Strategy #33: Make strategic use of performance appraisals

For both managers and subordinates, the annual performance appraisal can be an uncomfortable, even painful, little ritual. Sometimes the process is little more than going through the motions, with no real impact on either behaviors or expectations on either side of the desk. That’s too bad, because the performance appraisal process can be instrumental not only in enhancing your organization performance, but also in creating a more highly loyal workforce.

My client Auto-Owners Insurance does a great job on this. First of all, they take the performance appraisal process very seriously. Performance evaluations are used as an opportunity to recognize and encourage people who are doing great work, and to put them on track to do even more great work in the future.

But if there are problems in performance, the evaluating manager doesn’t act as if everything is just hunky-dory (as is so often the case in other organizations). They confront the issues head-on. Of course, it takes courage to confront an employee with performance problems, but this is essential if you want to build a high-caliber organization. It’s also an invaluable loyalty technique, since good people will leave if they don’t feel like they have a chance to stand out from the non-performers.
Auto-Owners does something else that is probably unique. Members of their senior executive team meet every single day for lunch to review operations. One of the things they do over the course of the year is, as a group, go over the performance appraisal of every single manager in the company (more than 250 of them). By doing this, they are in a better position to help their managers get ahead in their careers, and to recognize their accomplishments.

Furthermore, since Auto-Owners has a policy of only promoting from within (every one of their senior officers started in entry-level positions with the company), this group review of performance appraisals helps the senior team identify rising stars within the organization – the people who will eventually replace them in the executive office suite. Even if you don’t have a promotion-from-within policy, cross-departmental sharing of performance reviews can help you foster leadership development, and enhance retention of your up-and-coming leadership stars.

Another plus that comes from taking the performance appraisal process seriously is that it helps you identify those people who are most vital to the success of the organization, and who therefore merit the most intensive loyalty-earning efforts on your part.

Important:  If you take the performance appraisal process more seriously, especially if you incorporate an assessment of such right brain factors as attitude, enthusiasm, commitment, and creativity, then you really owe it to new job applicants to let them know about these expectations ahead of time. A number of organizations actually spell out their values and expectations in writing, and ask job applicants to read and sign the statement as a condition of being allowed to apply.  It’s a great idea because it conveys a sense of selectivity that makes people feel special.

Try this: Whatever amount of time you are now spending on performance appraisal, double it (or more). Make a point of spending some time every single day thinking about how your top people are doing, what they could be doing better, and what else you can do to help them do better. Then discuss your thoughts with them.

“Giving performance reviews is a very complicated and difficult business and… we, managers, don’t do an especially good job at it. The fact is that giving such reviews is the single most important form of task-relevant feedback we as supervisors can provide.” (emphasis in original)

Andrew Grove: High Output Management

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