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Why I Stopped Doing Annual Employee Reviews

Why wait months to discuss problems that matter now?

Ximena Hartsock

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When my company Phone2Action launched in 2013, we tried to manage employee performance with annual reviews. It was pointless. Why wait months to discuss problems that matter now? In a start-up, we needed to move faster and calibrate more often than annual reviews permitted.

We scrapped reviews and implemented a performance management system developed by Martin O’Malley, former governor of Maryland. He “disrupted” conventional management techniques well before Agile and Lean Start-up methodologies swept through Silicon Valley.

Today, many companies use “data-driven” management techniques. However, they struggle to find a balance between team and individual accountability, transparency and privacy, and actions and goals. O’Malley’s approach may help you find the sweet spot.

The CitiStat story

citistat-logoWhen O’Malley become mayor of Baltimore in 1999, the city suffered from chronic absenteeism, excessive overtime and poor response times. He implemented a data-tracking and management approach called CitiStat, inspired by the New York City Police Department’s CompStat crime analytics. Between 1999 and 2007, CitiStat saved Baltimore an estimated $350 million yet the programme cost only $400,000 per year (spent mainly on staff salaries), according to the Center for American Progress.

Related: These 4 Types Of ‘Nightmare Managers’ Are Scaring Employees Away

CitiStat required city departments to track performance metrics unique to their responsibilities. The Department of Transportation, for example, recorded how quickly it filled potholes after being alerted.

The department heads met with the CitiStat team every two weeks to review the data. If it was trending in the wrong direction, the CitiStat team and department head would brainstorm and test a solution. At the next meeting, the data would reveal whether the follow-up actions had made a difference. By 2007, the Department of Transportation was filling 97 percent of potholes within 48 hours of notification.

Other cities took note of O’Malley’s success. Mayor Adrian Fenty introduced a version called CapSTAT in the District of Columbia Government, where I learned the system. We used it to track major initiatives such as school openings.

“CapSTATs” were intense accountability meetings that gathered all the agency heads. When an initiative hit delays, there was no place to hide. The numbers, the colors (green for on track, yellow for delayed and red for behind) and mapping revealed the status of everything.

Having observed the effectiveness of CapSTAT, I wanted to create a version for Phone2Action. We called it ActionSTAT.

Why it’s different

There are different schools of thought in performance management. ActionSTAT addresses three conflicts that arise in most performance evaluation systems.

1. Team v. individual

Traditional employee reviews often happen in isolation and emphasise individual achievements. In contrast, ActionSTAT holds both the team and individual accountable by measuring how people spend their time. The system connects individual actions and goals to departmental and company goals.

This kind of “systems thinking” is hard to achieve in government but comes naturally in technology companies, which have standard measures of success. In software-as-a-service (SaaS), these could include annual recurring revenue (AAR), monthly recurring revenue (MMR) and gross retention.

For example, let’s say we ask each salesperson to make 40 calls per day. The salespeople who perform this “leading action” close more deals than those who don’t. The action appears to work, so we keep doing it. If salespeople made the 40 calls but didn’t close more deals, we’d test other leading actions. Ultimately, we trace the salespeople’s work to AAR and MMR.

2. Public v. private feedback

One of the hardest aspects of performance management is giving and receiving feedback. When a manager gives an employee feedback in private, the company doesn’t gain institutional knowledge. Only two people learn from the experience. When performance management is a team activity, a culture of continuous learning, improvement and transparency can emerge.

Phone2Action holds ActionSTATs every Thursday at 10 a.m. The meetings are open to everyone but focused on one department each week. We start ActionSTAT by reviewing a dashboard that shows the most important metrics of company health. Those include our load time, conversion rate and retention rate.

Next, we look at the department’s lagging indicators (marked green, yellow and red, just like in CapSTAT) followed by its “leading actions.” Often, we look at individual leading actions, too. The data sparks questions, conversation and feedback from across the company.

Related: 10 Tips To Motivate Employees Without Resorting To Money

Over time, a few things happen:

  1. Everyone in the company gets used to providing and receiving feedback.
  2. Everyone gets used to discussing performance publicly.
  3. Everyone sees what people do in other departments and therefore learns how each team member contributes to the company’s goals.

The health metrics never change, but how teams spend their time can. By discussing the leading actions of each department, we set and correct behaviours.

3. Actions v. goals

ActionSTAT distinguishes between how people spend their time (leading actions) and lagging indicators (goals defined by metrics). This is crucial because companies that manage solely by objectives cannot address the behaviors that drive the outcomes.

If we want to lose weight, jumping on the scale everyday won’t change anything. What we eat and how much we exercise will. The same applies to companies. If we measure lagging indicators but not the activities that influence them, we will not identify what works.

Every ActionSTAT becomes a chance to refine leading actions. If we wait one full year to evaluate an employee, we see if she hit the metrics, but we cannot correct behaviours along the way. Performance management is about continuously identifying the actions that produce desirable outcomes.

Related: ‘Let’s Be Friends’: Bad Idea When That Person Is Your Employee?

A thing of the past

Every tech company wants to be “agile,” but traditional employee reviews hinder that culture. Annual reviews exhaust managers and stress out employees who might have spent months working tirelessly – in the wrong direction. Neither the company nor the employee can afford to wait a year for the feedback.

Today, people choose work environments where they can learn continuously and understand how their actions contribute to the company’s success. Annual reviews are thing of the past.

This article was originally posted here on Entrepreneur.com.

Prior to Phone2Action, Ximena Hartsock managed membership and outreach for a national advocacy organization. She has held numerous leadership positions in Washington, D.C., and in 2009 was appointed to the executive cabinet of D.C. Mayor Fenty. She has a doctorate in policy from George Washington University.

Managing Staff

5 Things To Do When An Employee’s Performance Deteriorates

It can be confusing and frustrating when a successful employee’s performance takes a nosedive. Intervene effectively using these five steps.

Liz Kislik

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For all kinds of reasons, even longstanding, highly productive employees can experience a performance slump at some point. The Towers Watson Global Workforce study showed that up to 26 percent of workers surveyed said they felt disengaged, and another 17 percent felt detached.

As a founder, you may not always find an obvious way to get someone back on track, but the investment of energy you would need to turn this situation around is still so much less than what would be needed replace and train a new employee.

So, the upshot is that it only makes sense to figure out what’s going on and take action. Ready? These five approaches may help.

1. Ask explicitly if the employee is okay

And find out if there’s anything that you should know about instead of assuming you understand this individual’s current circumstances and reactions. Of course, it will help if you’re already aware of his or her personal situation.

Perhaps the employee is dealing with a new and challenging circumstance that’s distracting. In that case, it can help to share your evidence: “James, I was wondering if everything’s okay. I noticed that you stopped/started doing X, and I figured I’d better check in with you about it.”

At one of my clients’ companies, when a leader touched base with a staffer who had fallen below expectations, the woman explained that her dog had died, and she was grieving. Knowing her boss cared about her helped her refocus on her work.

2. Look for signs of stress and burnout

stress-and-burnout

Burnout costs U.S. businesses as much as $300 billion each year, whether the reason is employees having had to absorb too many changes or the fact that they’ve just been plain old working too hard for too long.

A longtime administrator I knew was being criticised for her negativity, her self-pacing and  her avoidance of anything new. After some analysis, however, it became clear that there was more work than her team could handle. Once her team was staffed up and the new team members were reasonably up to speed, she started to recover her resilience and became more even-keeled.

Related: Why I Stopped Doing Annual Employee Reviews

3. Probe for changes in the employee’s job

Perhaps there are new problems with equipment, resources or information flows; maybe a major customer is giving the employee a hard time, or a manager is behaving differently in some way.

A CEO I work with was concerned about a downturn in an executive’s previously outstanding performance. We discussed how the employee had recently been assigned to lead a new initiative for which he did not have previous experience, although he was the best internal candidate. The CEO agreed that as soon as the new initiative could afford to pay for an experienced executive, the reassigned employee should return to the assignment where his performance had been consistently superior.

4. Describe your expectations for the employee’s performance

employee-performance

And talk about how the business, team or customers are affected when it’s lacking. Although up to 87 percent of employees in one survey reported by Strategy + Business said they wanted opportunities for development, only one-third reported actually receiving feedback to help them improve.

So, make sure you’re concrete and specific about both expectations and impacts. Ask what employees need from you or from others in the organisation to help them get back on track.

I had to give one senior leader excruciatingly detailed feedback, in areas from interpersonal dynamics to personal hygiene. It wasn’t pleasant for either of us, but until he was made aware of exactly what was disturbing to customers, there was no hope for improvement.

Related: How Diversity Drives Board Performance

5. Provide meaningful recognition

Employees in  a survey by the Cicero Group were three times more likely to choose recognition as the single factor most likely to motivate superior performance– over inspiration, autonomy and even pay.

Recognition doesn’t have to be expensive or even time-consuming. One leader I knew started using the daily standup meeting not just to review the progress of the work, but also to mention superior contributions and excellent performances. Not only did preparation for the daily meetings improve, but team members were eager to make contributions that could be noted.

In sum, even excellent performers can lose momentum or be stalled by circumstances from time to time. How to respond as the employer? Intervening early will help you feel optimistic about a positive outcome and give the employee involved the benefit of the doubt so you can demonstrate to staff the confidence you have in them and your willingness to provide support during a tough time.

Just don’t wait to do this: If you wait till you’re fed up with either the person or whatever’s going wrong, you’ll find it much harder to turn the situation around.

This article was originally posted here on Entrepreneur.com.

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Managing Staff

Managing Multicultural Teams

In this article we answer some key questions around managing multicultural teams.

Dr Sorayah Nair

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Companies that have greater gender and cultural diversity, particularly at senior management level, have consistently reported higher than industry profitability – as shown in McKinsey’s latest Delivering through Diversity’ report. The statistics gleaned from the report show that companies in the top 25th percentile for gender diversity on their executive teams are 21% more likely to yield above-average profits.  Furthermore, executive teams that are more culturally and ethnically diverse are 43% more likely to report more favourable bottom line figures.

Whilst the findings do not directly confirm the correlation, that increased diversity results in increased profitability, it is hard to ignore the consistency comparing outperforming industry rivals. The benefits of diversity are strongly suggestive, however, managing the challenges of diversity in the workplace can be challenging. It requires leaders with high emotional intelligence (EQ) that focuses on open communication and building an inclusive culture.

In this article we answer some key questions around managing multicultural teams, including:

  • What are some of the challenges of workplace diversity?
  • 5 essentials to managing multicultural teams
  • What is the future of cross-cultural training? 

1. What are some of the challenges of workplace diversity?

For a start there is not enough diversity in the workplace. Statistics suggest that we do not have enough representation of women and, in particular, people of colour in senior management positions and even less at board level. The dearth of women and cultural diversity is a global problem and not just a South African one.

To address diversity organisations need to:

  • Make a compelling case for diversity.
  • Invest more in employee training.
  • Expose all staff to diversity and inclusion workshops.
  • Ensure that hiring, promotions, and reviews are fair.
  • Give employees the flexibility to fit work into their lives.
  • Focus on accountability and results. (McKinsey report, 2017)

Related: 5 Tips To Make Managing Employees Less Stressful For Everyone

2. Five essential to manage multicultural teams:

It is important to understand that culture is fluid. It is also common to find people identifying with more than one culture. This means that we need to be careful about making the error of cultural stereotyping. There are as much differences within cultural groups as there are between groups.

So the way to manage multicultural teams, I believe, should be no different to managing any team. If we want great teams then managers need to have the following attributes;

  • High EQ
    • Awareness of self (ability to self-regulate)
    • Awareness of others (Skilled at relationship management)
    • Motivated
    • Empathic
  • Be skilled communicator
  • Be inspirational
  • Be courageous
  • Understand diversity (in all its forms) 

Here are five ways to get the most out of a multicultural team:

Clearly communicate the “Why” (Simon Sinek)

It is important for leaders to clearly communicate the organisation’s vision and to ensure that the message cascades throughout the organisation. Organisations where staff are clear about their purpose and know what is expected of them, show less entropy (time spent on non-revenue generating activities). Staff also report higher job satisfaction when their purpose is clear.

Create an inclusive culture

Leaders need to create a space that allow everyone a seat at the proverbial table. Staff need to feel they have a voice and that their opinions matter.

Create a psychologically safe workplace

Employees need to feel safe to express their opinion without fear or favour. It is the manager’s responsibility to ensure that the right culture (the way things are done daily) is in place and that candid conversations are encouraged.

Allow employees to bring their ‘whole-selves’ to work

It is important for managers to get to know their employees. Managers need to make time to enquire about their lives outside of the workplace.

Create a culture of accountability

All employees need to understand the role they play in the long-term sustainability of the organisation. Employees who need support should be encouraged to ask for help timeously as their contribution impacts the whole organisation. This understanding of the individual contribution to the collective outcome should also encourage staff to support each other and discourage the creation of silos in the workplace.

Related: Your Employees Are Your Greatest Asset – Manage Them Well

3. What is the future of cross-cultural training?

The global trend is towards the need for greater cross-cultural awareness. In South Africa particularly, we are becoming increasingly aware of the legacies of our political history that continues to negatively impact the world of work.

Cross-cultural training or diversity and inclusion needs to intensify – for that we need our industry leaders to be courageous and know that increasing diversity not only makes good business sense, but that it’s the right thing to do.

For more information on online courses that help with managing multicultural teams, visit USB-ED.com.

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Managing Staff

From Employee Engagement To Empowerment

Engaged employees will go the extra mile to resolve a client’s problem or close a sale, they contribute to a culture that consistently delivers great service and they drive company growth. Here’s why.

Sandra Burmeister

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“Engaged employees are more innovative and take the success of the company personally.”

Employee engagement is defined as an active state related to productivity and innovation. Engaged employees can be described as being fully immersed in and enthusiastic about their work. This emotional attachment means that employees will go above and beyond the call of duty. Employee engagement differs from employee satisfaction. Satisfaction can be described as being happy at work. Engagement takes employees to another level.

Engaged employees will go the extra mile to resolve a client’s problem or close a sale, they contribute to a culture that consistently delivers great service. Engaged employees take ownership, deliver on their commitments in and outside the organisation and are passionate about satisfying the customer because they own the result of their work.

Simply put, engaged employees are a prerequisite for building high performance teams within an organisation.

Unleash potential

A recent Gallup survey on the State of the Global Workplace shows that a way to significantly increase productivity is to unleash employees’ potential by allowing individuals to identify, develop and use their natural talents so they become strengths. Employees who use their strengths on the job are more likely to be intrinsically motivated, and teams who know each other’s strengths relate more effectively to each other, boosting group cohesion.

Related: How To Build Better Employee Engagement

The survey also shows that making better use of employees’ strengths requires businesses to grant workers greater autonomy to use their strengths, which requires a profound management shift in which more personalised relationships and positioning team members for maximum impact occurs.

The resulting sense of empowerment, however, benefits both the employees and the organisation. Higher levels of autonomy also promote the development and implementation of new ideas, as employees feel empowered to pursue entrepreneurial goals that benefit the organisation — that is, to be ‘intrapreneurs’.

In addition, talented managers are critical players in implementing a performance- orientated, engagement-based and strength-focused culture and aligning the leadership and employee values. This individualised approach helps great managers account for generational differences in employee expectations, in particular Millennial employees that prefer a higher level of flexibility.

Amongst the top performing companies, in any survey, 60% to 70% of employees are engaged at work. This is a clear financial incentive for leaders to take employee engagement and empowerment seriously. Engaged employees are more innovative and take the success of the company personally.

Focusing on engagement

There are a number of additional activities to help leaders succeed in employee engagement. These include: Strong visible values in the organisation, understanding and addressing employee expectations, career pathing with tailored development programmes to help employees achieve their goals, great communication tools and internal social collaboration for peer-to-peer learning and collaboration, knowledge transfer and helping the company expand the use of best practices, along with a great reward and recognition programme.

The African continent, in particular, offers companies and employees more opportunities to be involved in community improvement projects and company-wide CSI programmes, which also increases the feel-good factor in the organisation and ultimately contributes towards an increase in employee engagement.

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