Performance Appraisal: How HR Gets It Wrong

Ask any of my clients and they'll tell you the same thing: At some point during my time working with them, I get on the case of HR. Really get on their case.

And that point often occurs when we're talking performance appraisal.

Why? Because HR gets it wrong. They fall into an organizational trap of their own making. They become bean counters.

HR too often sees itself as a cost center to the organization. That's wrong. When HR gets it right, they're a key contributor and profit center - specifically because of the processes and methodologies they adopt and advocate for hiring and development.

Moreover, they are the representatives and ambassadors of the company's culture. From the first, it's HR that sets the tone for the expectations of every employee that enters...or wants to. Then, once the employees are in, its the HR policies and procedures that create the consistency, continuity - and safety - the organization and its employees need and deserve.

All of that gets lost at performance appraisal time.

Suddenly, HR is thinking more about whether the employees' numerical results will create the statistical bell curve that they've been taught to believe should exist.
"How," they think and tell management "can we expect all our employees to be great? Why would we give them all top ratings? Not everyone is contributing equally. How could they?"
So they tell management that the majority of ratings should be in the mid-range - 3s on a 5-point scale. Sometimes they even give each manager a breakdown of exactly how many in each rating category the manager should be turning in.
"This many 1s. This many 2s. This many 3s. And not too many 'high performing' 4s and 5s. After all," they say, "average isn't bad. Most people are average."
Are you? Average, that is. I'll bet you don't think so. And how would your local HR person feel being told that he or she is average. I expect they'd disagree.

It gets worse. Because companies frequently tie the numerical rating result to wage increases and bonuses, those arbitrary ratings - which have now been even further compromised - impact every employees' paycheck.

So there they are - these employees that have been hired and probably not trained or developed to the extent that's really required (because there's rarely the funding or advocacy for that coming from HR either) - now being told that they're average, at best, and don't deserve a higher salary.

So much for catching up on their bills, buying the new car they desperately need or putting their kids through college.

They can't. They're average. Because HR told their managers to tell them so.

And, with respect, don't think that HR advocating for and adopting a 360 Degree Feedback program is going to make any difference. It doesn't. It's far too common that those programs just cost more to implement and create whole new cultural and morale problems.

So, what's the fix?

Really good HR people know that there's a continuity to the HR process that starts before hiring and continues throughout the life of the company. That's how they turn HR into a profit center.

Think of it as a time-based spectrum - from past policies and procedures that need review to addressing future needs even before they exist. At its most basic...

For existing employees - at all levels:
  1. HR works with every level of management to ensure that the job descriptions are actual and representative of what each employee in any given position is expected to do.
  2. They work with management to ensure that what constitutes 'success' in every job is clearly delineated with appropriate measures included, where possible.
  3. They ensure that adequate training and developmental tools and resources are provided to every employee and that each employee is given the time to pursue the necessary skill development.
  4. They enforce the requirements to ensure that the company has exactly the skill mix it requires to succeed.
  5. They work with management on a regular basis to ensure that, as job needs change or grow, existing employees are given the support / training / information / guidance they need - in advance - to ensure that when the changes come, the employees are ready to immediately and successfully execute.
For the hiring process:
  1. HR stops recruiting and hiring until the job descriptions and employee handbook are correct and up-to-date.
  2. They use every recruiting request to ensure that the job descriptions are correct and that adequate resources are identified for the most efficient and effective 'on-boarding.'
  3. Recruitment and hiring processes are reviewed and updated - including decisions regarding adoption of and associated training for panel, peer-to-peer and other recruitment techniques successfully utilized by other companies in their best practices. Then, they train, train and train again to  make sure everyone gets it right.
  4. Internships (paid and unpaid) and college (technical and academic), university and community college relationships are reviewed and expanded, as appropriate, to build the best pipeline and to become a preferred employer.
  5. HR management is deeply involved in strategic and new product development discussions in order to evaluate, plan and cost upcoming requirements - including developmental and recruiting needs.
For the organization's future:
  1. HR actively researches, assesses and plans for the legislative changes and legal trends that are emerging. From equal pay for employees to Boardroom gender diversity requirements to the potential impact of legal decisions on everything from gay marriage rights and termination reversal trends to healthcare coverage, the senior executive team is positioned to protect the organization immediately and over time.
  2. Compensation packages are reviewed with recommendations for best practices from other organizations, industries, sectors and countries represented.
  3. Consultant resources are reviewed across the company - with performance metrics - to ensure the organization is contracting with the right external resources.
  4. Policies are enforced - including Performance Improvement Plan (PIP) execution and, when required, progressive discipline - with management's performance actively monitored. 
You'll notice that at no point have I specifically discussed performance appraisal. That's not by accident.

It's because, when HR is doing everything else right, they're using the present to focus on the future. They're identifying, developing and executing innovative policies. They're a key information resource to senior management - for the future and about the present - that makes it easier for the senior management team to succeed and create success for internal and external stakeholders.

All of that, combined, makes punitive, numerically-restrictive performance appraisal processes unnecessary. It also gets HR out of its rut and turns your HR professionals into key contributors to everyone's success.
Please note that nothing expressed above constitutes legal advice.


Performance Appraisal: What do you do with your 'lowest' performers?

Depending upon whose account you've read, when Jack Welch ran General Electric, the company's performance appraisal policy was to fire the lowest 10 (or 15 or 20) percent performers.

All based on their performance appraisal numbers.

Welch's thinking was that, whatever that percentage was, those people weren't fulfilling what the company needed, so why keep them? Better yet, since all the employees knew that that would be their fate, they'd work all the harder to perform all the better all year round.

And because it was Jack Welch, organizations worldwide adopted the policy and applied it to their own organizations.

Big mistake.

It doesn't work the way he thought. In fact, his was bad and counter-productive organizational thinking on two different fronts:
  1. Most appraisal-related numbers, no matter how hard management tries, are arbitrary, and
  2. By letting those folks go, you're adding costs to and losing opportunities for your operations and organization.
Here's how I know.

Numbers are numbers - even when descriptive words are attached to them. But the numbers and the words are still being interpreted by the person doing the appraising.

Is a 5 the same thing to you as it is to the rest of your colleagues? How about a 2 or a 3?

Do you all define, perceive and understand the descriptors the same way? Do the descriptors apply the same way across departments? Divisions? Corporate headquarters or a remote location?

How do you know?

Whether you're management or a first line employee, you're going to interpret the number, the description and the performance based on your own frame of reference. Yours. No one else's.

And, let's be honest, if you're in management, you're looking at your employees' performance through the filter of how your particular function, department or division is performing. After all, their performance determines the way that your performance is perceived by your management.

Managers can be trained and trained and trained again on the categories and criteria of the performance appraisal process - and you're still going to find inconsistencies across the organization.

You can't help it. Numbers and their associated descriptors are perceived and interpreted. That makes the results arbitrary - because an employee who performs the same way for two different managers is likely to be rated two different ways.

Now let's take it a step further. If you follow our friend Jack's advice and get rid of the 'lowest' performers, you've just dumped a percentage of your organization that has knowledge of how things are done - and how to get them done. You've lost specific expertise as well as the networks that those employees have developed to end-run problems, obstacles and any other form of dysfunction the organization presents.

So what do you do with under-performing employees? You ask questions. For example:
  • Have they been trained for the job they're performing?
  • When did that training take place?
  • What did the employee think of the training?
  • What was presented particularly well? What didn't fit or work?
  • Do they understand what they're being asked to do...and why?
  • Do they think that they're using their greatest skills?
  • When do they feel they're contributing the most to the organization?
  • How and when do they demonstrate those contributions?
What you're looking for is how to best utilize the knowledge, skill and experience that that employee already has - and then build upon it, whether in your department or another.

The more you know about your employees' skills, the more you can access and utilize them across the enterprise. Sure, it may mean that you're moving folks around - or changing and updating job descriptions. But the more you use the people you have...letting them use their greatest strengths...the more positive a culture you're building - and that translates to increased morale, productivity and profits.

This is not to say that there are employees who shouldn't stay with the organization. In those cases - because you already know who they are - it's your responsibility as a manager to take the necessary action. That way you become a hero for those of your employees (and you, too) who have been living - day after day - with the difficulties the truly problem employees create.

It's a win all the way around.
Please note that nothing expressed above constitutes legal advice.


Performance Appraisal: "I neither agree nor accept."

It's performance appraisal season!

How do I know? Because, lately I've been getting calls from friends, colleagues and even former clients who are either getting ready for or are in the midst of their annual performance evaluations.

The one constant - no matter their level in the organization or the specific industry, sector or country they work in - is that no one is happy with the process.

They have every right and reason for that feeling.

In the vast majority of cases, there's no reason to be happy with performance evaluation systems. That's because they rarely do what they're supposed to do: Develop.
Develop the employee.
Develop the culture.
Develop the organization.
Develop profits and revenues for the organization and success and a sense of accomplishment for the employee.
Instead, they're more often used as a punishment tool or a box-ticking exercise by management. That not only defeats the purpose, but also adds exponential costs and lost opportunities to the organization.

I'll get into how all of that plays out in later posts, but, let's be specific for the moment.

What should you do as you're getting ready for your evaluation?

When I'm asked for my advice, the first thing I  say is:
You don't have to accept the evaluation you're given - not psychologically, emotionally nor in writing. The only time you accept is when you see merit in it and can agree with what's been written as being wholly representative of your performance.
In fact, just in case, I teach everyone the same sentence:
"I neither agree nor accept."
And I make them repeat it to me - many, many times - as our preparatory discussion ensues.

Why that sentence? Because it's liberating. It means that you're not just sitting there as a target for whatever impressions, thoughts, ideas or agendas may be thrown your way.

Too often, employees feel powerless in the evaluation process. It doesn't matter whether you're being asked to evaluate yourself or you're reading your manager's evaluation. It doesn't matter whether you're a front-line employee or have an office in the executive suite.

You sit. You listen. You feel violated.

Not if you neither agree nor accept. Better yet, not if you tell them so.

The thing is - to be able to make your case, you need to be prepared. You need to:
  • Get a copy of the blank evaluation form prior to your appraisal and become familiar with its criteria
  • Get a copy of your job description and review it before you fill out the appraisal form or have your appraisal interview
  • Put together a portfolio of your accomplishments for the appraisal period - with as many soft and hard numbers as you can include - that address the appraisal criteria and demonstrate how you've fulfilled and exceeded the criteria and your job description's responsibilities.
By doing so, if you disagree with your management's assessment, you have specifics and associated documentation to support your comments. You're not just spouting off. You're making a reasoned and reasonable case for your management to re-think their evaluation of you.

Because you deserve it.
Please note that nothing expressed above constitutes legal advice.


Brand Messaging and Customer Loyalty: Why @Staples Should Fire Its Marketing Department

I'm a long-time customer of the office supply store, Staples...or I was. Because I'm not any longer - and it's their Marketing Department's fault. There are two very specific reasons why - each of which is a laudatory tale for anyone looking at 'growing' their business at their customers' expense and without taking their customers into consideration.

The Bait and Switch Rewards Program

When Staples first established its customer loyalty program (because that's what rewards programs are supposed to be), they gave customers a 5% discount on each purchase. Immediately. At the cash register or online.

The money stayed in your pocket.

Somewhere along the line, someone (undoubtedly in the Marketing Department) got the bright and (short-term) money-saving idea that they could switch their Staples Rewards program so that instead of money, customers could get points.

Points! What an excellent idea! Customers would, I'm sure they thought, be just as excited about earning points as they were about seeing an immediate discount. And they'd just love to go through a remittance process - printing out coupons or showing their smartphones - once they got 'enough' points to warrant a reward.

Especially if the rewards were time-sensitive and the points disappeared if there weren't enough during any given rewards period.

Now that's putting the customer first, right? Yeah, right.

Which takes us to today's coup de grace:

Scaring the S**t Out of Customers That Their Credit Card Data Has Been Stolen

This one was a new one on me - and one for which they should be particularly ashamed in these days of stolen credit card information and identity theft.

Last week I made a purchase for which I undoubtedly got some points (see above) and, as part of my Rewards program 'membership,' received an email receipt. (I got a printed copy at the time, too, but we won't talk about that now.) Usually, that email marks the end of the transaction.

Not this time.

This morning, after having not made another purchase, I got an email from them with the subject line:

Thank you for your purchase! Open for More Great Products.

Their marketers may have thought they were being wise and witty, thanking me again, but they were wrong. Because when I saw that subject line, my immediate thought was, 
"Oh, s**t! Someone hacked Staples and got my credit card information. S**t! S**t!! S**t!!! Don't those f****rs know what they're doing?!?"
And I promise you, I'm not the only one who reacted that way. After all, any one of us can go through the litany of companies - from Target to Home Depot to JPMorgan - that didn't protect their customers' information adequately.

Based on that subject line, all it looked like was they joined the group.

Clearly their marketers weren't thinking about timing and what their message actually said. Otherwise, they wouldn't have sent it.

For my part, it put quite a pall on my morning - and no vendor is worth that.

For your part, it's worth taking the time to look at how you're creating and, hopefully, supporting your customers' loyalty - reward programs or not - as well as how you're communicating with them. As you can clearly see from my example, you may get one pass, but you won't get two.

And with that, I'm saying bye-bye to Staples and taking my business elsewhere. The saddest part for Staples is that I'm not at all sorry.


What Warren Buffett Sees...and Why Berkshire Hathaway is Going Local

I've been fascinated for years with Warren Buffett - but it's not his investing acumen that holds me. It's his thinking process.

Long ago, I heard Buffett say in an interview that even though he was and is great friends with Bill Gates, he didn't invest in Microsoft because he (Buffett) didn't understand what the company did. He invests in what he understands.

That's why the core of Berkshire Hathaway's companies is insurance, furniture, jewelry stores, executive jet services, manufactured (mobile) homes... All part and parcel of living your life.

Even his stock acquisitions follow suit. Coca Cola. Wells Fargo Bank. American Express. His logic remains the same.

He's also a great believer in the United States. It's only been relatively recently that he's begun looking at investments out of the country.

Back at home, a few years ago he bought a railroad. When everyone was saying that rail is as good as dead, he bought BNSF - the second largest freight railroad network in North America. It gets real things from one place to another.

In 2012, he started buying real estate agencies and put them all under the brand Berkshire Hathaway Home Services. State by state, he's buying up more agencies and putting them under the same brand.

This month, he announced that he has purchased the Van Tuyl Group of automobile dealerships. It comes complete with 79 dealerships and 100 franchises in ten states with something in the vicinity of $8bn in annual revenues. (Buffett will know, to the penny, exactly how much.) The plan is to start buying more. Then more...all branded as Berkshire Hathaway Automotive.

There are two things to learn here. The first is easy: Use your brand. Build your name and then use it to brand everything you possibly can. The more trust you've created, the more likely that people will find their way to your door - no matter what the product or service might be.

The second is more a trajectory thing. A thinking process. It's about local.

Buffett, possibly more than any other investor, knows about global. While his companies may be US-headquartered, they operate globally.

Yet, when he looks at what is coming next, what he seems to be seeing - at least based on his investments - is a hunkering down and in. A focus on an immediacy of life and its needs. On building a quality of life on a day-to-day basis.

It may be that, simply by virtue of his age (he's 84, after all), he's thinking more of home and hearth than ever before.

Possibly, but I doubt it. His filter for thinking is investments. He wouldn't be putting his or his shareholders' money toward some vanity project because he's in his 'declining' years.

Buffett sees Main Street and he sees it growing. He recognizes that there's a virtual world out there, but he, his companies and his investments aren't part of it. He sees something else. Something much closer to home.

He sees that humans have needs they want provided in a human and basic way - locally, in person, with a high quality of service, focus and attention.

At least that's what his most recent major purchases seem to be saying.

I think you should pay attention, if for no other reason than Buffett's track record. Because, realistically, if Buffett says it's worth doing, you can put your money on it...right along-side his.