If you’re in a growing business with 30 to 250 employees and someone’s suggested it’s about time you introduce a performance review process… this article’s for you.
Up until now you’ve likely been deeply connected to everything that’s going on in the business… the new customers, what everybody is working on, and where the big challenges are. Team members have felt aligned and informed, they may even describe the culture as a family where each person just knows what needs to be done to get results.
But now you might be seeing some cracks in this informal way of working. Perhaps you’re not hitting company goals or delivering on the strategic plan. Maybe some dead wood has crept in and things aren’t as productive as they used to be. You might be sensing tension between team members and you no longer feel connected to all the details.
Welcome to the growing pains of a great business. Whilst this stage of growth can be stressful, the good news is there’s battle tested way forward, and this problem is a lot less stressful to deal with than a shrinking business!
While you probably know deep down that you need to implement a more formal approach to performance review, it’s normal to experience a sense of reluctance to ‘get formal’ - both from yourself and your team. After all, you don’t want to undermine the culture that has done so well for the business thus far.
So what’s the best way to introduce performance reviews to a company that’s never had any?
First of all there’s no such thing as a one-size-fits all. Every company is different and it’s important to bring in a process that will work for your team… And how do you do that?
Involve your team in co-creating the process so they feel heard and have an opportunity to contribute to how the new process will unfold. Download our free Focus Group Template to self-host this session in your team.
The results of the focus group will surface key themes and insights about how your employees would like to develop performance reviews in your organization.
Whilst there is a widely accepted model for a modern performance review framework:
- Goal setting
- Employee / Manager 1:1 meetings
- Feedback & praise
- Performance reviews
The reality is there are many decisions to be made for each pillar to ensure the process is a good fit for your culture, and to make sure it all works together as one system. You may have different cadence’s or goal setting between departments depending on the type of work being undertaken or roles of team members. One-size does not fit all.
Goal Setting Considerations
- Have you already tried goal setting in the team, even if annual KPI’s. How has this worked? How disciplined were the team?
- We recommend sharing the company’s top 3 annual objectives widely so everyone is clear on the big picture and they can start to think how they may contribute to moving that forward.
- Decide if goals should be allocated to people or if they should be defined through a process of collaboration. With knowledge or service based work, aim to build trust and ownership by asking team members to come up with 3 goals they can work towards that will have the biggest impact on the team or company progress.
- Consider if it makes sense to cascade some goals down or align from the ground up to company objectives. This decision is often driven by the type of work, eg. compliance or transactional work is often cascaded down.
- How will goals feed into the performance review? At the end of the period only? Consider coaching throughout the cycle to helps maintain focus on progress and highlight any issues early.
- Today’s research tell’s us not to tie financial rewards directly to goals (perhaps with the exception of sales), because it can drive counter-intuitive behaviours, such as negotiating the easiest possible goal to ensure attainment.
- Demonstrate your interest in your employee’s personal growth and encourage the setting of at least one personal development goal you can help coach them towards.
- Transparency of individual goals across the organization has many benefits, however this can be a quite daunting if employees have only ever known their KPI’s to be private in their job description. Discuss and understand the appetite in your organization.
Employee / Manager 1:1 Meetings
- The single biggest pitfall we see with 1:1 meetings is triggered when a manager asks for a status update. It leads to a backward-looking conversation which will be little value for the employee and generate a desire to skip future 1:1s. Instead, train managers to open the 1:1 with a forward looking question. eg How can I best help you to be successful over the coming 2 weeks? Are there any blockers slowing you down?
- 1:1’s done well are possibly the most effective tool for building engagement and performance. ‘Done well’ means that managers shift their thinking from that of a ‘boss’ to that of a ‘coach’. For a simple coaching framework check out the GROW coaching model and downloadable template .
- If manager’s have not traditionally done 1:1’s it can feel quite awkward and somewhat daunting to begin with. We suggest making the first few 1:1’s more relaxed, this could be a coffee catch up and the objective is to connect at a more social level - perhaps by discussing personal interests. The nature of these conversations start to build more human relationships and lay the bedrock for increased trust .
- Cover multiple conversations (in different 1:1s), career aspirations, learning & development and how they’re living company values and culture. Use simple models like ‘start, stop, continue’ to capture next steps.
- Capturing notes from these 1 on 1 meetings throughout the year (both positive achievements and coached improvements) are invaluable for a fair performance review at year end.
Feedback & Praise
- The thought of feedback for employees and managers alike can often cause a lot of worry. Done well, feedback helps employees know when they are doing something great (and should do more of it) and also when minor course correction might be needed.
- If you’re just starting out with feedback in your team, take a moment right now and have a think who you like to receive feedback from… It’s likely to be someone you trust, that you find credible and think has your best interest at heart. For this reason we suggest the initial focus should be on authentically praising and recognizing the good behaviours. This way, when it comes time to provide a course correction it will likely be better received.
- A key reason for performance reviews is address how performance related pay will be distributed. Employees will naturally find this a high stakes process, however if they consider the process as fair, even if they don’t receive a bonus it is possible to maintain motivation. However, if the process is unfair, it can quickly cause disengagement.
- To increase fairness, use data captured throughout the year to drive the accuracy and quality of performance reviews. They should consider the feedback that’s been given to an employee and if they acted on it, ie. being coachable is a high performance characteristic. Refer to notes from your 1:1 meetings and the impact the employee had through their completed objectives.
- Don’t get carried away with too many questions. Remember that your managers will need to complete the question set for each of their team members and you don’t want to introduce question fatigue.
- Consider what is most important to measure, to give you meaningful data that will drive impactful decisions. A good starting point is to focus on two key business performance drivers:
- ‘The What’. What has been delivered (Measured by goals, financial, or other specific outcomes)
- ‘The How': How has the person gone about their job (Measured against values, behaviours, feedback, observation)
- Decide on a rating scale for questions. Smaller 3 point scales lead to more accurate classifications of performance, but bigger scales lead to more differentiation of performance allowing identification of really high potential.
- With any rating scale, ensure very well defined and communicated classifications. Try to make the definitions descriptive of behaviours and not subjective interpretations.
Top 3 Success Factors for Introducing a Performance Management Process
Even with a perfect performance review process, supported by the best technology in the world, things can still go off track. Without the following foundations, your initiative has a good chance of failing:
- The process needs to be initiated by the CEO. Top CEO’s know their behaviours and attitudes set the tone across the entire business - they don’t just talk about what they want to see, they live it.
- Employees need to be equipped with the right skills. This includes effective goal setting (it’s harder than it sounds!), how to give (and receive) meaningful feedback, how to have forward-looking coaching conversations.
- Manager accountability. Managers often feel ‘too busy’ or ‘uncomfortable’ with the people part of their job (especially if they were promoted for being a high performing individual contributor) so managers may naturally push back which is usually in the form of silently not doing the new process. Managers must be advised that a big part of their role is developing their people and this will form a component of their performance review.
Ask us about our Continuous Performance Transformation Program - we developed it after learning most businesses REALLY, REALLY struggle with a simple, effective and fair performance review process .
Keep it Agile
Remember to stay flexible, listen to feedback about the new process and iterate so it delivers real value to the team.
A good performance review process that’s embraced by employees and managers will have many positive impacts across your business.
You can expect to see:
- Improved employee retention and engagement as work becomes more meaningful
- Increased leadership development as managers become coaches
- Strategic plans getting executed as employees and work are aligned around company imperatives.
Bringing a performance review process to life is a big deal. Just like the introduction of any new process, it might be clunky to begin with but you’ll get better with each iteration. It’s important to stay realistic and recognize it will continue to evolve as your business and people grow. Just like when you introduced a sales process for the first time, you didn’t give up on that because it was hard!