by Bob Herbold. Copyright (c) 2011 by John Wiley & Sons, Inc. All rights reserved.
In many organizations, once a year HR will pass out employee performance review guidelines and forms, indicating that it is now time for that annual exercise, along with a target date for completion.
In my consulting work, I’ve often found that HR is really not disciplined about this task. HR people don’t require that the forms be signed by both parties and collected by HR. In fact, in many cases, the performance appraisals simply never happen.
The reason why they don’t happen is that it’s hard to give a performance appraisal. No one wants to do it. The supervisor doesn’t want to do it because it is uncomfortable and feels unnatural to describe the shortcomings of other individuals. Subordinates don’t want their performance appraised, because even if they are strong performers, the boss will find something to complain about. If they are average-to-weak performers, it’s no fun to sit there and have their boss dwell on their problems and shortcomings.
The typical attitude of both the subordinate and the supervisor is, “Let’s just ignore the whole thing.” That’s why in most cases, employee performance reviews never happen. This means that the company is giving lower priority to developing employee talent and putting less emphasis on achieving business goals, both of which should be unacceptable to strong leadership.
Performance Reviews: The Basic Requirements
Every organization needs a rigorous performance appraisal system. But how should such a system be structured? The important question to ask is, “What are the basic requirements that any performance appraisal system ought to have?”
This is an important issue, as there are a lot of different ways to approach the performance assessment process. Here is what I believe are the fundamental components:
- Isolate the top 10 percent. The most important aspect of a performance appraisal system is spotting your really strong performers and stretching them appropriately. They represent the future of your organization, and you need to invest in them heavily. Most importantly, this means you must have a high-quality approach to finding these people in the first place.
- Isolate the bottom 5 to 7 percent. If performance excellence is a goal, it’s critical to constantly isolate people who simply aren’t able to make the grade. Every year you should clearly identify the 5 to 7 percent of your organization who don’t perform as well as the other 93 to 95 percent. Most recruiting strategies can never be perfect, so you are always going to end up with a spectrum of people from super-strong performers to the very weak. To continually strive for excellence means you have to confront the fact that there will be some weak performers, and you need either to let them go or to find a job for them that is a better fit.
- Match rewards to performance. If the average salary increase is going to be 5 percent, your top performers should get at least twice that. Your weak performers should receive virtually no increase. Too often you see organizations where differences in employee compensation between the top and bottom performers are quite narrow. That’s simply wrong. Your dollars need to match your words to employees concerning their performance.
- Calibrate the middle. As I discussed earlier, Microsoft broke those who were not in the top or bottom groups into three parts: the two, three, or four ratings. It’s not critical to breaking this middle group into three pieces. What is important is to have some kind of calibration process so that you know which groups of people are clearly high performers and low performers. Personally, I think that not breaking up the middle 80 percent or so into smaller groups is a missed opportunity. Breaking this group down allows you to make valid distinctions among that big group, to acknowledge and motivate the strongest and to warn the weakest of their need for improvement. However, I’ve seen some organizations appraise this group as one and simply charge the managers to discuss strengths and weaknesses, encourage improvement where needed and praise good work.
- Make the system foolproof. Nothing atrophies like a performance assessment system. As I noted earlier, nobody wants to have a performance appraisal, neither subordinates nor supervisors. This is why you need a rigorous, foolproof system that requires everyone to go through this tough exercise, document it, and have it recorded by your HR department. Whatever system you develop, it’s vitally important that it be foolproof. Performance appraisals must take place, and they must be documented. The person being evaluated needs to sign a summary of it, indicating that he or she has received the appraisal and the rating. Anything short of that and I can guarantee you that within two or three years, half your people won’t be receiving performance appraisals.
- Ensure regular timing. Employees who have been with the organization less than five years should be assessed every six months so that they know what kind of progress they are making as they become more and more acclimated to the company. After five years, an annual assessment is probably all that is necessary.
In any organization, achieving great results is totally dependent on having great talent. The only way to retain top talent is to deal with employee performance very objectively and concretely.
The business world has proven over and over that this is hard to do, and that if you are to successfully grow the people who will enable you to grow the impact of your organization, you need a disciplined, standardized system that is well executed by HR.