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How Do You Manage Performance?

performance_management

Continuing with the theme of “performance management” from our previous post, which shared input from our Partners in Improvement, this post will focus on the specific activities associated with the practice.

While most readily agree that managing employee performance requires first and foremost clear communication of what is important for the organization and how the individual could best contribute, they also recognize that, as one Partner put it, “the #1 reason people don’t do what you want is that they don’t know what you want.”

So, communication about targets and goals can be listed as the first requirement or item on the list of “best practices.”

Further, this communication must not only be done as part of the strategic planning and execution process, but also as part of the everyday conversations and coaching between employees and their managers.

Along similar lines, coaching was considered to be the most important and effective Performance Management method.

This would include providing frequent constructive feedback for individuals, implementing a mentorship program, coaching of teams, and
senior managers exhibiting the behaviors that they are looking for.

The Partners recommended sitting down with people regularly to have a dialog about what is going well, what help they need. Immediate feedback is most useful.

The next activity identified and discussed was performance reviews. Not surprisingly, annual performance appraisals came in for some criticism — but there were also some suggestions for how they might be done better.

Several Partners mentioned that the annual reviews were a source of angst and dread, perhaps by both parties. They were always late and were considered among the more onerous of management responsibilities.

Others questioned their effectiveness. For example, when a bank implemented formal performance appraisals that evaluated Loan Officers on the dollar value of loans approved and measured the Credit Department on ‘the quality of the loan portfolio’ (i.e., no defaults), it reduced profits and created dysfunction and animosity. The Credit Department was careful to take no risks, while the Loan Officers focused on quantity, hoping that something, at least would be approved.

The bank as a whole suffered.

This example is by no means an exception — Purchasing Departments are often measured by purchase prices, leading to excess inventory when they order in bulk and substandard material when they give too much weight to price instead of incoming quality and timeliness. One of the drawbacks of annual individual performance reviews – especially when tied to compensation — is the high risk of driving the optimization of individual metrics while sub-optimizing the organization as a whole.

But one of the Partners said that their performance review process was greatly improved by increasing the frequency from annual to quarterly. The feedback discussions were both more timely and less stressful.

Others found that when reviews were de-linked from salary adjustments they could focus more effectively on coaching. But then another participant said that they had stopped doing reviews when they had a salary freeze and not able to offer bonuses because the reviews and the salary increases were linked to one another so closely,

Finally, the amount of time spent on performance management varied from 10% to 45%, and it seemed to differ in large part based on whether an organization was focused on formal annual reviews or on frequent coaching or people and evaluation of processes. The majority leaned toward more time and more frequency of interaction.

Our next post will complete the series and will focus on the motivational aspects of performance management.

What is Performance Management?

performance_management

Recent posts have focused on retaining and engaging people, so it seemed logical to continue the discussion about how we interact with one another in the workplace.

Certainly Performance Management embodies this activity.

When we asked our Partners In Improvement to define Performance Management, we heard a range of perspectives: the strategic orientation of the organization, process Performance Management, setting of goals and objectives, individual performance appraisals, daily direction and feedback which reinforces the behaviors we are looking for, providing tools and coaching to help people be successful, and rewards and recognition.

From the strategic perspective, Performance Management begins with the identification of what’s vital to the organization. If these priorities are not clear and it is not clear what role everyone plays in the priorities, the rest Performance Management is unlikely to mean much. One of the Partners measures customer loyalty, sliders/defectors, and Continuous Improvement (CI) impact at all levels.

Several of the Partners pointed out that Performance Management refers not just to people management, but to process management, and plant management (which one of the Partners called the “3 Ps – People, Plant, and Process”).

One of the Partners explained that she always starts by measuring the performance of the process. To improve the process, based on the root cause analysis she would work to improve the people performance, tools, materials, methods, the environment, or whatever factor was driving the performance of a process.

However one might define the practice, one issue on which everyone agreed was that Performance Management must be an every day job for managers, and it must be approached on a proactive basis.

Our next post will pick-up from this point, and will share perspectives on the specific activities that comprise an effective approach to Performance Management.

Retaining Talent Through Engagement

Continuing the theme of “retaining talent” from our previous post, we have found the combination of productivity and engagement drives many things, including employee retention.

In reality, and like most things in business or in life, it’s the ongoing execution, work, measurement, and improvement projects (which sounds remarkably similar to Deming’s Plan—Do—Study—Act cycle) that will yield better performance results as well as higher levels of employee engagement.

In fact, we have found engagement can be a bi-product of productivity, as opposed to the other-way-around, which is the more accepted ‘conventional wisdom’ opinion.

Thus, it is by taking a formalized approach to creating a workplace culture that is linked with team productivity, performance, and job satisfaction that an organization will achieve the fore-mentioned levels of performance gains, engagement, and talent retention.

In a white paper shared in the past, we described an approach that aligns nicely with the ISO 10018 People Involvement and Competence guidelines. It incorporates Continuous Process Improvement (CPI) as well as Continuous People Involvement (CPI), so we call it CPI².

ISO 10018 and the concept of CPI² will require a formalized plan for improving the work and the workplace… a formalized plan for helping people to achieve higher-levels of productivity and job satisfaction, which will yield better business performance as well as the “skyrocketing” levels of engagement we all strive to attain.

To achieve optimum results, a system for gathering, synthesizing, and analyzing data must be developed, followed by a rigorous method of priority-setting to decide what to work on.

People at all levels must be involved; they must be educated, empowered, and engaged so that the concept of improving both their work and their workplace becomes cultural, and so they become emotionally-invested in their work and workplace.

Supporting this perspective is research conducted this past year by Dale Carnegie and MSW Research, which revealed that although there are many factors that impact employee engagement, there are three key drivers:

  1. Relationship with immediate supervisor
  2. Belief in senior leadership
  3. Pride in working for the company

Recognizing these drivers as “targeted outcomes” is a good first step for business leaders who would like to initiate and document (a-la ISO 10018) a formalized approach to engaging people into their organization’s quality and improvement system.

A Good Question About Retaining Talent

retain

We all know that unwanted workforce turnover is disruptive and costly*. In a recent article, fuse, a workforce management firm, shares four of the most common reasons employees opt to leave a job. It’s likely we know these reasons as well…

But the good question posed in the article is whether or not we are taking proactive steps to avoid unwanted turnover!

In case you’d like a quick refresher, the article identified the following as the most common reasons employees leave:

  • Poor relationship with their manager
  • No clear path forward
  • Good work isn’t valued
  • The job doesn’t promote work-life balance

With a little forethought and planning, it shouldn’t be difficult to avoid these pitfalls; and, as the article states, “With the market for skilled talent becoming more and more competitive, smart employers will take stock and do whatever it takes to keep their best and brightest satisfied.”

To add additional perspective, when Gallup announced that the percentage of engaged workers had, for the first time in a very long time, increased just before the pandemic, their research showed that the primary reason for the increase (from 30% to 36%) was that organizations had made improvements in their approach to developing people.

  • the cost of replacing employees is somewhere between 90-200% of their annual salary based on a recent SHRM study!

The Foundation of a Functional Team

trust

When Patrick Lencioni set out to write about the attributes and behaviors that determine if a team will be functional (that is accomplish the results it set out to achieve) , he described five key attributes in terms of a pyramid with results at the pinnacle. As he stated in Overcoming the Five Dysfunctions of a Team, the foundation of the pyramid was trust.

Effective teamwork is, Lencioni asserts, “the one sustainable competitive advantage that is largely untapped.”

When people set aside individual needs for the good of the whole, they get a lot more done well in less time, at less cost. Not only that, effective teamwork also gives people a sense of connection and belonging.

But many teams and organizations, if not most, never get to the level of high performance. Participants are reluctant to set aside their own agendas and focus on achieving the team’s goals. And in most cases, the trouble stems from a lack of trust.

Teams must trust one another, Lencioni says, on a fundamental emotional level so they are comfortable being open with one another about their weaknesses, mistakes, fears and behaviors. If people fundamentally trust one another, they are not afraid to engage in passionate dialogue around issues and key decisions that are critical to the organization’s success. This “unfiltered debate” ensures that all ideas and objections are put on the table and worked through so the team can arrive at a genuine commitment to the decision. Genuine commitment enables team members to hold one another accountable for follow through and to put achieving the results ahead of individual agendas.

So, trust is essential to having open and honest dialogue and debate, which leads to better decisions, better commitment, and better follow through: i.e., competitive advantage. It is that simple.

Does it work?

In There is Nothing as Fast as the Speed of Trust Stephen Covey cites a study showing that high trust organizations outperform low trust organizations by nearly 300%. Covey describes a lack of trust in an organization as a tax that reduces the value of every interaction. People waste time worrying about their image. People don’t hear the message clearly enough because they are factoring in assumptions about intentions. They often take things the wrong way — wasting time and talent. People who are unafraid to admit truth about themselves have no need to engage in political behaviors that waste so much time.

Tough Problems v. Tough-to-Implement Solutions

Continuing with our previous post’s theme of problem solving, business leaders often find themselves with these kinds of difficult decisions: significant problems or opportunities versus proposed solutions that cost too much, take too long to implement, or carry adverse unintended consequences of their own.

Here are some examples:

  • A large chemical company had opportunities to increase sales by $60 million if they could expand production capacity, but the capital investments would cost $20-$30 million and would take 18 months to implement.
  • A data processing company received too many complaints about quality but the market and margins would not bear additional costs for ‘QC.’
  • The manufacturing company needed to cut raw material costs without weakening its suppliers.
  • Breakthrough technology that cost too much to be commercially viable.
  •  Centralizing the Purchasing function had reduced responsiveness and efficiency but when it was decentralized, it lacked sufficient controls and access to expertise.

In most problem solving situations, the first idea is the barrier to the second idea. Steve Jobs hit the nail on the head, observing, “When you first start off trying to solve a problem, the first solutions you come up with are very complex, and most people stop there.”

In every example cited above, the people working to solve the problem had stopped at the first idea. Once an idea was developed the attention shifted toward evaluating the return on investment and lining up support rather than improving or replacing the idea with something better, faster, less expensive, or more effective. They stopped too soon!

The best idea is almost always hidden somewhere behind the first idea. In order to arrive at the best idea, you have to keep going. As Steve Jobs observed, “… if you keep going, and live with the problem and peel more layers of the onion off, you can often arrive at some very elegant and simple solutions.”

What’s the Problem?

Problem

Few decisions have a greater impact on the likelihood of success of an improvement project than the definition of the problem.

Stephen Covey says that the way we see the problem is the problem.

Albert Einstein warns that we cannot solve problems at the same level of thinking with which we created them.

The way we define and communicate the problem the team is expected to solve will greatly influence the speed and efficiency with which a team will complete its work, the degree of satisfaction between the team and the project sponsor, and the efficacy with which an organization prioritizes and sequences the problems to devote resources to.

Consider these different approaches to defining the same problematic situation:

  • Order fulfillment is too slow and is costing us a lot of business.
  • Our lost sale rate has increased from an average of 125 per month over the previous six quarters to 190 per month this quarter.
  • Our Order-to-Delivery timeline has increased to 60 days due to a bottleneck in packaging.
  • Profits are down.
  • Sales has missed their target for the past three months.
  • Packaging is too slow due to old equipment.
  • Order-to-Delivery time from the Mid-western plant in Q3 increased by 15 days over the same quarter prior year, and was cited as the cause of 42 lost sales in Q3 impacting revenue by $270,000 in the quarter.

Some of these are statements of fact, while others are judgments. Some are very broad, and others are very specific. They may ALL be valid observations about the same situation, yet the problem-solving efforts they would guide would differ greatly in urgency, efficiency, and efficacy.

Developing a good problem statement at the start will help you define and lead an improvement project that most efficiently arrives at better results.

Four Practices That Lead to Better Results
A good problem statement is not rocket-science, but simply requires some solid pre-work, thoughtful consideration & discussion, and the restraint to avoid speculating before the analysis. If you follow the four basic guidelines for problem definition, you will greatly improve the chances the right problem will get solved for good.

  1. Write It Down. If the problem is not written, shared, and discussed, all participants will feel comfortable that everyone is on the same page about the problem they are trying to solve. Such will not be the case, and the blissful ignorance about their different expectations will eventually give way to a combination of bewilderment, conflict, frustration, disappointment, and a great deal of inefficiency.

    Organizations can avoid the problem-solving frustration and rework by surfacing right up front any different views of the problem they are trying to solve. The best way to surface and discuss any differences is to write it down and discuss it with all participants, to ensure it is well understood and agreed to. In addition to getting everyone on the same page, only a written problem-statement can be tested against the next three qualities necessary to effective problem-solving teams.
  2. Include a Quantification of the Waste the Problem is Causing. Yes, this means you have done some pre-work, because no problem statement is as effective as it should be if it does not indicate why we care.

    Quantifying the waste makes certain that the organization does not invest scarce resources on something that will not have a significant impact. Every organization has more opportunities for improvement than capacity to execute on the improvements.

    Quantifying the waste also helps elicit the urgency and support that the project merits. A problem statement that is “…costing the organization $18,000 each week in excess charges” will receive more urgency than a problem “…costing the organization $800 a week.” And problems for which no discernable and measurable impact can be found probably should not receive much urgency at all. Quantifying the waste in the problem statement helps an organization make sure that they are working on first things first.

    The statement of impact best fits at the end of the problem statement but identifying and quantifying the waste should come at the start of the problem definition process. If we cannot reasonably measure the impact a problem is having on an organization, we cannot reasonably prioritize the effort.
  3. Be specific about the metric you are using to size the problem. Malcom Forbes once observed that “It’s so much easier to suggest solutions when you don’t know too much about the problem.” The rub is that you will have a hard time determining if your solutions are effective.

    To avoid this pitfall, your problem statement should incorporate the measurement you expect to move the needle on, the current baseline for that metric, and both the time and the place that your baseline measurement was taken.
    • The metric: If order-to-delivery timeframe is our problem, the problem statement should be a factual statement of order-to-delivery times. Maybe order-to-delivery times have deteriorated or maybe they have always led to lost orders. Either way, a recent measurement of order-to-delivery times must be part of the problem statement if this is the problem you intend to solve.

      For example: “order-to-delivery times have grown to 6 weeks and was cited as the reason for 25 lost orders last month.” A description such as “too long” is too general, but teams may be tempted to substitute this judgment instead of a metric because a recent measurement is hard to get.

      Bear in mind that if the problem is too hard to measure up front, chances are it will be too hard to measure later on when the team needs to evaluate the efficacy of the solution. Even if the team can gather measurements later, they will have no baseline with which to compare the new results.
    • Timeframe: When have you observed the problem? Is your metric from last week, last month, last quarter, or last year?
    • Scope: Where are you seeing the problem? Does the metric describe what is happening at one plant or all plants? Is it one product, a product family, or all products? By making the problem statement factual and specific about what observable phenomenon we saw when and where, we create for the team a clear and effective baseline against which to measure improvements.
  4. Omit Judgments and Opinions about Underlying Causes. Maslow observes that “If the only tool you have is a hammer, you tend to see every problem as a nail.” We all have biases, and when we make assumptions about the underlying cause, we bias the process to overlook other possible causes.

    In theory, this could be a time-saver — if you hit upon the correct root cause. However, in our experience this rarely happens. Making assumptions about the causes almost always makes a problem more difficult to solve instead of easier to solve. This is because if one or more important underlying causes are overlooked by the bias introduced in the problem-statement, the problem will not be solved before the project goes through quite a lot of rework.

    Most people have some sort of bias or hunch, slight or strong, about possible underlying causes of most problems and they will consider these first.

    For example, some people easily incline toward thinking that the technology is not what it could or should be and theorize that this is the cause of most of the problems they encounter. Others are quick to suspect that the incentives are misaligned. And still others may speculate first that processes are not sufficiently defined and adhered to. These hunches are developed based on experience and people with diverse experience and biases tend to serve a project well.

    However, no matter how confident in the theory about the root cause, inclusion of an assumption about the cause or the solution in the problem statement is more likely to impede results than accelerate them. A hunch makes an excellent servant (in the problem analysis phase of the project) but a poor master. Leave any comment about possible underlying causes out of the problem statement.

    If you follow these four guidelines, your project will have a much better chance of arriving at, implementing, and validating an effective solution that produces lasting results.

Why Quantify

quantify

When engaged in Continuous Improvement (CI), a key objective is to identify, quantify, and eliminate waste.

People often ask why it is so important to quantify the waste – and the answer is straightforward: quantifying the waste does three things for you.

  1. First, it helps you distinguish between the “big‐hitters” and the nice‐to‐have improvements so you focus on the most important opportunities first.
  2. Second, it makes the organization aware of the cost of a delay in tackling a ‘big‐hitter’. If a problem is wasting $5 million a year, every week of delay is wasting nearly $100,000, so the organization wants to make sure nothing slows this improvement effort.
  3. And third, quantifying the waste enables you to have more meaningful discussions with other parts of the organization whose support you need to change the processes that cause the waste.

If you’re wondering about how to go about the process of quantification, here are three simple guidelines:

  1. Identify if and how the problem affects the four forms of waste: lost sales, material costs, time, and capital costs. If the problem causes delays, think through and estimate the form of waste that the delay results in. Does it increase capital such as inventory or receivables? Does it delay sales and revenue? Does it cost you customers and future business? Does it require additional people time? Many problems will affect more than one of the four forms — lost sales, material, time, and/or capital. For example, excess inventory not only ties up capital, but may increase the number of people who need to manage it, the warehouse costs to store it, and the probability of scrapping it. All these factors can be reasonably estimated with some historical data and getting close enough to the work.
  2. Quantify the impact, recognizing that assumptions and estimates will probably have to be made. If you have or can gather data, use the data and document where you got it. If you must use assumptions or estimates, document how you came up with that — who did you talk to? Perhaps document a range that you are pretty confident about.
  3. Do the math to roll it up into annual dollars.

Guess Who’s Trying to Sink Your Boat!

crew team

At a Gallup presentation the audience was asked to imagine their business was a ten-person crew boat.

The speaker then went on to share data (at the time) indicating approximately 30% of the US workforce fell into the “engaged” category, which meant that they were invested in their work and workplace, that they made a strong discretionary effort, and worked at a very productive level.

If these people were on your crew boat, they would be diligently ‘manning their oars.’

We were then informed that just over half of the US workforce fell into the disengaged category. These people were not highly-motivated and, though they made a fair effort each day, they were more likely to do only what had to be done – and sometimes less!

If these people were on your crew boat, they would occasionally dip their oars in the water but mostly sit idle looking at the scenery.

The remainder of the nation’s workforce, we were told, fell into the actively disengaged category. These people tend to undermine the work, spread rumors, call out sick at higher rates and do only the bare minimum.

If they were on your crew boat, they would most likely be trying to sink it!

Makes a strong case for implementing a formalized engagement plan, wouldn’t you say?

Developing Teams – Start the Engagement Process Early

Onboarding

When engaged in continuous improvement (CI) it’s important to frequently assess our approach, starting with the foundation.

When it comes to engaging employees, the process begins with onboarding, which is the process for welcoming new employees. Among other things, onboarding is an opportunity to make new hires feel confident in their decision to accept the position as well as in their new role and team.

Despite the fact that onboarding sets the tone for the rest of your new employee’s experience at your company, and despite the fact that effective onboarding has a strong impact on retention and productivity levels, data shared by SHRM, Indeed, and others indicates that over 80% of businesses don’t have a very good onboarding plan.

If you’d like to improve your employee onboarding process you might start by considering the following best practices:

  • Start communicating before your new hire’s first day
  • Prepare well in advance
  • Set up the employee’s workspace before they arrive
  • Send out a new employee announcement including name, role, etc. If done by email, cc them
  • Pair new employees with a peer mentor / “buddy”
  • Ask new employees for their feedback early-on in the process and several months into the process