Companies started throwing out performance rating scales and stopped ranking people from best to worst more than ten years ago. The first lesson learned is conversations about compensation and conversations about performance improvement are two different conversations. Companies that still combine these conversations spend too much time looking backward.
Tip #1: The compensation conversation stands alone. Compensation is based on the contribution to the company. That contribution is defined by the execution of the position’s purpose, the well-written job description. Performance standards should clearly define the expectations and behaviors.
Tip #2: Mitigate biases. There are so many ways bias creeps into evaluations. That is one reason scores are becoming a thing of the past. Solicit input by asking at least one other person who can provide meaningful feedback specific questions and request specific examples.
Tip #3: Calibrate the managers’ assessments of their employees. Have managers get together with their Performance Appraisals to ensure the outcomes are fair and within budget before they are finalized. Have managers discuss their high potentials, good performers, and others to develop career planning objectives.
Tip #4: Build managers feedback skills. Managers must understand and believe in a growth mindset to be heard and not be a threat. Managers benefit by understanding SCARF to have quality conversations that motivate and focus on building capabilities. Developing a culture where employees and managers ask for feedback is the least threatening environment.
Tip #5: Expect managers to have a variety of purposeful conversations throughout the year to drive performance. The compensation conversation may continue to be an annual end of cycle event. The cycle begins with Performance Standards, a mutual understanding of the position’s purpose using the job description. This dialogue may establish goals or goal setting might be a subsequent conversation. Ongoing conversations about goals, just checking in, touching base should become natural and quick. Recognition conversations and refocus conversations may take longer but need not be more than a few minutes. These conversations require a sentence or two of documentation.
Tip #6: Decide how to hold managers accountable for these conversations. For instance, NOVA Chemical did not define the frequency of conversations and asks for a few sentences of narrative because they wanted to eliminate the checkbox mentality. The Wonderful Company requires Goal Setting, End of Cycle and ongoing conversations. Goals + values = enterprise contribution and what + how = overall results. That company, as well as others have developed conversation guides. The GAP expects monthly performance conversations that may be “on the floor” and 30 seconds in length.
Tip #7: Performance management is bigger than individual compensation. CIGNA expects both manager and employee to document insights from each of their four conversations per year. These takeaways become action items for the division. The focus is the company’s performance improvement, and this gives people a sense of meaning.
The big win is changing the focus from compensation to growth. Valuing employees’ thoughts and developing employees’ capabilities results in meaningful contributions to the company’s growth.