Ranking Employee Performance

School may be out for the summer, but for businesses and the women and men who lead them, school is always in session.

Effective leaders learn continuously.

Their companies continue to improve, adapt and evolve or risk getting flunking grades from customers who decide to take their business elsewhere.

Grades for individual performance are handed out year-round – formally in performance reviews, informally as spontaneous feedback or both. Failure to set clear expectations with your colleagues and to discuss with them their future at your organization creates another risk that could see your best players leaving your firm to join an organization that values their contributions and engages them in meaningful work.

If your organization’s fiscal year ends on December 31, your year is nearly half over. Remove the half-dozen holidays that occur in the second half of the year, subtract weekends, vacations and PTO and by the time July 1 rolls around, you and your team have fewer than 120 days to meet this year’s objectives.

It’s almost mid-term.  What’s your grade so far?

Would your team agree? What about your bank, your board or any other impartial observer?

Mid-term Homework

In the strategic planning sessions I lead for organizations of all sizes in all industries, dozens of questions are asked to ensure everyone’s clear on the mission (purpose beyond making money), vision (where we’re headed) and values (code of conduct), the three or four high-impact priorities, and the plan for getting things done.

My book Lead The Way outlines the planning process and provides exercises to spark debate and templates to drive implementation.

It’s helpful to schedule a follow-up session four to six months after the initial two-day planning session.  Here are five essential questions to ask and answer:

1. What issues did we not anticipate in last year’s planning session that we must now address? What – if anything – could we have done to anticipate these changes?
2. Do you believe that your colleagues who are charged with implementing these action items have a good understanding of the challenges they’re facing for the remainder of our fiscal year?
3. Do you have confidence that your colleagues have an appropriate plan in place to complete their commitments and address their challenges?
4. How will we address under-performance?
5. What must we add, remove, change or improve to achieve the success we say we want?

In the 30 years I’ve been helping people and organizations become more successful, I’ve found 10 significant reasons most organizations fail to achieve the objectives outlined in their plans (Top 10 Performance Hurdles).

The performance hurdle you will not find on this list is the excuse that “we didn’t have enough good ideas.”  Most organizations have too many good ideas and do a poor job staying focused, replicating success and holding one another accountable.

A, B and C Players

If you were handing out mid-term grades to your colleagues, who on your team would earn an “A”? “B”? “C”?

“A” players are stars, risk-takers and over-achievers. They leap tall buildings in a single bound.

“B” players have been called “the vital majority” because they comprise about 70% of your workforce and are the steady performers doing most of the work. To climb a tall building, however, they prefer using an elevator.

“C” players do enough to get by, and generally fail to deliver on promises. They can barely find the building.

“First-rate people hire first-rate people,” said Leo Rosten. “Second-rate people hire third-rate people.”

Who are you hiring? Who are you retaining?

Jack Welch called it “differentiation,” or “20-70-10.” His critics called it “rank and yank” – firing the bottom 10%.

Differentiation, said Welch, is about “letting the bottom 10% know where they are and then giving them a chance to move on. Who wants to be on the bottom once they know it? This is not a mean-spirited thing. It’s you sitting across the table from me and telling me, ‘Jack, you’re not measuring up. You’re going to have to improve.’ If I don’t, you tell me that it’s best for me and my family to find someplace else to work.”

Forced ranking – another name for this process – continues to be a controversial model.

By whatever process you call it, there are three constants when it comes to employee performance:

1. Even top-performing companies that make Fortune magazine’s “Best Places to Work” list will have people on their payroll who are unable or unwilling to do the job they’ve agreed to do. How you address under-performance separates exceptional companies from mediocre ones.
2. People issues are among the toughest in business. You can mitigate the emotions that swirl around discussions of under-performance if you have set clear expectations, set clear consequences (rewards and penalties) and provided a clear way of measuring progress. Without this clarity, you will find yourself in a gray zone where assumptions, ambiguity and emotion cloud decision-making. Be crystal clear about what you expect.
3. Remember that under-performers put at risk the welfare of the rest of your organization. So when under-performers don’t improve, it’s time for them to move. Failure to move an under-performer out of your organization also erodes your team’s trust and respect in you as a leader. Move out under-performers with dignity, and then get back to work.