It’s that time of year again for performance reviews… I’m sure we’ll all agree that the traditional top-down performance review system is not only ancient but flawed, ineffective, and loathsome for all parties involved. For appraisers, the responsibility is overwhelming and for those on the receiving end, there is a fear of the results.
Based on Ironstone’s research and our work with multiple advisory firms, we have experienced first-hand the harmful consequences of these flaws, which are numerous and fall within the following categories:
Clear, Consistency, & Connected: Ineffective performance reviews often have performance goals that are either complex and therefore difficult to fulfill; inconsistently measured among team members and result in competitive and conflicting behaviors; or disconnected from any kind of common purpose. The basis of performance goals should start with a common connection, which is the client’s need. Every goal should be defined in terms of how it will impact the client, which results naturally in a consistency among all goals not matter what level or department. By outlining tangible actions or objectives in this manner you automatically create clearly defined goals without even trying.
Not Goal Oriented: Improvement goals can be both short-term and long-term, however are seldom aligned with a company’s 5 to 10-year goals. Significant long-lasting changes don’t happen overnight and while performance goals should be attainable, they should also be realistic.
Output vs. Input: A performance review is more than just inaccurate when it only captures results and not the work that goes into achieving those results; it is discouraging and counterproductive. All objectives may be fulfilled and yet an employee may have performed at the minimum standards (or displayed exemplary standards). Without recognition or rewards for “going the extra mile”, those extra efforts will wither away and team members will be reduced to mere clock punchers.
Quantitative vs. Qualitative: Often times, there is too much emphasis on a numerical rating, leaving any qualitative comments practically useless and merely cosmetic. In such cases, numerical averages are the only influence over incentives and employees are quick to pick up on whether their efforts make a difference to the company’s bottom line or their own.
Beyond the Dollars: Employees are influenced heavily by what behaviors have the highest financial return because in most cases their end-of-year bonus is on the chopping block. At a minimum, the performance interview should never include the conversation about compensation. Beyond that, the performance interview should include an inquiry about incentives that exceed compensation and therefore uniquely important to each individual.
Power in Numbers: Key advisors seldom focus on more than 10% of team member efforts, so when review time comes, it is impossible to rate the remaining 90% with the same accuracy and depth and almost always involves an unhealthy amount of bias. This only provides a snapshot and therefore paints an inadequate picture of performance and renders the review system futile.
Too Little, Too Late: On the one hand, annual performance reviews rate results over the last 12-month period and team members expect to get an accurate appraisal of objectives (whether they were projected or not). On the other hand, regardless of the rating, there is little to no effect one can have on outcomes that have already occurred.
In our efforts to help our advisory firms implement best practices, we have developed the following checklist to create a performance review that not only rates performance but empowers employees to achieve more.
Always Be Coaching!
These checklist items are essential to the ABC’s of performance reviews, inspiring you to…
CRAFT THE JOB DESCRIPTION
This is more than just a title and description. This is the foundation of your expectations and all aspects of your performance review.
Define tangible and intangible traits/behaviors, and create a scoring system that allows employees to know what to work toward.
INSTITUE A REWARDS SYSTEM
Determine what motivates employees beyond the dollars to define tangible and intangible consequences of actions. Build a tailored portfolio of recognition and rewards that will create a wide winners circle and not a losers circle. Meaningful recognition and incentives result in gravitation toward desired behaviors. Some of the most common favorites are: work from home, casual day, gift cards (coffee, gas, books, etc…).
CREATE 360-DEGREE PERFORMANCE REVIEWS
A performance review should consist of more than just an annual checklist of excellent, good, fair, and poor. There is power in numbers and is therefore important to gather information “… from people who work for, with, and above the employee, as well as those outside the company …”.* This approach relies heavily on a high frequency of reviews and goal setting. Regular (quarterly) performance reviews and goal revisions are proven to increase performance results**.
COLLECT THE DATA
Create performance logs that supply concrete examples to ensure raters (managers and subordinates) know how to rate what they observe, and provided guidelines on appropriate vs. inappropriate criteria.
ANALYZE THE DATA
Sort the data per employee in order to make sense of it and identify the trends. Draft your interview agenda, which should include employee feedback and action items to implement.
CONDUCT THE PERFORMANCE INTERVIEW
While meeting with the employee to review the data you have collected you need to make rating consistent by keeping the interview structured for all interviewees. To alleviate the anxiety in this part of the process, see it as a collaborative learning experience for positive change based on reaffirming job expectations, correcting problems, and answering questions. As confirmed by the Alexander Hamilton Institute, Inc., feedback can have significant legal and practical management effects. Recommended feedback requires the following preparations:
- Gain experience by talking to other managers and drawing from your own experiences.
- Have a clear understanding of the message you want to convey and what you want to achieve.
- Be fair and objective. Focus on performance and not the personality or character of the performer.
- Don’t give all your feedback in one session – this may be overwhelming and possibly demoralizing if negative.
- Be consistent with company policy.
- Take the emotion out of feedback by judging the situation realistically and practically – use specific examples.
- Have something tangible (if necessary) to back your words up, for e.g. sales figures, written warnings, client approval, etc…
- Allow the employee to respond.
IMPLEMENT GOALS & FOLLOW THROUGH
You know the saying “gone but not forgotten”? Well, this step in the review process is often gone AND forgotten! Regularity is an inherent characteristic of the 360-degree performance review, which ensures continuous monitoring and execution of objectives and goals that have been set.
RATE THE PERFORMANCE REVIEW PROCESS
The key to any successful program is following through, constant monitoring of effectiveness. Review the successes and failures to refine process and create a performance review that works for your firm. Take a look at the most common Do’s and Don’ts and the performance review audit below to assist in this process.
The volume of information that is collected from this type of performance review can be overwhelming, but the impact on motivation and results is undeniable. Focus on the continuous process of goal setting and a development plan to Always Be Coaching! The success rate will soar and the gratification from the initial reward is replaced with a genuine desire to produce and grow for the betterment of the firm and its employees.
We’ve outlined pitfalls that hinder effectiveness in order to help you build pillars for performance:
- Clear job descriptions
- Clearly communicated performance expectations
- Conscientious documentation
- Relevant rating system
- Listen – explore all possible explanations in order to devise appropriate and effective solutions
- Personal bias and emotions cloud judgments
- Compensation concerns will detract from the evaluation of behavior/performance
- Extreme ratings are signs of excessive lenience/strictness or false assessments
- Prohibitive communication – condescension, comparing, overemphasizing problems
- Lack of follow-up – strong coaching cultures encourage higher employee performance
Take this audit to evaluate your current performance review process.
Ironstone can assist you in developing a custom performance review process for your firm. We specialize in identifying gaps in your existing plan and will collaborate with you to develop solutions that are parallel in achieving the results your desire.
Contact us for assistance in starting and improving your Performance Review Process.