In my experience, ninety percent of companies whose executives complain of low performance problems have some kind of formal HR-led performance management framework in place, like management by objectives (MBO), or its myriad of variations. However, when I ask what managers are doing for informal reviews between the formal ones, I usually get, “What do you mean?” as a response.
The problem isn’t so much that there is anything wrong with the formal framework. It’s just that it has been designed with one purpose in mind, while executives are expecting it to serve another. For performance improvement of individual staff, a separate and distinct informal process is needed.
The Informal Performance Review
The reality is that the HR-led formal performances reviews are not enough to drive boosts in performance. I don’t believe that statement will surprise anyone with even a small experience in corporate life.
The formal performance reviews are really like the periodic physical checkups we have our doctors perform for us. No one expects that these checkups actually drive us to boost our physical condition and health. For that we engage sports trainers, dietitians and other people who can coach us, give us advice, provide us with frequent feedback, and help us monitor our progress toward our goals.
Why should we expect this to be any different in individual performance improvement of in companies?
The Difference Between a Formal and informal Review?
The informal performance review is held between a manager and staff person. It is private. The results are not shared with HR. It is not meant to be a basis for determining remuneration, such as bonuses, promotions, or compliance with a minimum level of required competence in the company. It is purely a tool for the manager to guide his staff person to achieve better results for the organization he leads. It is in the mutual interest of both managers and their staff. Managers are accountable for results and staff typically want to do better.
The Three Keys to an Informal Review: Turbo-Charging Improvement
I recommend informal reviews to be held monthly. The frequency of the reviews makes a difference, because it gives staff people rapid feedback so they can make midair course corrections, rather than waiting for the formal review only to find out that they could have and should have been doing something else months ago.
There are three keys to an informal review.
- Selecting areas critical to success, and evaluating them consistently
- Basing evaluation on observable behavior and phenomena
- Having the courage to use your own judgement
Let’s review these below.
1. Areas Critical to Success: the RFC
Every manager, if he sits down for a moment to think about it, can come with what it takes for a staff person to succeed at his job. I recommend thinking about these in three categories:
If a staff person develops the right competencies and applies them frequently, he should achieve good results.
Results = Competency X Frequency
So, what might these be, say for a salesperson? Below are some examples.
New customers acquired
New products sold
Conversion rate on quotes and proposals
New business development
Sales calls per week
Sales visits per month
I recommend for a manager to come up with between three and five each for results, frequency and competency, and develop a document containing them. These will be the areas by which to evaluate a staff person. I call this document the RFC. It is based on concepts originally proposed by William Skip Miller.
2. Observable Behavior and Phenomena
One of the greatest problems in setting individual performance objectives is fuzziness. For example, looking at the competency of “Communication” above, what does it actually mean when you tell a staff person he needs to “improve his communication skill?” How can he take action on that?
It is critical to communicate expectations and feedback in terms observable behavior and phenomena. For example, for the communication competency a manager might describe an expectation as, “In a meeting with a prospect, the sales person should be asking questions about the customers business as per our sales methodology, and listening to the answers.” This kind of statement is clear. The staff person knows what he must do and how he will be evaluated.
When giving feedback, take the same approach. Instead of saying, “I think your communication skills need work,” which is not actionable, a manager couches the feedback in terms of observation, such as the following:
“When we visited the customer together, you spent the entire time talking about the functions and features of our products, and did not ask one question about the customer’s business. He could hardly get a word in edgewise.”
Feedback like that is clear. When recommending action for improvement, once again, couch it in terms of observable behavior, as below for example:
“During the coming month, I want you to work on this. I want to see you asking questions about the customer’s business like we had practiced.”
Now the staff person knows exactly what he needs to do to improve performance and get a better evaluation.
3. Courage to Use Your Own Judgement
Management by Objectives and its many incarnations use quantitative metrics to determine progress and achievement of goals. For the RFC however I recommend not using metrics, but rather using grades just like in school, ABCDF, or you can use 12345, or Whatever you prefer. Metrics may guide your evaluation, but don’t let metrics get the better of your best judgement. The reason is that metrics don’t always tell the story.
For example, at a client company of mine I met with a sales manager to discuss how she felt about the performance of her sales staff. She brought the MBO scorecards for each member. One salesperson had outstanding results in terms of sales, a good performance review as a result, and even got a small bonus. My reaction was, “Wow! This person is a real star!”
The manager said, “No. She is the worst on my team. You see, she inherited all her accounts from a previous salesperson. These are all re-orders. She has developed no new business or new clients on her own. I asked why the manager has given her a positive review. She responded that she has to, because of HR policy and the structure of the MBO.”
We developed an RFC together, and I asked to the manager to grade all her staff. When I looked at the grade for the problematic salesperson, it was an ‘A.’ I asked why, after all the manager had told me this was her worst salesperson. She responded, “I gave her an ‘A’ because she is hitting her targets!”
“Wait. The RFC is tool between just you and the staff person,” I explained. “You don’t need to follow the MBO guidelines here. Give her what you think she deserves! After all, you defined sales results in terms of sales that the salesperson got based on their own effort, not just inherited accounts.”
“You mean I am allowed to use my own judgement?” the manager asked.
“Yes! That is what you are paid to do as a manager!”
“What if I am wrong?”
“Don’t worry about that. You will make mistakes from time to time. But if your staff person thinks you are wrong, let her explain why in term of her observable behavior and phenomena. Then decide whether or not you are convinced.”
She did just that, and the sales person changed her behavior. She began to cultivate new business rather than relying only on inherited accounts.
Advantages of the Informal Review
In my experience, both managers and their staff respond favorably to the informal performance review. For managers, it gives them a systematic way to cultivate staff and achieve better performance based on the results for which they are accountable as managers. They design the RFC categories and the standards by which staff will be evaluated, and they use their own judgment in evaluating. I have found that staff people appreciate the frequent feedback, the advice and the coaching, and like being challenged to grow. There is mostly upside for them, and little downside. In my experience, derive satisfaction from succeeding in challenging work.
At the same time, managers whom I have helped implement informal reviews say that it makes the formal HR-led reviews easier and less awkward. In addition, because this system is private and the results not shared with HR, it is less threatening to staff.
Implementing Your Own Informal Review System
Preparing and running a system of informal review is neither time consuming nor difficult.
- Start first by preparing your own RFC. For each result, frequency and competency, write a simple description of the behavior or phenomena you would expect to see.
- Then, grade your staff. For each grade, make a note of why you gave the grade you did in terms of observed behavior and phenomena. Make a note of what you think the staff person should do to improve by the next review, and what you would expect to see in terms of behavior and phenomena.
- Hold a meeting with the staff person. I think 30-45 minutes should be sufficient. Share the written RFC document with all your notes. Carry out your review–what you expect, what you have seen, how you evaluate that and why, what to do to get a better evaluation, and what you expect to see by the next review.
- between informal reviews, I recommend taking time once per week or whenever it suits you to record behavior you observe of each staff person. Make it specific–what you saw, when, and with whom. This gives you concrete examples you can use during the review meeting, and also ensures you don’t forget.
Most managers can implement this system on their own authority, as it is really just a management tool between you and your staff. It is unrelated to HR. Implementing an informal review system gives managers the power to take individual performance improvement into their own hands, and is win-win for both managers and the staff they manage.