Category Archives: Building Better Business Managers

Grading Employees Fails the Grade

The traditional method of employee “performance reviews” has not only lost its effectiveness (if it ever was), it has become counterproductive.

I don’t know about you, but for me it made no difference whether I was the “reviewer” or the “reviewee,” the ritual of the annual job “performance review” always struck me as akin to evaluating the past and appraising the future based on the ruminations of a demented soothsayer. In short, they were, at best, a waste of time and most often they did more harm than good.

That is unfortunate because “performance meetings” between a manager and a subordinate can be a powerful tool for cooperative relationship-building, Review2increasing morale, instilling motivation, rewarding effort and ultimately, enhancing performance. No matter what the level of the job or responsibility, everyone wants honest feedback on his or her performance.

Yet, employees for the most part look upon a looming “annual performance review” with trepidation; they’re unsure how the boss views their effort and work. And the truth is that most managers see conducting the annual performance review of each employee as a burdensome chore, rather than an opportunity to communicate and build a deeper level of trust and respect with the subordinate. These dichotomous feelings of both the employee and the manager materialize for the simple reason that the traditional concept of the annual performance review is fatally flawed.

Rethinking the Employee Review

The artificial and sometimes awkward annual sit-down with the boss to have one’s job performance “rated” with such clear and defining terms as “outstanding,” “above average,” “satisfactory” or “needs improvement,” has been used to assess the performance of employees for generations. But it has outlived its usefulness – if it ever had one.

One specific weakness of the grading approach is that the subordinate’s future is dependent on the caprice of the boss. It is a two-way street as well, because often the one doing the rating seeks to avoid direct conflict with the employee and does not want to “hurt their feelings,” so there is a tendency to “over-rate” the performance of the employee. And that disingenuousness on the part of the manager can end up causing even greater problems.

These negative dynamics inherent in the traditional performance review system only leads to confusion and frustration for all participants. When the employee feels the assessment of the boss was unfair or inaccurate, there is little or no recourse and this directly impacts their morale and effort. When the manager is less than candid about performance –especially if it has been poor – it makes it difficult to take corrective action in the future. There is no question that this system is inefficient, ineffective and hangs on only because it is ingrained in the long-established corporate HR mindset.

Beginning to Recognize that Grading is Failing

The good news is that companies are beginning to recognize the weaknesses in the traditional performance rating exercise. The bad news is that they don’t seem to know how to fix it. This conundrum was brought home in a Wall Street Journal article. The Journal article aptly pointed out, “As companies reinvent management by slashing layers of hierarchy or freeing workers to set their own schedules, performance ratings with labels like “on target” stubbornly hang on.” The article pointed to a long list of some of the largest companies – Gap Inc., Adobe Systems, Intel Corp. and Microsoft – that recognize the weaknesses inherent in the traditional performance review process, but seem stymied in their efforts to create a better system. The problem is that these and other companies are locked into the past and are trying to patch fixes on an intrinsically bad system, when an entirely different approach is needed.

There is a Better Plan that can Make the Grade

How would you like to be in a school that not only conducted open-book testing, but also allowed you to grade your own test? Schools that have experimented with this approach have discovered that students given this freedom and responsibility were not only more serious about the effort, but ended up learning more. A variation of this approach was used for performance rating by one company I know and the results were amazing.

What the company did was to turn the “performance review” upside down by conveying the responsibility for assessing the performance of the employee to the employee. Not only did the employees end up more involved in the process, they established higher standards of performance and were more demanding on themselves than any manager could reasonably ever be.

Here is how it worked:

At the beginning of each year the employee was asked to list the five most important goals and objectives they had for their job in the upcoming year. Then they were asked to enumerate the specific actions they would take to achieve these objectives. Next, the employee was asked to list his or her three greatest strengths and weaknesses. Once these strengths and weaknesses were cataloged, the employee was asked to identify three specific efforts they would make to leverage their strengths and an equal number to correct any weakness. For the final step the employee was asked to write two or three paragraphs summarizing what they would be able to report as their performance at the end of the year.

This entire process was in collaboration with and support of the manager. This put an onus on the employee to be the ones setting the standard of performance and accountability. Once all was agreed to, both the employee and the manager signed the “plan of performance.” Then each quarter the manager and the employee would have a brief meeting to discuss the activity and progress the employee had established and committed to achieve. If adjustments were needed, they could be made at that time. At the end of the year there would be an “annual review.” in which the employee – not the manager – would take the lead. In effect, employees would “grade” their own performance based on the goals and objectives they had set for themselves.

The reality is that we know better than anyone if we are performing well. What the company discovered was that by using this approach to “self-directed performance reviews,” the employee set higher standards, had more of a sense of personal accountability and made a greater effort to meet established goals. Allowing the employee to set their own goals and performance standards within the job was a great lesson in empowerment and personal responsibility. It also fostered a feeling of trust and respect between the employee and the manager. This in turn promoted collaboration between the manager and the employee, with the manager in a support, rather than demand role.

This “open book” approach to performance review may seem like Pollyanna to those locked into the constraints of the traditional graded performance review system, but there are two things in its favor – it works and the old system has failed. Not only is this new approach simpler, it eliminates conflict and uncertainty while involving the employee in a way that makes them part of the process, not its victim. In short, it gets a passing grade.




Governing is not a Good Profession for Heroes

Being a hero calls for big and bold, while governing demands down and dirty.

On August 2, 2007, then-candidate Barak Obama first offered a pledge that he would often repeat during the presidential campaign. He promised, “As President, I will close Guantanamo, reject the Military Commissions Act and adhere to the Geneva Conventions. Our Constitution and our Uniform Code of Military Justice provide a framework for dealing with the terrorists.”

That was a popular position for a presidential candidate to take, because a majority of Americans had become revolted by scenes of prisoner abuse and flagrant torture, causing America to forfeit the high ground of morality when compared with the terrorists. In short, Americans were eager for a leader who would solve those issues and put them in the past.

How is the Obama promise going so far?

Not good at all.

It’s now six years later and “Gitmo” is still open with 122 detainees, making it the longest-standing war prison in U.S. history. Moreover, the Military Commissions Act is 2001-detaineesstill the primary judicial system for dealing with suspected terrorists and that act basically denies captured suspected terrorists any rights under the American jurisprudence system. Their court of last resort is military tribunals. Lastly, there have arguably been violations of the Geneva Convention and the Constitution in dealing with both American and foreign born suspected terrorists.

There is little doubt that Obama was genuine in his desire to fulfill his promise (along with many others), but he ran dead-smack into the political reality that – at least in the American form of government – it is easier to promise than perform. Obama’s dream of being the hero doing big and bold things collided with the reality that governing demands down and dirty work. President Obama is not the first, nor will he be the last to fall prey to the striking difference between leading and governing.

Those who run for President of the United States are motivated by many desires, but none is stronger than the craving for the power and the glory that comes with being the hero who will save the day. The problem is that once elected president, they have to govern the country and that always gets in the way of being a hero.

This is a conundrum for those who yearn to be president. The electorate longs for the heroic leader who will come riding in on a white steed to solve the problems and cure the ills of the country. Yet, the structure of our government is bipolar. It assigns the President the responsibility for creating policy and solving problems, but the power to do so is diffused. In the long run, this is most certainly a good thing, but it does mean that the president is less CEO and more COO, chief operating officer. Can you name one COO who is recognized as a “business hero?” Neither can I. And it is this mixed-message of the electorate pining for a heroic leader, but demanding an effective manager that forces the candidate for president to promise more than can be delivered and then, once in office, deliver less than has been promised. This results in a frustrated president, a disillusioned electorate and the problems being kicked down the road, waiting for the next “hero” to take them on.

Learn from government what not to do in business

This muddled confusion in government between the desire for a heroic leader who can offer a bold vision and the expectation of efficient management offers a good lesson for those who seek to be “heroes” in the business world.

First off, never accept a job filled with responsibility, but devoid of the authority to get the job done. This may seem obvious, but it is amazing how many who seek to move up in an organization accept new responsibility without confirming, let alone demanding, the authority to do the job. This can only lead to frustration and failure.

On the other side of the coin, when you are in a position of leadership – especially if you want to be a hero – it is critical never to promise more than can be delivered and always NeverPromisedeliver more than is promised. This is true for all parties to the business equation: those you work for, those who work for you and the customers you serve. Nothing destroys the credibility and confidence in a leader more than to promise more than is delivered. If you promise the moon, make sure you can deliver it – and it will be even better if you end up including the stars along with it.

It is difficult to be big and bold while getting down and dirty

It may be a cliché, but it is true that accomplishing great things is a team effort. Every team needs a leader, but every leader needs a team, too. As is said in sports, true team leaders, no matter how talented they may be, are most effective when they encourage others to be involved and get better and then allows all to bask in the glory of the accomplishment. It is no different in business.

The number one responsibility of any heroic leader is to be big and bold. To offer a clear vision that is challenging, inspiring and motivating, but that is not enough. The leader must put in place the actions that need to be done to accomplish the vision; this is accomplished by empowering, motivating and rewarding others to get down and dirty to do them. This allows the leader to present the vision for accomplishment and problem solving, and remain focused on it, while others concentrate on doing what needs to be done to make the vision a reality.

At the formation of LifeUSA – a startup life insurance company – my vision was that within five years the company would be a national company competing heads-up against – and beating – the biggest companies in the industry. My promise to those willing to join in and do the down and dirty work in what was seemingly an impossible effort, was that they would all share in the rewards for helping to make the vision a reality.

My responsibility as the leader was to keep the vision in the forefront and focused, while at the same time providing the encouragement, support, tools and – most important of all – the sharing of power that would allow others who had the ability to get down and dirty to do the things necessary to accomplish the vision.

And guess what? It worked. In five years LifeUSA was a national company competing effectively against the largest companies in the industry. And seven years after that, the promise of sharing in the value created was delivered when LifeUSA was sold to Allianz at a value of more than $500 million. All of those who relied on the promise made to to share in the value of the company, will tell you to this day that they received more than had been promised. I may have been considered the hero, but the real heroes were those who bought into the promise of shared rewards and got down and dirty to make the big and bold possible.

This just might be a good lesson for those who want to be President.

Negotiate as if You Want the Other Party to Win!

Successful negotiation occurs when two parties reach agreement and each believes they got more than the other one.

The big news last week was the tentative agreement between the United States (along with Great Britain, Germany, France, Russia and China) and Iran dealing with limiting its ability to develop nuclear weapons. Consistent with the typical diplomatic process, this is not actually an agreement at all, but simply an agreement to reach an agreement.

One of the reasons the negotiations to achieve an agreement have been so protracted and cantankerous is because many New York John Kerry, Mohammad Javad ZarifIranians continue to be truculent in their ongoing distrust of American intentions. It can’t be that after some 50 years, the Iranians are still belligerent because the American government instigated a coup to overthrow the last democratically elected leader of Iran and replaced him with the brutally despotic Shah of Iran—just so America could assure a flow of cheap oil. Or that America supported Saddam Hussein in his war against Iran that killed almost 500,000 Iranians. (Did they forget that America turned on Hussein and killed him?)

Of course, reaching any agreement has been difficult from an American perspective too. Many American political leaders believe that by taking American hostages, supporting the Shiites in Iran and generally opposing American interests in the region that the Iranians totally overreacted to America interference with their internal affairs, and as a result, they can’t be trusted.

This background is mentioned only to make the point that, given this mutual distrust, it is remarkable that the two sides could sit at the same negotiation table, let alone reach a substantive agreement. What is telling about the proposed nuclear agreement with Iran is that, when it was announced, the perpetually petulant conservative right-wing factions in both the United States and Iran vociferously condemned the deal. This means that it is probably an equitable arrangement for everyone else.

Despite the rancorous puerile actions of our fractious political leaders, there is a lesson to learn here when it comes to negotiating any issue. Even in situations where there is deep mutual enmity and barely a scintilla of trust present, it is possible to reach an equitable agreement. That is, so long as positive principles of negotiating are used.

Where True Negotiation Begins

Many make the mistake of defining negotiation as, “What is mine is mine and what is yours is mine.” They believe that the tactics to be employed to accomplish this objective are to be strong, rigid, aggressive and intimidating. The goal is to take as much out of the deal as possible and leave only crumbs for the vanquished. Time and again it has been proven that even if a deal can be struck on this basis, it will never last and will lead only to future distrust and sure conflict. Successful negotiating will result only when both sides walk away believing they got more of what they wanted than the other guy. To that end, here are some proven principles that can help anyone achieve this type of more lasting and enduring result.

Never be so in love or in need of a deal you can’t walk away.

Prior to initiating any negotiation, know your bottom line. It does not make any difference if you are buying a car, a house, negotiating a pay package for a new job or constructing an international peace treaty, know your limits. That means knowing what you will not do or relinquish in order to make a deal. This has to be a hard-and-fast floor that is not to be violated – no matter what happens. I know this can be difficult, because the natural tendency is that once you enter into negotiations, you want to make the deal. But falling in love with making a deal is a trap that will ensnare you in a bad deal.

Just like you can’t be half-pregnant, you can’t go half way with your deal limits. Either you understand there is a point beyond which it is not worth it to make a deal and have the courage to walk away, or you don’t, and run the risk of agreeing to what for you ends up a bad deal.

There is another benefit for not being so in love with a deal that you can’t walk away. Invariably, when you do walk away from a deal because you limits have been reached (and it is not simply a theatrical bluff) you put pressure on the other party to adjust their position. You see, they are under pressure to make a deal, too, and more often than not, they can’t just let you walk away any more than they can walk away. The reality is that knowing your limits and sticking to them gives you significant leverage to make the right deal.

Get on the other side of the table and help the other person make the deal.

Once you understand what you will or will not do to make a deal, the best way forward is to learn what the other party will do or needs to do to make a deal. The way to accomplish this is to “get on the other side of the table.” You can get on the same negotiation1side of that table as the one you are negotiating with by asking the simple question, “For you, what would be the very best results you could hope to achieve from our discussions? Exactly what would make you happy?”

It is true that most will be a little reserved and constrained by your approach. After all, most will be coming from the traditional approach to negotiating that says your should keep everything close to the vest and disclose nothing. But a little patience and soft cajoling will get most to open up. You are catching them off guard – no one has been concerned with what they wanted from a deal. It was always what others were trying to get.

This approach does not need to be insincere. In fact, it shouldn’t be. In pure negotiations both sides have something of value they are willing to exchange (or should be) for something of different, but of equal value. You can be perfectly sincere in trying to determine and achieve the needs and desires of the other party because –by their nature – they are not in conflict with yours. And if you can do that, the other party is more naturally agreeable to making the deal you proposed, because it is in their best interests too.

If you enter the negotiations armed with the knowledge of a hard bottom line of what you will accept to accomplish the transaction, and then gain an understanding of what the other party needs and wants to accomplish, then you are ready to put the deal together.

Humans have an almost compulsive need to reciprocate in kind to the offerings of another human. Ever notice that when you compliment a person, then a very short time later they’ll return the compliment? The same human reaction works in negotiation. If you are willing to give everything the other person wants that are unimportant to you, they will have a strong inclination to respond favorably, when you ask for something that is important to you. (If they don’t, it is time to follow rule number one and walk away from the deal.) The real art of successful negotiation is to appear to always give up more than you are asking for, and put the subliminal pressure on the other party to give the key things you need.

And the Moral of the Story . . .

There is no magic to successful negotiating. Anyone can be good at it all the time. Despite the fact that most recommend your negotiation stance must be rigid, aggressive, and intimidating and seek to take as much from the deal as possible, these tactics are really a recipe for friction, frustration and failure.

Real success in negotiating, on the other hand, is based on understanding the difference between bartering and negotiation, being willing to appear to give up more than is received and – most important of all – learning to never be so in love with a deal that you can’t walk away.

Try this approach and discover just how successful you can be in any negotiation — even with the Iranians.