Demotivating Employees One Performance Review At A Time

Tweet

After all that's been written about the destructive effects of the traditional performance review, it's amazing how many business still do it. It's been proven in study after study that grading or assigning a number to a person's performance - especially when forced into a "normal" distribution - results in far greater demotivation than improvement. Companies that continue the practice, though, tend to feel that they're the exception rather than the rule.

Let's say, for example, that you have the best employees in your industry. After all, this is a goal of the hiring, leadership, and employee development processes, right? If we have a performance rating system that forces a normal distribution of ratings, we would have to find ways to separate the "top" performers from the "average" and "low" performers. By doing this, will we actually motivate the "lower" performers to improve by assigning them lower grades? Unfortunately, in most cases, the motivation this type system creates is to energize the worker to stop caring about the company or to find a job with another company.

Okay, in reality, you probably don't have the best employees in your industry. You probably have team members who do not perform as well as you would like. But is this the fault of the employee? Can we force the type of change we desire by rating and normally distributing people? Or should we study the situation to understand and correct the causes that interfere with everyone from performing well. These causes can usually be traced to one or more critical company systems, including:

• The hiring process
• The employee development process
• The system and style of leadership
• The rating system itself

WHY NORMALLY DISTRIBUTE?

It is interesting that some businesses feel that their systems for hiring and developing people are consistent and predictable enough to justify a normal distribution of ratings. Besides the fact that this is often driven more by gut feel than data, it assumes that the company has no effect on employee performance beyond assigning a rating to motivate the person to improve on his or her own.

A normal distribution doesn't just happen.  It results from consistency and tight control over a process and, in the case of performance reviews, normally distributing the ratings and tying to raises and bonuses is tampering, which is destructive and interferes with the system's ability to remain normal.

Understanding that there is no logical basis for normally distributing performance ratings will be a major step toward improving performance. Let's say, for example, that in your efforts to build the best workforce in the industry, you decide to rid the company of its below average performers. So you rank everyone, figure out through some means those who fall into the bottom half, and fire them. So you now only have above average workers, right? Not exactly.

You could actually continue this practice with the remaining workers because you will now have a new average and a new set of workers who are "below average." You could even keep ranking until you have two remaining workers and guess what? One of the two will perform below average. Even with only one worker, you would find that he or she will perform below average roughly half the time.

WHAT TO DO

The fist step to improve employee morale and performance is to figure out whether or not the performance review system is actually achieving the results for which it's intended. Is performance actually improving or is there no discernible difference? If the system is not resulting in improvement (like most), stop doing it. It does not matter if you don't have a process with which to replace it. Like anything you do in a company, if it's causing harm or costing money and time with no return, you need to change it or stop doing it altogether.

Secondly, figure out what the real problem is and what's causing it to occur. If employees aren't performing, is it due to a poor hiring process, ineffective leadership, lack of attention to development, or some other cause? Is failure to consistently meet objectives due to poor planning, too many priorities, lack of teamwork? Whatever the cause (and its probably a combination of many), this is where efforts can result in real improvement. You can continue to spend time judging performance and ranking people, but without effective leadership, planning, and a host of other elements, frustration and employee turnover will occur, but improvement will not.

FEEDBACK, YES . . . RANKING, NO

Effective leaders talk to those on their teams. They coach and develop on a continual basis, rather than wait for the once or twice per year performance review. Of course, leaders need to know how to coach and mentor, but those who resist the process and fail to make it happen are ignoring one of the most important responsibilities of leadership and should be in other jobs.

Everyone, regardless of position can benefit from coaching, and effective coaching requires continual feedback. It takes time and a lot of effort to be successful, but the process can lead to increased employee motivation, much better teamwork, and improved overall performance.

Improvement Requires More Reflection; Less Justification

Tweet

Using an A3 for business planning is one of those practices that, like many aspects of lean thinking, is simple but not necessarily easy.  Although the basic process tends to make sense to people, success requires those involved to exhibit certain behaviors that are so different from the norm that most plans produced by the process result in nothing more than business as usual.

Making Problems Visible

There are few people who will argue with the concept of making an organization's problems visible.  Understanding the role that KPIs or the boards and lights associated with an Andon signal play in problem-solving efforts is not difficult.  What does tend to be difficult, though, is applying the same type of thinking to the company's higher-level planning processes.  An organization has little chance of improving performance if its leaders can't agree on the problems they need to address.

In The Birth of Lean, Taiichi Ohno is quoted as saying that kaizen continuously requires people to, "assume that things are a mess."  Since business planning is fundamentally kaizen at the organizational level, we've got to create the idea that things are always a mess.  To do this requires that targets are clearly visible and people feel free to openly and honestly reflect on performance against the targets.

During business reviews, it is not uncommon for teams to spend significant effort justifying the performance gaps rather then accepting them and reflecting to understand the reasons that drive the gaps.  This is not surprising given the way many organizations to recognize and reward people.  When rewards are based on meeting targets rather than addressing problems, people will fight to justify results.  The crazy thing about this type of behavior is that most people recognize it - we just don't tend to do anything about it.

Moving the culture away from justification and toward reflection requires recognizing that the company's systems and practices may be driving the wrong behaviors.  There is always a mess, and it's got to be okay to recognize and openly admit it in order to free  people up to drive improvement.

It's difficult to say that any single component of business planning is more important than another but without adequate reflection, the organization will fail to recognize its biggest problems and will never move beyond mediocrity.  Time and energy spent justifying results is waste, and the sooner we replace it with open and honest introspection the sooner we can bring the big gains into reach.

Maslow: Still Relevant 70 Years Later

Tweet

Being an effective leader is not easy. With all of the external factors that can affect performance seemingly coming at an ever-increasing pace, keeping an organization operating at a high level can be a difficult job. With the continual changes in technology, markets, and regulations, however, the most difficult aspect of leadership continues to be the same as is has for the last 100 or more years: people.

Organizations have gotten thinner in recent years forcing managers to increasingly become doers. Because of this, the importance and complexities of helping team members be satisfied and productive in their jobs has unfortunately become more of an afterthought than a priority. Although we talk about the importance of developing and motivating people, our actions say otherwise.

A HYPOTHESIS FOR IMPROVED LEADERSHIP

In 1943, Psychological Review published A Theory of Human Motivation by Abraham Maslow. In the paper Maslow presented the results of a study of highly successful people, including Albert Einstein, Frederick Douglass, and Eleanor Roosevelt focused on understanding what motivates people to become high performers. As a result of the study, Maslow proposed that the stages of growth of human beings tends to follow a pattern which he characterized as a hierarchy of needs, or stages of development that drive motivation.

As presented in the diagram, the stages generally go from lower-level basic survival needs to higher-level increasingly sophisticated needs focused on fulfilling one's potential.*

The hierarchy proposed by Maslow has been taught in business schools for years as a component of effective leadership. Leaders need to understand where team members are in the pyramid as a basis for motivation and development. Also, it's important to understand that a person can move up and down the hierarchy depending on his or her individual circumstances, including things like personal relationships, impending layoffs, health, or a variety of other factors.

Effective leaders appreciate the importance of building relationships with those on his or her team to understand how to best help them develop and grow and be successful. When the leader is too busy doing things other than coaching and developing team members, there will be a tendency to treat everyone the same and focus only on group motivation techniques, often resulting in dissatisfied team members, poor performance, and high turnover.

To improve the situation, leaders need to be taught how to apply the hierarchy in everyday situations.  They need to be given the ability to work closely with those they lead, and held accountable for the development, motivation, and retention of team members.

Leadership is a serious responsibility and there is no magic formula to assure success. Maslow gave us a model 70 years ago that, although not necessarily making the job any easier, can make it much more effective. The hierarchy presents a hypothesis that spending time with people and treating them as individuals can lead to increased success for the person, the leader, and the organization. And when you get down to it, anyone who doesn't think it's important to spend time with team members really has no business being in a leadership position.
-----------------------
* NOTE: Maslow never actually presented the hierarchy in terms of a pyramid.  The pyramid was developed much later as a simple way to graphically depict the theory.

Escaping Mediocrity

Tweet

“Wisdom is born from the ideas of novices. The veterans will spout off about what's possible and what's not possible on the basis of their experience and a tiny bit of knowledge . . . So kaizen can't even get started.” -- Taiichi Ohno (as told by Michikazu Tanaka)*


Why do so many companies seem to be happy with mediocre performance? People generally consider the idea of having it all – perfect safety, high quality, short cycle times, low costs – as an unattainable fantasy. As a result, the bar is set low and everyone feels good when mediocrity is achieved.


So often, it is our experience that interferes with moving to the next level of performance. We don't set aggressive targets because we know they are impossible to achieve and, in the end, we don't want to be disappointed or suffer the consequences of missing a target. As a result, we trudge along with average results and view problems as inevitable or out of our control. If we're lucky, our competitors operate in the same mode. If not, we remain in the middle of the pack and the gap between us and one or more key competitors widens.


Energy Can Be Created
A group wide vision of problems as inevitable is what causes people to lose their energy and inspiration. When one views significant improvement as impossible, intrinsic motivation wanes and extrinsic motivation – e.g., compensation – dominates. And the longer this type of “it happens” mentality continues within a company and the more deeply engrained it becomes in the culture, the more difficult it becomes to change course.


Leaders can stop or prevent operational by first realizing that their own behaviors and the systems they created may at the root of the problem. It's not necessarily easy to do, but letting go of some traditional beliefs and methods of management can begin to drive the type of change that can energize improvement efforts and give people the confidence that they can have it all.


To do this first requires that leaders believe that problems are not inevitable and that the company has the ultimate control over its own future. In short, they must deeply believe that they can “have it all.”


Stretching Without Breaking
Leaders have to trust that the people in the organization possess the ability to successfully tackle the difficult problems facing the company. Developing this ability, though, often requires stretching people by encouraging them to accept challenging projects and targets, and supporting their efforts to succeed. They won't always be successful in achieving the target (if they are, they're probably not being stretched enough), but they will grow and develop with each project.


A stretch target refers to a target that is difficult, but not impossible to achieve and, although you can't stretch people all the time, you've got to make sure there is enough tension within the organization to keep people developing and the company's performance improving.


Getting people to accept stretch objectives assumes that they will not be penalized for missing a target. Reward systems need to support development and participation in stretching the organization, rather than merely meeting a target. If you encourage people to stretch but continue with a reward system based on meeting targets, nothing will change. People will continue to pursue safe targets and push back on any attempt to stretch. In other words, mediocrity will reign.


Organizations tend to cause their own problems. The effects of problems caused outside of the organization tend to pale in comparison to those created on the inside. Understanding and accepting this, however, often requires a shift in thinking toward the idea that mediocrity is unacceptable and that the organization can, in fact, have it all.


*From The Birth of Lean (Lean Enterprise Institute, 2009)

Unilever: Transformation & The Environment

Tweet

I love reading about organizations that exhibit lean behaviors without actually labeling them “lean.”  Although using a term like lean helps provide a common way to describe an organization’s approach and practices, and connects them to a wider community for learning and development, there is something to be said for companies that tailor the system to make it their own.  Such is the case with Unilever.

A recent issue of Fortune Magazine included an interesting article about Unilever CEO Paul Polman and the success he’s having in transforming the organization toward a more environmentally sustainable business model.  The company issued a Sustainable Living Plan, which outlines its principles and approach for its model, including aggressive targets to be achieved by 2020.

Making the Transformation

Through the Sustainable Living Plan and Polman’s drive for change, Unilever appears to have done the right things to begin a transformation that, by all indications, appears to be on track to achieving some pretty aggressive objectives.  Although the transformation process never ends, getting to the point where it truly begins to take hold requires some fundamental elements that, without which, make a vision nothing more than a hope or prayer in the future.

Not in any particular order, these elements, that fall within the responsibilities of the organization’s leaders, include:

Clarifying the Vision  Creating a clever term or buzzwords to describe the vision are not enough.  People need clarity in order to connect their activities and efforts to a transformation.  Clarity also provides a lens with which to understand whether current systems and processes support or conflict with the future direction.

Deeply Believing in the Direction  The leader must fundamentally believe in the direction and need for change, and be obsessed with making it happen.  Without this level of belief and engagement, the message will lack the energy and confidence that people need to accept and buy into the effort.

Establishing a Worthwhile Cause  In spite of what many leaders believe, the vision must go beyond profits and share price.  Getting people to buy into a vision requires connecting it to something deeper than financial gain.  This can be done through a clear connection to the fundamental need the company serves through its mission, or through an ancillary aim like Unilever’s sustainability plan.

Stretching Targets  Lean thinking requires the desire and confidence that you can have it all.  Shifting thinking toward the idea that absolute perfection is the only objective helps drive creativity in ideas for improvement.  Polman’s belief that Unilever can double its sales while cutting its carbon footprint in half is an example of stretching the organization to unleash innovation.

Removing Barriers  Talking about achieving the impossible while continuing to operate in the same way will lead to frustration and a loss of trust in leadership.  Successful transformation requires breaking down barriers and questioning the company’s systems, processes, policies, and culture to discover what is interfering with the future.  The responsibility for doing this lies entirely with the organization’s leadership team.

Having Patience . . . but Not Too Much  Transformation takes time and, the further the organization currently is from where it wants to be, the longer the process will take.  Leaders must have the patience to let people internalize the new direction, and the impatience to know when the effort has stalled and requires direct action.

Two years into the plan, Unilever has begin to show remarkable results.  In 2012, revenues increased by 10.5% and the company’s stock price, up 75% since 2009, has reached an all-time high.  On the sustainability front, the company has significantly reduced packaging in some of its largest selling products, and 10 of it U.S. factories have completely eliminated the waste to landfills.

I used to live in Rotterdam and drove by the Unilever building every day on my way to work.  Other than thinking that it was interesting how the building hangs out over the river, I never thought about the important role the company was to play in global environmental and economical sustainability.  I sincerely hope that Polman is able to keep the transformation going and prevent the natural forces from pulling the company back to traditional thinking.

Accidental Success Is No Reason To Celebrate

Tweet

Lean Rule #18: If you can’t explain it, you can’t take credit for it.

It is not unusual to expect people to be able to explain the causes of a decline in performance.  Those leading an area experiencing a decline are expected to know their processes well enough to explain what happened, as well any countermeasures planned to get the process back on track.

For a variety of reasons, though, we don’t expect the same level of understanding for an unexplained improvement in performance.  The improvement is often gladly accepted with the hope it will continue, or it is credited to something subjective like increased focus.  In some cases, the improvement is celebrated even though there is no indication that result was anything other than random.

As with a decline, an improvement in performance results from one or more causes. The inability to explain the reasons for a sudden improvement shows a lack of understanding of the process.  And without an understanding of the causes of the an improvement, it will be impossible to standardize them and assure that the improvement can be sustained.

One of the objectives of standardized work is to control a process to the point where absolutely nothing is left to chance.  Although in reality, it’s not possible to ever get to this point, it is important to keep trying.  This means continually studying the process to understand why it performs as it does.

When work is approached as an ongoing experiment, results will continually drive learning which in turn, will feed improvements in standard work.  Changes in performance - good and bad - will be easier to analyze because people will always be looking for situations where their hypothesis has failed - i.e, standard work did not result in perfect quality.

Although more commonly used than people would like to admit, hope is not an effective way to run a business.  For many organizations, transformation in thinking will be needed to create the type of environment where people become obsessed with achieving perfection – and getting there requires never stopping even after a change in behavior becomes evident.  You will know the transformation is beginning to happen when the desire and energy to study the causes of accidental success is approached with the same urgency as a sudden decline in performance.

Growing Deadwood in the Organization

Tweet

“Were they dead when you hired them? Or did you kill them?* -  W. Edwards Deming


Who is responsible for the poor performers in an organization? These are the people about whom leaders regularly complain and blame for many of the company’s problems. According to Jack Welch, they are the 10% of the workforce who need to improve or be fired.

In most organizations, there are processes for documenting poor performance and terminating employment of the nonproducers, but very little for developing and helping these people improve. It is fairly uncommon, though, for organizations to hold the leader accountable for hiring poorly or failing to help the poor performers on his or her team.

Leader as Teacher

In his book, Getting the Right Things Done: A Leader’s Guide to Planning and Execution (Lean Enterprise Institute), Pascal Dennis presents his list of Lean Mental Models to describe the methods and behaviors of lean leaders. One of the mental models is Leader as Teacher which describes a lean leader as one who continually develops the ability of team members to identify and solve problems to improve the organization’s performance.

Developing talent is one of those things that most people would agree is a part of effective leadership but how many organizations truly hold their leaders responsible for doing it? When managers complain about a team member, it should be viewed as a reflection on their leadership capabilities and used as a coaching opportunity to improve.

I have found that, in many organizations, the responsibility to coach and develop talent is much lower on the list of priorities than documenting and replacing the poor performers. This is surprising when one considers what it costs the organization to hire, train, and fire employees. In my experience, this type of situation generally results from a lack of knowledge of how to develop people and/or impatience (or short-term thinking).

Instituting Leadership

In Out of the Crisis, W. Edwards Deming wrote, “The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.” One of the areas Deming felt was in need of transformation was the poor track record and lack of personal accountability of leaders to coach and develop team members.

So what do we need to institute leadership within organizations? One step is to address the culture and systems related to team member development. Like much of organizational transformation, it is not easy, but there are five steps that can help jumpstart the process.

1. Make it difficult to fire someone for performance issues.
   When it is easier to coach and develop “poor performers” than to fire them, leaders will begin to find the time to coach rather than just give up and remove the person from the organization. One of the roles of Human Resources should be to help the leader work with the person to develop his or her abilities or find another role in the organization that would be a better fit for the person’s talent and abilities.
    
2. Recognize terminations as a failure of the system.
   A decision is made to hire someone because one or more people feel the candidate is a good fit for the organization and the specific job. When it doesn’t work out, we need to look at the hiring process to understand why it failed and what needs to be done to prevent if from happening next time. Defects within the hiring process are costly to the company and, as with any process, continual improvement is required.
    
3. Establish systems and support for team member development.
   Transformation will not happen by merely telling leaders to start coaching and developing those on their team. Leaders must be taught how to coach, and the proper systems and structure must be available to support the process.
    
4. Make it clear that developing team members is a responsibility of leadership.
   Leaders must be held accountable for developing the people on their team and understand that coaching and mentoring it is a condition of remaining in a leadership position within the organization.
    
5. Promote based on leadership abilities.
   Promotion into a leadership position must be based on the person’s existing or potential leadership capabilities, including the ability to coach and develop the talents of others. Too often, promotions into leadership are based on personal preference or a person’s performance in a current position rather than the ability to lead others.
    

Besides showing respect for people, placing a high priority on coaching and development will help the organization improve performance by reducing turnover, improving morale, and engaging more people in improvement efforts. Like any element of transformation, though, success requires clarity, consistency, and the patience to stay with the effort.
____________________________________
*I remember hearing Dr. Deming say something like this during one of his 4-day seminars but couldn’t remember the exact quote Thanks to Garold L. Markle (www.energage.com) for the wording.