You Must Appraise Employees

Recently, an associate and good friend mentioned that in her consulting practice she often recognized that the company she was working with did not have an adequate and/or effective appraisal system.  It might be more accurate to say that they had no system at all.  I have often recognized this problem as well.

Appraisal systems are critical to maintaining a high level of company performance and having a well-motivated staff.  Employees want to know how they are performing.  When discussing performance, be sure to give examples of good and poor performance.  And if you have some employees who are not meeting your standards, sitting down with them and discussing their deficiencies may get the employee to improve their performance.  If not, it will help you establish a baseline which could result in their legitimate termination.

Many of us have difficulty discussing employee performance, especially if there are some negative aspects to it.  We would rather not do the appraisal at all, than discuss the negatives. That is very unfair to the employee.  They may think that they are performing well and would modify their behavior if they knew differently.  It is costly to the company when there are problem employees.  Customers may not be treated properly; there could be inefficiencies in the tasks the individual is performing, or many other issues which negatively impact the company.

One of the problems with appraisal systems is that they are given at the same time that the pay discussion is held.  This is not the time to discuss pay.  This makes the appraisal even more difficult since at the end of the discussion the employee is expecting the decision on pay.  Do not link the two.  While we all know that performance may have an impact on pay, the conversation will be much more effective when pay is omitted and you can concentrate on performance issues.

The appraisal offers you the opportunity to get feedback from the employee.  They may have some suggestions for improvements.  Or there could be some issues of which you are not aware.  

Additionally, this should be a time for establishing goals with the individual for the coming year and making sure that they understand the company’s goals.  Be sure that these goals are specific, realistic, measurable, and based on the individual’s specific job. The employee must fully participate.  The more you involve them in the process, the more involved they will be in designing their goals.   It is often helpful to get them to discuss their own evaluation of their strengths and deficiencies.

During the appraisal session, be sure the individual understands how their performance meshes with the company’s goals and how their success will help meet company objectives.  Be absolutely sure they understand the points covered in the session and their goals for the coming period.  Ask them to sign the appraisal and offer them an opportunity to respond with written comments.

There are many good appraisal systems that can be found on the internet or from human resource professionals.  Be sure that these are specific, clear, useful, and consistent.  When reviewing potential examples or developing your own, steer away from any that use the word average to describe their performance.  No one wants to be called average.  A much better classification is that the employee meets the standards for the job.

Effective appraisal systems, consistently used, are critical to ensure a well-run company.

Too Busy Doing the Work

In today’s tough economy, we all focus too much on just getting the daily work done.  This is also an easy mistake to make even when business is good.  ”The work” is the daily activities of our business.  We are all trying to reduce expenses as much as possible or increase tomorrow’s sales, but by concentrating only on these daily activities, we will be making a mistake that will haunt us in the future.  We must be taking time to plan on the continued development and improvement of our business.

We often make the mistake of thinking “What would I do if I do not do the work?”  Or another, “I can’t afford to delegate the work.”  Your business will not grow much if you are doing all the work.  You become the bottleneck to your growth.  Does Donald Trump deal cards at the blackjack table?  You must be responsible for the “big stuff,” not the “little stuff.”

In 1985 Michael Gerber wrote the book, The E-Myth, which has become one of the most popular business books in the last 25 years.  He published an update to it, The E-Myth

Revisited, in 1995.  The primary premise in both books is that all owners have three different roles in their businesses.

1. The entrepreneur.  This role is probably the most fun , but also the most challenging.  You are creating the vision and the direction for your business.  During this time the owner is thinking about the start-up of his company.  He is developing his strategy, and meeting potential clients and employees.  He is meeting with banks, attorneys, insurance agents and possibly investors.  He is telling his story to all these people and probably others.  While there are many challenges, the company is starting up, sales are being made.  This is an exciting time–adrenalin is flowing.  This is the time when you are the dreamer/creator.  You are looking towards the future and your plans are based on your future goals.
2. The manager.  The manager function is defined by a transition from doing the day-to-day work that produces revenue to organizing and supervising others who will do the day-to-day work.  You now become the pragmatist, planner, and organizer. As the company grows the owner/manger determines that he needs more people to help him run his business and he starts hiring.  Along with the hiring comes the need for employee procedures and an employee handbook. He may develop a procedure manual to help with the running of the business. He will have to decide on what responsibilities to delegate to others and he will start to develop the organization.  This can be enjoyable, but we find that most people really do not like having to develop the procedures and manage people on a daily basis.  This can be frustrating, because very few employees will do the work as well or as efficiently as the business owner.
3. The technician or the doer.  Now you are representing the tactical view of the business, not the strategic view.  You are looking at just what needs to be done each day to get the product out or satisfy the demands of your customer.  If your employees cannot do what needs to be done, you just do it yourself because you can do it better.  You become your own gerbil–just running on that treadmill.  You are no longer building value for your business or working to move the business forward.  You no longer own the business: the business owns you as you become just another employee.  Remember that the technician does little to move the business forward or to create value.As a business grows, you as the owner/manager will have to fulfill all of these roles at certain times.  But under the daily pressure to produce, most owners become too much the technician.  Their total focus becomes the daily task list.  They do not take the time to step back and plan for the future, or to evaluate existing problems and correct them.  The business growth is limited to what you can accomplish by yourself. 

Studies have determined that most small business owners function 10% as entrepreneur, 20% as manager, and 70% as technician.  There is no universal answer, as the optimal percentage will vary based on the maturity of your business.  But spending only 10%  of your time in the entrepreneur function is not sufficient.

Where are you?  Remember that the entrepreneur is obsessed with building a business that works without them.  The entrepreneur prepares himself/herself and their company for growth by building a foundation and structure that can carry the weight imposed by growth.