Bob MacDonald on Business

Sage Advice for Superior Business Management

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Grading Employees Fails the Grade

May 3rd, 2015 · Building Better Business Managers, Business Management, Effective Leadership, Employee compensation, Improving Your Business Leadership

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.




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Governing is not a Good Profession for Heroes

April 26th, 2015 · Building Better Business Managers, Business Management, Effective Leadership

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.

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Be Surprised if You Win the Lottery—But Not by Your Success

April 19th, 2015 · Business Management, Effective Leadership, Improving Your Business Leadership

If your success comes as a surprise to you, it means you were lucky, not good.

Success is the anticipated reward for hard work and commitment to achieving an objective, but many are convinced – or at least want to be – that success is the result of chance rather than choice. Those who fail to achieve success often account for their failure by rationalizing that the success of others is due to a “lucky break.” They equate the random luck of winning the lottery with how Winning-the-Lotterymost people win success. In their mind, failure to be successful is not their fault; they just were not as lucky as those who are successful.

Likewise, there is an intriguing reaction to success that comes from some of those who achieve it. Some see success as if it is the end of the road, when it is really only a sign that they are on the right road. Others reach a certain level of success and then begin to concentrate on enjoying the material rewards. They don’t understand that real success is determined by what is achieved, not what is received. And then there are those who, once they attain success, forget what it took to get there, and begin to act as if its continuance is preordained.

These attitudes about success contribute to the reality that more people rebound from failure than survive success. What many fail to grasp is that, as difficult as it may be to attain success, it is even more challenging to retain it. That’s because success has a way of cooling the passion and blunting the drive to achieve it.

Some Are Consistently More “Lucky” Than Others

Folklore supports the “lucky break” justification for failure by often highlighting the “overnight success” that is seemingly arbitrarily bestowed on the chosen few; it’s as if they had no part in the success —they just got lucky. Yet, when you go behind the scenes, you discover there is much more to the achievement. While there may have been a dollop of luck to be in the right place at the right time, the truth is that these individuals had toiled for years learning their craft and preparing themselves to be in the right place at the right time to achieve success. That instant success may be a surprise to others, but not to them.

In 1942, a middle-aged colonel, who had spent 27 years in the Army, but not one minute in battle, was selected over nearly 400 senior officers to lead U.S. forces in the war against Germany. (His immediate promotion to four-star general was the single biggest jump in rank in the history of the Army.) To say there was an army of naysayers carping about this decision would be an understatement. Those officers who were passed over and did not get the job claimed he was just lucky to have caught the eye of the Army and political leaders in Washington. The reality is that this obscure colonel had spent 27 years in the Army developing an intimate knowledge of military strategy and honing a remarkable talent for organizational ability and consensus-building. This “lucky guy” went on to serve as Supreme Allied Commander in Europe and after the war was elected to serve two terms as President of the United States.

When Dwight Eisenhower was once asked how he was able to emerge from almost 30 years Eisenhowerof obscurity in the Army to, almost instantly, become one of the towering figures of the 20th century, he remarked, “I knew that eventually opportunity would come my way and worked hard to be prepared when it did.” Eisenhower was probably the least surprised by his success, because he made himself the most prepared to be successful.

And that’s the point. If we win the lottery, we should be surprised, because we had no control over the outcome. Winning a lottery is a random happening that is not likely to be repeated. But we should never be surprised by our success, because we can plan and control the outcome. If we are surprised by our success, it means we did not plan for it. And if that’s the case, the chances are that our success will be a random event that is not likely to be sustained. If Eisenhower had not been prepared when opportunity came his way, no amount of luck would have allowed him to be successful.

It is certainly not on the level of an Eisenhower, but in my own career I have experienced firsthand the “just lucky” attitude about success.

When the company I helped found – Life USA – overcame high odds and the multitudes of skeptics to become the success story of the life insurance industry, I lost count of the number of people who came up to me and asked, “Aren’t you surprised by the success of LifeUSA?” My answer was always the same, “No! My only surprise is that it did not happen sooner.”

For many, my response may have seemed arrogant, but only because most people are surprised when they see others become successful. That’s because they see success as a random happenstance and that others were lucky to be in the way when it came by. The doubters assume that those who attain success must be surprised by it, because they certainly would be.

And yet, isn’t it interesting that these same individuals are not surprised – and maybe in a perverse way are happy – when they see failure? The failure of others gives many a place to hide from their own failure. The point is that when you prepare to be successful – rather than just hope for it – you are more likely to achieve it. And when you do achieve it, you are not surprised; nor should you be.

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