Annual reviews or constant feedback?

Here comes a controversial subject.  How often do you take the time to rate your direct reports?  Is it worth the time and effort when measured from the perspective of the company and of the employee?  In terms of time, this can be expensive and disruptive to you and your direct reports. In terms of value…well let’s examine that.

What metrics will you use to fairly evaluate each direct report?

First, like any important process, the metrics used to measure effectiveness and progress are so important to a successful outcome, that a good manager will spend time reviewing those metrics used by others and create an appropriate set of measurements for your company that reflect the most important attributes of the employee as they relate to the needs of the company.  There are many formats for use in rating and reviewing employees, and selection of the proper form and format is the first step in a successful process.  But note that this alone will be time-consuming for you.

How often to review, if ever?

I’ve been asked often if such reviews should be performed quarterly, semi-annually, or annually.  Note that few ever ask if they should be performed at all.

One argument: legal protection for the company

When an employee is subsequently dismissed for any reason, the documentation of past performance and reviews, including any past notification of weaknesses or warnings, becomes an important shield to protect the company against a subsequent lawsuit or challenge from a state employee review process.  Many companies do not take the time to perform such reviews and end up paying the price in adverse rulings by courts or commissioners based upon verbal statements alone. So, protection of the corporation is reason number one for investing in such a process.

Do employees care enough to go through the process?

[Email readers, continue here…]   Second, employees most often genuinely want to know how they are performing against the company’s standard and management expectations.  It is human nature to desire praise; and the review process is one tool to provide such positive feedback to employees. This still does not address the question of how often to make this a formal process if ever.

Alignment of employee goals with those of the company

Third, every employee should be directed to work toward the goals of his or her department, which in turn are aligned with those of the company itself.  By providing a format for review that includes a number of key performance indicators that measure just such alignment, both the employee and the manager keep focused upon the real goals for productivity.

Passing on corporate values

Fourth, corporate values are passed on to employees in a number of self-reinforcing ways, including discussion of values during the review process.  Many a business would not have strayed into a dangerous regulatory and legal abyss if employees were shown, told, and measured by their adherence to the values stated by their corporation as important to all stakeholders.

So, how often should you and your reports do this?

To answer the question of how often to perform such employee reviews, from experience I believe that quarterly formal written reviews are too much of a task for all.  Semi-annual reviews are excellent, especially for companies that offer stock options as well as merit increases for outstanding performance.  With such reviews, option grants could be tied to one review and merit increases to the other.  Two carrots in a year are better than one for obtaining desired outcomes.  The very minimum level of acceptability should be one annual review for an employee.  There are those who are passionate about tossing out the formal review process completely and just providing feedback when warranted, positive or negative.

How about reviewing the CEO?

I participate in a number of CEO reviews as board chair of those companies.  In such reviews of the top executive, I reach out to his or her direct reports for input, and then I turn to other members of the board of directors.  With such a comprehensive view of CEO performance, it is much easier to sit with the CEO and provide valuable input that is useful for CEO development.   And even founder-CEO’s are thankful for the input received, usually taking criticism as a challenge to grow in the position.

Our conclusion

I’d have a difficult time thinking that any company, large or small, could perform at its peak without great employee metrics including individual key performance indicators, capped by consistent reviews and feedback.   You’ve just heard the arguments for and against specific periodic reviews.  That decision I’ll leave up to you now that you’ve heard from both sides of this controversial argument.

Facebooktwitterlinkedinyoutubemail
Posted in General | 1 Comment

Do you act like an Eagle Scout?

You may have been a Girl Scout or a Boy Scout in your youth.  Certainly, you are aware of the top rank in each – the Gold Award for girls and the Eagle badge for boys.  Scouting teaches leadership and even if we were not members in our youth, there are lessons for us all.

Be prepared!

For example, the Boy Scouts of America motto is “Be prepared.”  And from that comes training in first aid, disaster preparation, and outdoor skills, planning for events and outings, and any number of simulations or practice runs at rescue training – from snake bites to earthquakes to fires to broken limbs to heart attacks in the wilderness.  We could learn from this simple motto memorized by boys from ten to eighteen.  (Our illustration is by Norman Rockwell, of a Scout in the uniform worn in the 1950’s and 1960’s.)

Asking “What if?” to protect against bad outcomes

Simply learning to ask, “What if?” of our direct reports is a good first step toward reducing exposure to bad outcomes, whether attempting to plan for handling a natural disaster or workplace calamity.

And the twelve points of the Scout Law

[Email readers, continue here…]   Every Scout memorizes the twelve points of the Scout Law: A Scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean, and reverent.  That may seem an overwhelming list of aspirations, but would it not be a better world if each of us practiced most, if not all, of these?

Better employees and better managers

By the time a boy reaches Eagle Scout, he has internalized the Scout Oath and Scout Law to a degree many employers later recognize makes him a better candidate for a job merely by that attainment in his youth.   After all, only two percent of all Boy Scouts do reach Eagle rank.

Living those values even if never a Scout

We adults cannot revisit our youth to live seven years of our lives with these principles always in close sight.  But we can aspire to act like an Eagle Scout, an adult who recognizes the values and attempts to practice them in business and personal life for the betterment of ourselves and our companies

Facebooktwitterlinkedinyoutubemail
Posted in General | Leave a comment

Gamify those otherwise dull work assignments

Most of us are driven by the competitive spirit, the desire or need to win.  It reinforces self-worth, provides closure at the end of a good effort, and energizes us during the effort to achieve.

Being driven to achieve results

Many of us as managers – and our employees as workers – are driven by process, actions required to achieve a result.  And many of these actions are repetitive to a fault, contributing to boredom and ultimately to restlessness and desire for something new, in or out of the company.

The solution that works

There is a solution.  Everyone loves a good game.  It provides a short competitive experience with a measurable outcome in which the players know who won and by how much.  And it challenges each player to play again with learned skills and an incentive to beat the past score.

How do you make “process” into “game?”

[Email readers, continue here…]   So, think of ways to make each process into a game, one in which there is a defined metric or measure of the winner at the end of a cycle short enough to permit teaching, celebration, challenge, and motivation for the next time played.  Create small but meaningful competitions between groups or individuals for which recognition or small rewards are published in advance.  Allow for wins to be accomplishments of the team, as much as the individual, so that competition is a team sport, not an individual play for power.  Create and publish metrics as goals and comparisons to past accomplishments.  And pause to celebrate each new first or top score.

Empower your people to gamify their leadership

There are so many places where routine jobs can be made into a game.  Sales people know the rules and play to win, celebrating each small success along the way.  Why not empower each person or manager of each task in other areas to create similar challenges and metrics?  These cannot be viewed as corny or artificial ways for management to gain more output from a group without significant recognition or reward.  Or you will risk a backlash in which employees see the effort as merely a way to increase productivity in disguise, with no reward worth the effort.

Be a good coach and be creative.  We all want to play to win and be recognized for our efforts.

Facebooktwitterlinkedinyoutubemail
Posted in Depending upon others, Surrounding yourself with talent | 2 Comments

“What’s in it for me?” A motivational lesson

Ever wonder why one of your employees, shareholders, managers, suppliers, or board members sometimes behaves in a way you might consider irrational?

Putting yourself in their shoes

If you want to best describe the motivation behind the action, think “What’s in it for me”? Your employees, your shareholders, your customers, and your suppliers are all driven by this question.  So why not put yourself in their shoes and develop your action plan and goals to help each of them to achieve theirs?

Be a good manager

Employees want to be challenged, appreciated, and rewarded for good work.  So, create a plan for each that will accomplish these goals upon successful achievement of their tasks over time.  Be bold enough to ask each during their periodic reviews to tell you what they want to achieve.  Be a good manager by creating paths to achievement that reflect those ambitions and allow the employee to measure success in a meaningful way during the effort to progress.

Handling suppliers’ needs

[Email readers, continue here…]  Suppliers need you to be a good customer, to pay a reasonable price for goods or services, to pay your bills on time, and of course to reorder when the time comes.  But suppliers also want to know what makes you productive and help you win at your game.  Good suppliers want to create solutions to your needs and distance themselves from their competition.  So, meet with critical suppliers and challenge them to meet your needs, asking how they can help solve your problems.  Both sides win when you take the effort to inform, challenge, and partner with suppliers.

And especially, reach out to your customers

Your customers want to be treated as special.  Each would like to know that they are important, genuinely important, to your success.  Many would gladly share their problems with you hoping that you could provide solutions that would benefit both parties.

 

And then there is your board of directors

Your board members would experience a special feeling of accomplishment if they, as a group, could help you solve a problem that is strategic to the success of the company.

But deep within each of these stakeholders is the question baked into our psyche: “What’s in it for me”?  You can unlock lots of energy, talent and effort from each of these stakeholders merely by thinking ahead and planning your approach in response to that simple question.

Facebooktwitterlinkedinyoutubemail
Posted in Depending upon others, Surrounding yourself with talent | 2 Comments

Do people follow when you (think you) lead?

Let’s get personal.  Do you think you’re much better than a marginal leader?  Well, here are a few tests for you to help come to an answer.  And a few tips for you if you fall a bit short.

Why do people follow their leader?

Dictators are not great leaders in the long run.  People follow such leaders by fear, rarely by devotion.  Employees want to have a stake in their own destiny, and above all want to understand why actions are taken which affect them, even if the outcome is not in the employee’s favor.

Traits of the best leaders

The best leaders are those who share problems and alternative solutions with their direct reports, then seek consensus in decisions as a result.  Obviously, there are exceptions.  If the group cannot agree upon a course of action, the leader must act, even if the action taken is to defer the decision until more information or a consensus is reached.  And obviously, an emergency is rarely the time to seek consensus before acting to protect lives and assets.

And the pace of leadership

[Email readers, continue here…]   In non-profit enterprises, such as educational institutions, the pace of decision-making is usually much slower as the executive director, president or chairman seeks consensus from the community wherever possible.   Many business executives first joining a non-profit board are surprised by the slow speed of deliberation and the resulting consensus-seeking that results.   Especially in collegiate academic communities, a dictator chancellor or president rarely lasts long in the position.

Employee empowerment

And this rule becomes a part of the DNA or culture of the organization.  Employees throughout the organization want to feel empowered to make suggestions, to know the reasons for decisions that affect their jobs, to have some small control over their environment.

Your bottom line

Without a doubt, if you interview employees and managers in companies large and small, you will find that those feeling most appreciated, most productive, and most creative are the ones allowed and encouraged to participate in the decisions that affect their jobs.

Facebooktwitterlinkedinyoutubemail
Posted in Depending upon others, Surrounding yourself with talent | 1 Comment

Are your projections really realizable?

Here’s one for the ages.  How many times have you projected income and profits only to fall short, and make excuses to those depending upon you to perform?

We know the answer of course.

Lots of people do or will depend upon your leadership in driving growth, stability, and profitability. There will always be times when salespersons or associates provide you with projections for future sales that reflect their inherent optimism.

Who do you send these projections to and why?

Whether you in turn report to a CEO, a board or just your bank, you must reconcile such projections against the commitment of resources that will drain short term cash in expectation of revenues.  Hiring call center employees, building raw materials or finished goods inventory, making that decision to expand space, all are made as a result of pressures from the past or expectation of growth in the future. So, you bake some amount of these projections into your own budget and forecast and make decisions based upon the result.

The rule of the 50’s

[Email readers, continue here…]   Some of us who’ve had extensive experience in senior management have lived by a rule of the 50’s.  Fifty percent of the salesperson’s forecast rolls into cutting 50% of the sales VP forecast, making 25% of the initial salesperson forecast the operating budget.

The smaller the company, the more unreliable to data

In a smaller company, the tendency to believe the numbers originally projected is higher because there are fewer levels of management and therefore more danger of overstatement.  And some are so good at forecasting that this entire issue seems to be of no value.  I had that discussion recently with several CEOs.  I left the room wondering if they truly acted upon forecasts without change.

What if future revenues seem guaranteed?

Even if you believe future revenues to be a solid guarantee, it is prudent to discount the numbers by some percentage so that planning for expenses is more conservative.  Everyone feels great when surprises are positive.  We don’t celebrate just making our plan, we expect it.  Instead, we celebrate overachievement and all it represents.  Bankers, the board, shareholders, employees all love to see success.  Think of the public company announcements of earnings, you see them instantly compared to analyst’s projections. The market punishes anything but a positive surprise most of the time, a reflection that this insight is a part of the culture of the public markets.

Recurring revenues help but churn can be a spoiler

Many current businesses have predictable or recurring revenues each month by contract or historic performance.  Obviously, forecasts of this kind of revenues are more accurate and believable.  But churn can spoil the best of these absolutes, especially when product quality, aging systems or poor service drive customers away.  Churn should be conservatively forecast – reducing recurring revenues at least slightly more than you believe realizable at the start of the budgeting year.

The most important question

Why pressure yourself, endanger the business and lose credibility by risking missed forecasts?  We are rarely rewarded for the accuracy of our forecasts, and always are dunned when there is a shortfall.  Think like Apple, a company that historically has always exceeded its forecasts to the delight of all stakeholders and respect of investors.  We can’t all be Apple, but we can learn at least this lesson from that company.

Facebooktwitterlinkedinyoutubemail
Posted in Protecting the business | 1 Comment

Data collection is about to get much more dangerous

On January First, 2020, California will enact the toughest data protection laws ever, far outpacing Europe’s General Data Protection Act (GDPR.)   Called the California Consumer Privacy Ace (CCPA), few of us are even aware of this and need to know.  California often leads the nation in protective acts, and it is likely that other states will soon follow.

Are we protecting ourselves against ourselves?

The CCPA grants new rights regarding personal information for California residents. But more impactful – the law creates more and more duties for companies collecting data within the state (which is most everyone.)  And of course, the fines are astronomical.  Are we going too far in this process of protecting our personal data that many of its beneficial uses will be crushed?

First, the limits upon companies

CCPA will be imposed upon for-profit companies doing business in California with gross revenues greater than $25 million (whew) that buy, sell, or receive any of the personal information for more than 50,000 consumers, households or DEVICES (emphasis mine) for commercial purposes.

Devices? You’ve got to be kidding.

Here’s something to think about just from my home: I have three Amazon Echo devices in various rooms, two Ring doorbells, “Hey, Google” on five devices, “OK Cortana” on three, three smart TV’s, one smart 4K player, three desktops and two laptops, two smartphones, and WHO KNOWS how much more.  Count two of us living in the household, and this law adds twenty-six (people and device) counts for our household. All collecting data when I type or speak (hopefully to not just near them.) By comparison, GDPR just addresses data collection and leaks with no count of sources. Now back to our story…

What’s covered?

[Email readers, continue here… ]   California is interested in protecting personal information that can be associated or linked with a particular person or household. (Think of the advertisements that follow you around various sites for days and weeks after you visit the first site and look for a product.)  And, gee, if the information is already public (from legitimate data-gathering sources such as a census) than you and the companies are off the hook.  But who relies upon up to ten- year old census data which has no IP addresses or email addresses?

The good news

This new CCPA does not restrict a businesses’ ability to collect, use, retain, sell or disclose a consumer’s information that is “deidentified” or aggregated.  Whew again.  Most of us create our data stores to identify trends both geographic and product-based, stripping individual contact data from the mix.  (But I know of at least one airline that can tell its marketing people the name, address, and more about every single ticket sold during the past ten years.  Billions of records to track your travel preferences.  But I digress.)

What does a business have to do (above GDPR notices?)

Now, businesses gathering data in California must inform consumers about what personal information is being collected and its intended use.  Wow!  Let’s hope this is not buried in one of those 2,000-word EULA’s we all agree to by scrolling down to check the box.   And businesses must offer an “opt out” option to all consumers.  Here’s a question: How many consumers will confuse this with “unsubscribe” and decimate our good mailing lists?

How about youth under 18?

Of course, CCPA protects children under 18 by strictly prohibiting the sale of any information containing data from this group.  So, do we have to ask on every form the age of the viewer?  Umm. Yes.  And consumers may request deletion of their stored information (subject to certain limitations.)  Now, there’s an opportunity for a new industry of “data deleters.”  If Facebook can hire 3,000 people just to check for false or fake postings, how many will they need to hire for responding to requests for deletion of data?

Penalties for data breach?

How about $2,500 for EACH violation (that means individual or device if unintentional, or $7,500 if intentional?  The grand “out” is that businesses have thirty days to cure the offensive act after receiving official notice.  That sounds great if the cure is related to the process and not to any previously acquired data.  If the latter, the cure will be almost impossible to address in such a short period, if ever.

What’s the conclusion?

Most of know that we are giving away personal information in return for convenience, free access or free use.  Especially our younger consumers know this and are comfortable with the trade, considering it fair.  So, are we going too far with CCDA?  Well, this is much more geographically restrictive for a few (but not for any businesses collecting customer data over the Internet.)   We’d all like not to receive so many unsolicited ads via email, placement on pages we visit and now even invading our texts.  But we’d also like to keep our favorite sites free to use (including Google search and millions of aps among the many that will be impacted.)

Very soon, you will need to make that decision again and again as you visit those sites and aps that you want and need.  It’s like a pendulum: We once had free access without realizing the data dissemination quid pro quo.  Now we’ll know and control more but pay the price if we opt out by receiving much less useful information in ads and perhaps considerably less free ap and site access.

Which will you “vote” for when asked?

And here’s a final something to think about. The law now states that covered companies must have $25 million in revenues AND collect data from 50,000 or more sources.  What if in the future, California or some other state substitutes “OR” for “AND” so that small businesses collecting data from at least 50,000 sources (remember that I have 26 people and devices in my home)?   Now, how much are you concerned by this issue?

 

Facebooktwitterlinkedinyoutubemail
Posted in Protecting the business | 5 Comments

Most of your big problems start as small problems.

Let’s talk about surprises. And whether to warn your superiors or your boards about these unraveling events early.

You have a dashboard or KPI’s, don’t you?

Every good executive has a set of critical data points that best alert him or her to the changes in the flow of business most important to note and in many cases to curb a negative trend early in the game.  By now, most managers at any level have created a set of key performance indicators and even a dashboard to help follow trends and warn of excursions.

The “rule of excursions.”

There is a truism you should internalize: Most all big problems start off as small problems.  We’ll call this the “rule of excursions.”  Small deviations from the trend or norm if unchecked often become much larger over time.  A missed cash discount by your accounting department probably means that cash flow is getting tighter.  Are receivables collections slowing?  If so, is it one critical customer or a trend?  Is it time to focus more resources upon collections, credit research, or even time to “fire some customers” who continually break your rules or take up too much of your resources?

Keep the information to yourself?

[Email readers, continue here…]  Whatever the problem, the person or board to whom you report does not want to hear about it after it has become a threat to the enterprise.  If you are the head of sales and the pipeline is emptying or sales have slowed for any sustained period, the red flag must be raised, even if the focus is on you as a result and not upon the problem when the news is first delivered.

And if you’re the CEO, your board definitely does not want to hear that revenues are about to fall through the floor because bookings for the past two periods have been so far below forecast.

What form should an alert take?

 An alert does not have to be too detailed or too long.   It should be sent to your superiors (and everyone has one or more) quickly, often with a short “and we are working on finding the cause and redoubling our efforts.”  That’s like a promise to self as well as to those who need to hear.  And of course, a promise not kept is an indication of a lack understanding of the problem or of care for the solution.

Another of my board learning experiences

I have been a board member a number of times when either the board discovers a surprise or management delivers the news too late.  Neither are good recipes for CEO survival.   I recall that the board of one of my companies sat through an extended meeting just eight months after receiving a significant eight figure VC cash injection, reviewing income statements, budgets, sales statistics, Internet customer trends, and more. We discussed these with management thoroughly for a total of four hours.  Three weeks later, the Board received a communication from the CEO that the company had only weeks of cash left and immediately needed another round.

Can you guess the mood of the board members? 

Management must have had some or total knowledge that cash was critical.  But not a word was said, nor a discussion of alternatives suggested by the CEO or CFO, both present throughout the meeting. Well, both the CEO and CFO were soon gone, and the VCs reluctantly passed the hat well before the budgeted cash-out date.  And the terms of the new round were ominous, reflecting the anger and obvious catbird seat control the VCs had with no competition for their investment and too little progress to show from their last round.

Bad things happen to good people. But good managers do their utmost to make sure there are no large surprises such as that one.

Facebooktwitterlinkedinyoutubemail
Posted in Protecting the business, Surrounding yourself with talent | 1 Comment

Can you just tell little business lies?

Are any of these little lies worth worrying over?

“He’s not in right now.”  “I am going to the doctor at that time.”  “I paid only two dollars a unit to your competitor.”  Whether not true and used to avoid hurting someone’s feelings, or whether used to gain an advantage in a negotiation, these little business lies are acceptable because they achieve their intended result without actually hurting the other party.  Right?

Wrong – in the long run, even if apparently harmless at the moment.  One problem, as demonstrated in so many movie scripts, is that you sometimes need to tell another lie to cover the first, and then another. And small lies turn into habits. And habits define the individual and often the culture of the individual’s direct world of influence.

“if a tree falls in the forest…”

What if you are never caught telling these little business lies? Is there any harm?  Sometimes you will never know that you were caught. Someone sees you at another event when you told them you were out of town.  Another asks his competitor if they really did sell to the company at such a low price. Someone you told was doing a superb job and was soon fired mentions the comment to his attorney or perhaps just as damning – to former peers still in the company.

Just one instance

[Email readers, continue here…]    It takes only one instance of being caught to cause an entire group of people to question the truthfulness of all of your statements. And that is a large consequence to come from a small business lie.

So, would you tell such white lies if you knew you’d never be caught?  Never?  That depends upon how you chose to live with yourself. It certainly is difficult to be truthful or silent but never slip into little lies.

The Scout Law and this issue

For much of my adult life, I have been affiliated as an adult volunteer with the Boy Scouts of America, happily serving youth and adopting the Scout Law as an important part of my ethical being.  Of the twelve points of that law, none state “A Scout is truthful” because there is a greater law in Scouting: “A Scout is TRUSTWORTHY.”   And that is the bottom line for all of us in business.  We should strive to be TRUSTWORTHY in our actions and deeds.  People can depend on us to be truthful and trusted.   A simple lie caught immediately or much later, belies that trust.

Can you tell little business lies?  Sure.  But should you?

Facebooktwitterlinkedinyoutubemail
Posted in Protecting the business | 8 Comments

Are your chairman and CEO the same person?

Here’s one that targets most any company that has taken investments at any stage, as well as more mature companies.

Why would you split the positions?

More and more today, shareholder organizations recommend that the positions of chairman and president (or CEO) be split, so there are checks and balances at the board level in the leadership.  This recommendation is true for all companies with outside investors who are active and have or seek board representation.

The risk of hand-picked boards by the CEO

If we examine the blowups that have been so public these past years in public company leaders exceeding their reasonable authority or exercising dictatorial authority to the ultimate detriment of the shareholders, in most cases the CEO and chairman was the same person.  When you combine that fact with the relative inaction by the board, it becomes clear that some boards are hand-picked by the CEO who is also the chairman, and those boards are the ones most likely not to challenge marginal or bad decisions.

Why this balance is important

[Email readers, continue here…]   With a balanced chairmanship and CEO separation, the chairman sets the meeting agenda, manages the meeting, allows for asking the tough questions by board members, encourages all to speak and hopefully gain consensus, and moves the meeting along to cover critical issues.  The CEO is given much of the meeting by the chairman, but it should be clear who is in charge of board meetings.

The types of chairmanships

There are two types of chairmanships: executive (paid and full time) and non-executive, the latter typical of most corporations whether private or public.  Non-executive chairmen (chairwomen) should actively dialog with the CEO before the meeting to discuss the agenda and expand time for discussion of critical issues.  Without this, it is typical that board meetings seem to follow an agenda that does not change much from meeting to meeting, and strategic issues are often ignored at the board level when a high profile, large ego combined chair-CEO is in charge.

Is there a formal method required for splitting the positions?

There is no shareholder vote required to split the positions.  Officers are elected by the board, not the shareholders.  So, it is the responsibility of a great board to explore then act upon this recommendation from the various shareholder advocacy groups and split the positions.

Facebooktwitterlinkedinyoutubemail
Posted in Depending upon others, Protecting the business, Surrounding yourself with talent | 6 Comments