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Doug Blizzard
Secrets to effective performance management

These tips will make the annual performance review easier—or maybe even replace it.

May 27, 2014
By Doug Blizzard

As a manager, few things are more difficult than delivering honest performance feedback to an employee.

Of course, delivering bad news in a review isn’t supposed to be fun. Yet the strategies many managers use to cope with this difficulty can exacerbate the problem. Some managers avoid giving bad news altogether, hoping performance improves on its own. Others sugarcoat the assessment to the point that the employee can’t see the problem. Then there are managers who just “tell it like it is” with no filters or tact. They succeed in getting their point across—but at a cost.

Surprisingly, many managers also struggle when it comes to delivering positive performance reviews. Some pour on the kudos so much, or so generically, that employees aren’t sure what specific actions are being praised. Far too many managers don’t take the time to give any feedback at all, usually because they are so “busy.”

The cost of poor performance

Companies incur substantial costs due to performance review problems. On average, U.S. managers spend 34 days per year trying to address inadequate employee performance, according to a study commissioned by human resources services company SHL. The report also found that managing underperformers takes up seven weeks of senior executives’ time annually. Tolerated underperformance is a leading reason top performers, who must work harder to pick up the slack from others, leave for greener pastures. Underperformance eventually affects customers and impacts the top and bottom lines.

Fortunately, there are ways to address poor performance. Success lies in the execution of the following simple ideas.

First, most employee performance problems are really hiring problems. Managers regularly hire people who don’t fit their culture and then waste valuable time trying to “fix” them. I once heard it put this way: “You’re hired for what you know, and fired for who you are.” The cure: Only hire people who fit your culture. Of course, that means managers must define their culture, i.e., the behaviors that lead to success, and then recruit people who demonstrate those behaviors.

Second, there should be no disagreement over what successful performance looks like at your company. Instead of using outdated job descriptions, managers need to set clear employee expectations that are tied to organizational priorities. For instance, if your firm has a new CFO, replace the typical, generic job description jargon with something more specific:

Cut operational expenses by 5% before end of the coming fiscal year. Within six months, select and integrate financial reporting software that reduces the monthly closing cycle time frame by one-third. Expand the finance department’s staff by 10% in the coming year. Renegotiate the company’s senior credit facility in order to reduce borrowing costs by 4%.

It’s much easier to measure performance and deliver feedback once you’ve established objectives such as those with each employee. Unfortunately, without such specificity, the responsibility rests on each manager to subjectively determine if someone’s performance is satisfactory. And that is a very uncomfortable place to be.

Employees own their performance

Third, conduct regular check-ins—at least monthly—with employees to review their performance. One good technique is called the “five by five.” In this technique, the manager prepares a sheet of paper with  the employee’s four to six performance goals for the year, as well as the employee’s development goals. Below those goals, the employee lists the five activities he or she plans to work on over the next month to accomplish the annual goals. At the next monthly meeting, the employee reports on progress toward those five planned activities then sets five more activities for the next month. The manager provides feedback and input. This process is repeated every month. For this system to work, the manager must make it clear that the employees own their performance, which is another tenet of effective performance management.

Fourth, performance management isn’t about the form, it’s about the conversation. Many employers constantly tweak their performance review form—with poor results. They use 10-point scales, then switch to five-point scales, then no scales, and on and on. A five-by-five system—i.e., regular structured conversations—and no performance review form can get you closer to optimum performance than most appraisal processes. In fact, companies such as Adobe Systems Inc. have abandoned the annual performance review for a check-in system similar to the “five by five” technique.

Finally, when giving positive or negative feedback, managers should remember to focus on the behavior, not the person. What you ultimately want is more good behavior and less bad behavior.

Fortunately, giving performance feedback can be learned. These tips can help, as can additional training for managers. Success in this area leads directly to improved employee performance, and that translates into improved financial performance … which, as financial managers, should be somewhere on your annual success profile.

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Doug Blizzard is the vice president of membership for CAI Inc., a human resource management firm with locations in Raleigh, N.C., and Greensboro, N.C.