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Managing Your Business
Performance management is a partnership between you and your
employees. The desired outcome of this partnership is to jointly
The best analogy to use when explaining this rather esoteric
assertion can be found in something most of us are acquainted
with at one level or another: sports, and the relationship
between coaches and players. The job of a coach is to get each
of his/her players as ready as possible to execute the plays of
their assigned positions, with each player having a good
understanding of the overall team strategy for the particular
game. This is what makes performance management a partnership;
success is interdependent - all the players must effectively
play their positions for the team to consistently win. It is the
coach's job to prepare his/her players to play well.
Coaching is an ongoing process that takes time and commitment
to the team and each of the players. Each player must
believe that they can successfully fulfill their assigned
roles and that the team can win-can be successful-and it is the
coach's challenge to instill this confidence and belief in
players and the team.
Most people at one time or another have been part of a team.
Think about the good coaches you have had in your life. What
were the attributes/behaviors/skills that made them good
If you are not a skilled coach, or if your people
don't see you as a good coach or if you don't provide a
coach's leadership, it is highly unlikely your team will
"win the game." ACHIEVE SUCCESS THROUGH THE PERFORMANCE OF
In Human Resources terms, Performance Management is an
ongoing process, where:
In Human Resources terms, Performance Management is
NOT and should NEVER be used for the
THE FUNDAMENTAL PROBLEM WITH MOST PERFORMANCE
MANAGEMENT APPROACHES IS THAT COACHES DON'T APPRECIATE THE
DEPTH AND SIGNIFICANCE OF THEIR ROLES AND THE PLAYERS ARE
MANAGED INDIVIDUALLY-NOT AS A TEAM.
What is the best way to do Performance Management for a small
business owner? What would the specific process entail? The
following 6 Steps will help you create a win/win team
environment that focuses on mutual success through understanding
Step 1 - Introduce/Discuss the "Game Plan".
your people to openly discuss the company's future ("openly"
means it is a dialogue with the opportunity for
questions/comments/discussion). Here is the information everyone
needs to understand so they clearly see how what they are doing
fits into the game plan and why they are integral to
Step 2 - Be Their "Coach".
Meet with each of
your employees. Start each meeting by asking good questions and
CONGRATULATIONS! You have just completed both a Company
and an individual employee written performance plan for your
next business cycle.
Step 3 - Feedback/Score Board-How Are We Doing? How Am I
Everyone wants to know how he or she is doing and how the team
is doing. In sports, feedback is almost continuous. Not only do
you know who is winning, you also know how many points you
scored, how many points you allowed your opponent to score,
whether you followed the rules and played the game appropriately
(standards, values, and acceptable behaviors in terms of how
everyone is to do his/her job and work together), etc., and how
much longer the game will last (measured by time, distance,
score, etc.). "How am I doing? How are we Doing?" are almost
existential questions because if what one does in life is
meaningful, a positive answer to "how you are doing" validates
the person. As a small business owner you know this. You get
your "how am I doing" answered by the survival, growth, and
financial success of your business. (You might also get it based
on your employees' feedback of how you are performing as the
"coach" if that's important to you and you ask the
Here are some things to consider for Step 3-Feedback:
Step 4 - Non-Judgmental Teaching/Training Process
What do you do if you see someone doing something which
appears to be inappropriate or detrimental to the "game plan?" Take a deep breath and don't get upset or angry. You need more
information (unless it is blatantly wrong, like someone engaged
in some form of sexual harassment, being intoxicated on the job,
You need information and data before you form any opinion or
judgment, so investigate. Take the employee aside (or, if it was
something multiple people were responsible for, the group) and
in private, ask the employee to explain the situation. You are looking
for information and answers and you are not to jump to
conclusions or judge or make un-coach-like exclamations like
"that was really stupid." You need to understand what was
happening, what your employee(s) was/were thinking, and
his/her/their explanation of why they did what they did.
If what you learn during this information-gathering exchange
makes your first impression wrong, (i.e., what appeared to be
inappropriate was not) let your employee know (or the group) and
thank him/her for explaining the situation to you. That's the
end of it unless you want to circle back to the employee(s) and ask them if he/she thinks there needs to be additional
changes to the process in question.
If, following the explanation, you still think what the
employee(s) did was inappropriate or it is unlikely the results
will improve, tell the employee it was inappropriate/short of
what you expected, and be very specific about what the employee
needs to do next time to appropriately handle any similar
situation, or improve her/his results. To validate that you have
effectively communicated the message AND the employee has
understood, before you leave, ask the employee to tell you in
his/her own words what the employer will do if a similar situation
occurs in the future. This employee recitation will not only
satisfy the effective communication standard, but it will also
reinforce the desired outcome or behavior you want the employee
to achieve. Close by poignantly asking the employee if he/she
needs any further training or coaching to make the
correction/improvement. If not, move on. If training/coaching is
necessary in your eyes then, with the employee, talk through what
that will entail and make specific plans to overcome the
training/coaching shortfall. You have just put this employee in
an uncomfortable place, so make sure you circle back often to
offer words of encouragement, tangible help, etc. Again,
remember, you are teaching and training and improving someone
you still believe can do a good job for you, so you don't want
to leave that person dangling psychologically because you are not
interacting with him/her like you used to (which, by the way, is a
big coaching mistake). The message you have to overtly send is
that you want to make this work, that you want to support the
employee and that you will go the extra mile to get the employee
and the business outcomes back on track.
If this is an error, mistake or behavior about which you have
previously counseled this employee before and it is not
insignificant, please read Chapter 8 on the recommended way
to start and manage the disciplinary process. Again, give
yourself some time to consider the situation and to put some
distance between yourself and what might be an emotional
reaction (either yours or the employee's) before you do or say
anything. Then proceed to begin the discipline process.
Step 5 - Adjusting Performance Plans
No matter how clear or prescient your crystal ball, you will
not be 100% accurate in your predictions of the future. At some
point, you will have to make modifications to the collective
performance plan for the overall business, as well as update and
change individual employee-performance plans.
When will you know you need to make a change to the
performance plans? When achieving a desired result is absolutely
unrealistic, or when the business process must change because of
new or different customers or market dynamics, it is a good time
to sit down with the process owners (employees) and talk through
with them what the new plan/expectations should look
There are many other events that require changes to the
performance plans. Consider the following list: turnover or
staff additions, promotions, significant changes to demand
(reductions or additions), the introduction of new technology,
and unplanned new product or service introductions
required/requested by your customers, etc.
It is suggested that you visit the question "Does anything in
our plan have to change?" at the regularly scheduled monthly
update (where you tell your people the score). Doing it in this
forum reinforces the "we're in this together as a team" message
that you are trying to send to everyone in the company.
Step 6 - Formal Performance Reviews
It is probably a good idea to do a formal performance review
that you can give to your employees and put in their files. If
nothing else, it helps provide some history on them
and their roles in the company. As a small business owner, you
will probably be able to retain most of the salient information
in your head, but you know what they say-"the palest of ink is
better than the best of memories" (Mark Twain).
The process for this should be simple if you have followed
all of the other steps in this chapter and if you have been a
good coach. To continue the theme of trust and involvement, it
is suggested that you ask your employee to write a one-page self-assessment, using the performance plan the employee developed
(and probably modified) as the base-line for any comments,
narrative or quantitative. If your feedback to the employee has
been honest and frequent, there will be very little difference
between your view of the employee's performance plan and the employee's
Once you receive the employee's written self- assessment, note
any items or comments that you see differently, meet with the
employee to iron out these differences, contribute any written
comments you want to make (including praise) and you are
Congratulations! You've just completed a written
performance review and it was relatively painless.
Now start all over again for your next business cycle. .
Performance Management and Pay Increases
Author's Extended Note: You've undoubtedly heard all
the buzz words that tell you to link pay to performance. As a
concept I think it is great. In the real world, I think it does
as much (if not more) damage than good to announce that this is
your "shining" policy to link pay to performance where the cream
will rise to the top and their pay likewise.
In a small organization, this becomes even more problematic
as it is doubtful you have people in the same "pay ranges"
(people being paid the same general amount because their jobs
have the same level or responsibility).
As was noted in this Chapter, performance is team-based.
Telling one team member that they get a 2% increase and another
team member they get a 5% increase for the same team
accomplishment creates a real problem.
As a small business, you may want to pay your people more,
but you can't afford to because your competition keeps lowering
their price, and to maintain market share you do likewise. Your people have done what you have asked and then some, but
you can't afford to give anyone a raise because of factors way
beyond anyone's control. Or, a recession eliminates four new
customers almost overnight and your revenues drop, so you can't
afford to give raises.
The point is that it is almost impossible to be able to
"prove" to a skeptical employee that there is a definite link
between pay and performance. Not much has to go wrong (a lot of
which is out of your control) to scuttle such an altruistic
platitude. I can almost guarantee you that the link between pay
and performance will not be apparent to your people.
I have been toying with the idea of offering
"across-the-board" pay increases based on the budget (what we
could afford) and the directional movement of the consumer price
index (be careful to never make a 1:1 link between pay and the
CPI as there are nuances to the CPI that make it less useable
than some people think it should be). In any case, an
across-the-board increase seems to be the antithesis of
pay-for-performance, but I believe it avoids many pitfalls. To
overcome the counterclaim that stars and laggards are getting
the same pay increase, I would compensate the stars another
way--be it in additional perks, time-off, or one-time bonuses. I am
not advocating this approach, just offering it as food for
Whenever money is discussed in the context of employment
and rewards/recognition for performance, please note that
compensation is NOT a long-term motivator. In fact, it is a fundamental that the motivational
effects of a pay increase are transient and there are no
discernable positive long-term effects.
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