Performance Management: How Great Companies Evaluate and (Continuously) Improve Results

What was the point of that evaluation?

Honestly, I still have no idea how I’m really doing.

Why not tell me what I did wrong when I can actually do something to fix it—not several months later!

Sound familiar? Ever have these thoughts run through your head after enduring a "pointless" performance review early in your career?

But now you’re the one in charge who’s conducting these evaluations. And the odds are strong that your key leaders are thinking the same thing about their performance reviews: What’s the point?

After all, according to a Deloitte study titled, “Performance Management is Broken,” only 8 percent of companies report that their performance management process drives high levels of value, while 58 percent said it is not an effective use of time.

Those numbers are bleak. Yet, the hallmark of high-performing teams is that they’ve instilled effective processes for evaluating and continuously improving performance throughout the organization.

But how can you fix your performance management process to put your company on a higher (and faster) growth trajectory?

Apply the principles from Breakthrough Workshop #5: Performance Management, which we’ll unpack for you in this article.

RECAP: The “Collaboration Effect on Profits” Series

If you missed any of the previous articles in this series, here are the links and key takeaways to give you the context you need to get up to speed. If you’ve already read these articles, feel free to jump right to the next section.

Intro to the ‘Collaboration Effect on Profits’

Article: The Collaboration Effect on Profits: How Great Culture Drives Business Results 

Key Takeaway: When you create an environment where leadership and rank-and-file employees alike are all working together in their optimal roles toward the same vision, that culture becomes a force multiplier to achieve breakthrough profits.

Breakthrough Workshop #1: What’s the Why?

Article: How Bold Companies Turn Their Courageous Vision into Breakthrough Performance

Key Takeaway: Simon Sinek put it best when he said, "Vision is a destination—a fixed point to which we focus all effort. Strategy is a route—an adaptable path to get us where we want to go." Make sure that your Courageous Vision is a destination that you and your team are willing to work towards together. And then use the "Big 4" strategic business questions to help chart your course.

Breakthrough Workshop #2: Role Optimization

Article: Role Optimization: How Great Leaders Put Together a Winning Lineup

Key Takeaway: When you and your team have a clear understanding of your company’s Why, How and What, the next step: Evaluate everyone's roles and giftedness—to get everyone into their optimal position, all rowing in the same direction.

Breakthrough Workshop #3: Most Important Tasks (MITs)

Article: MITs: How Great Leaders Take Charge of Their To-Do Lists

Key Takeaway: MITs serve as a compass to ensure your work is moving you in the right direction—and guide you on which action items to delegate or cut altogether.

Breakthrough Workshop #4: Line-of-Sight

Article: Line-of-Sight: How Great Leaders Get Everyone on the Same Page to Win

Key Takeaway: When employees have clear line-of-sight to the company’s targets—and know what’s expected of them to help reach that goal—they’re better equipped to block out distractions, make good decisions, and focus their efforts to help the team succeed.

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Today, we're going to discuss how to fix your performance management process to create what we, at Legacy Advisory Partners, call a “Triple Win”—the company wins, you win, and your key leaders win.

Workshop #5: Performance Management

Virtue: Accountability

Objective: Develop systems for timely, consistent, and useful feedback between managers and employees 

When each member of your team has taken ownership of their role in helping the company succeed, how do you help ensure everyone stays on course?

That's where performance management comes in. Most organizations use this exercise to let someone know how they are doing from a performance evaluation standpoint. But that process is broken with most companies. 

Why? 

Here are the three primary reasons we see when we consult with companies at Legacy.

1. Poor alignment: The employee's objectives are misaligned with the company's goals. For example, the head of production has specific efficiency metrics to meet, which may incentivize that employee to find ways to cut corners to achieve those numbers, without regard to any negative impact on quality and customer satisfaction. Or, if employees believe they're being measured against their co-workers—with some sort of ranking system—they'll be reluctant to share information and collaborate with others on the team, which will undermine the company's ability to achieve its overall performance goals.

2. Broken feedback loop: Far too many companies make performance reviews a once-a-year exercise that’s light on substance and specifics for how to improve. And by the time the employee receives feedback, it could be several weeks or months after the point that the feedback would have been useful to the employee—and the company.  

3. Check-the-box mentality: In many cases, the performance management process is merely a check-the-box task for assigning pay raises or bonuses. And that means lost opportunity to genuinely connect with that employee and coach them to perform at their best. 

Fixing Performance Management

So, how can you fix your performance management process?

That’s where Jim Robinson comes in.

Robinson is the president and senior consultant at Atlanta-based Robinson Compensation LLC. He has over three decades of experience in compensation, benefits, and performance management with MARTA (Metropolitan Atlanta Rapid Transit Authority) and Southern Company.

We’ve partnered with Robinson to tap into his deep expertise in performance management for this Breakthrough Workshop and other projects. And his values align very well with the “Great 8” leadership virtues for building a high-performing culture that we’ve written so much about the past few years and strive to live by and teach to clients at Legacy.

Our team recently sat down with Robinson to get his perspective on how to create a highly effective performance management process. Here are the key takeaways from our conversation that will give you a glimpse into the critical points we cover in this workshop.   

#1. Define the goals and metrics. 

What are the goals for the employee? How will progress toward those goals be measured? 

“It’s important to have a limited number of objectives,” said Robinson. “People can't focus effectively on too many goals. If you have more than three or four, that will most likely hurt performance.” 

But as you and your key leaders collaborate on defining their individual goals, make sure that progress toward those goals will contribute to the company achieving its overall objectives, said Robinson.

#2. Shift to a coaching model.

When it comes to an employee performance goal, you can’t just set-it-and-forget-it. Nor can you rely on once-a-year reviews to help your team perform at its best.

“For your performance management program to be successful, it must be an ongoing process. It's not just a once-a-year check-the-box process. It involves a lot of planning and ongoing coaching to give those employees the timely feedback they need to succeed,” said Robinson.

Coaching is a dynamic activity that promotes conversation and discussion between the manager and employee, with feedback being provided by both parties. And for your coaching to be effective, you must go beyond merely correcting behaviors; you should be catching your people doing the right things and affirming them in a way that reinforces the performance you want to see from them. 

As the Deloitte study cited earlier in this article put it: “In a world where employee retention and workforce capability are significant indicators of business success, the performance management process should focus on continuous coaching and development, rather than competitive evaluation. Managers who provide regular feedback and opportunities to improve are far more likely to field high-performing teams than those who retain once-a-year rankings.”

The important point here is that smart companies develop performance management systems that provide valuable feedback within much shorter intervals—daily, weekly, monthly, and quarterly—so that everyone knows what they do well and what they can adjust and improve upon to stay on track.

#3. Align incentives with company success.

What happens when key leaders hit their targets? Are the incentives compelling enough to motivate those employees to perform at their highest level—and cause them to want to stay with your company? And is the incentive program properly designed to reward the behaviors that are in the best interest of the company as a whole?

"When people leave companies, it's usually because they don't feel valued by the organization, or they don't see a future for how they can grow with the company," said Robinson. "You need to know what motivates those specific key employees and design a plan around rewarding employees when the achievement of their goals has also helped the company hit its targets."

The Bottom Line: Pursuing the Triple Win

At Legacy Advisory Partners, we believe that sustainable business success is built on the foundation of the “Triple Win.”

The big idea here is to design your performance management process with these three wins in mind:

• Corporate Win: When the goals of your key leaders are aligned with the organization’s objectives, your employees’ success will translate into company success.
• Shareholder Win: As your company grows, so will its value—and your net worth.  
• Key Leader Win: And your key employees will feel valued and appreciated for their contributions and loyalty.

Then you can be confident that your company’s performance evaluations are fruitful and productive—to accelerate the “Collaboration Effect on Profits” that takes your business to the next level.

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About the Author: J. David Harper, Jr. serves as CEO and owner of Legacy Advisory Partners, an Atlanta, Georgia-based firm where advisors provide total retirement plan advisory services. David is also the author of the book “The Great 8: A New Paradigm for Leadership” that teaches business leaders how they can tap into eight timeless “virtues” to expand their influence and achieve sustainable success for their organizations.