Wednesday, October 24, 2012

The 5-step process for optimizing employee performance

The biggest element missing from a typical employee performance review process is the process itself. Many employers do not have an established program for tracking and evaluating their employees' achievements, strengths, weaknesses, and other key performance indicators. Rather, employers often create some general success metrics, from which they arbitrarily reward and discipline employees.

But you cannot optimize employee performance if you lack deep insight into employees' contributions to the company. That's why we've created and institutionalized a 5-step process for monitoring, measuring, and optimizing our employees' performance. Our process is rigorous and well-defined, and has powered the continual improvement and advancement of our management team over the past several years. I wanted to explain how it works for my third post on HR best practices.

Step 1: Create a 90-day performance optimization plan

When employees begin working at Stroll, we give them a personalized performance optimization plan. This plan defines what we call "areas of craft," which are the skillsets and competencies we want employees to hone and perfect. Examples of areas of craft are marketing analytics and financial accounting.

Within the plan are three goals we want employees to achieve during the first 90 days of employment. These goals usually embody Stroll's core values. In addition, we provide employees with a plan for how they can achieve their goals, and we closely track and measure their progress at prescribed periods throughout their first three months. We also give employees education budgets, which are pre-approved dollars they can use for books, conferences, and other learning tools to help them hone their areas of craft.

A goal, for instance, might be to become more strategy minded, which is one of our core values. Beneath this, we provide a detailed plan of actionable steps to take that will propel the employee to success. One step might be a series of weekly meetings with different departments so the employee can assimilate with other teams and understand how they operate. We track these meetings and debrief with employees afterward to ensure they're gaining the appropriate understanding of how our teams work together.

Step 2: Review and revise

After the first 90 days, we assess employees' performance according to how well they progressed through their plans and whether they achieved the stated goals. We also review the original goals and decide if we feel any of the goals should be revised for the remainder of the year.

Once we develop an updated goal set, employees create their own action plan for attaining their goals. This approach strengthens accountability and helps increase morale, because employees are more internally motivated to accomplish the steps required to reach their goals.

We vet and approve this plan, and monitor and measure employees' progress throughout the year. If we see an employee's progress begin to slow or head off track, we immediately meet with the employee to discuss the issue and help them regain their course.

Step 3: Initiate year-end self-review

Our year-end employee review process starts with employees reviewing themselves. This self-review gives employees the opportunity to reflect on their performance, and provide insight into achievements, skills, and talents that our managers might not see. Employees assess two factors: how well they embody each of Stroll's core values, and the results they've achieved.

To assess their values, employees group themselves into three segments -- the top 20 percent of performers in the company, the middle 60 percent of performers, and the bottom 20 percent of performers. So an employee might evaluate himself to be a top performer when it comes to mental toughness (one of our values), and a middle performer when it comes to ownership thinking (another one of our values).

This 20-60-20 strategy is a modified version of the renowned performance appraisal ranking system developed by former GE CEO Jack Welch. His system, however divides employees into the top 20 percent, the middle 70 percent, and the bottom 10 percent.

To assess results, employees evaluate how they believe they measure up across four categories. The first category is to describe actual results they have achieved over the year. Next, employees describe their strengths, or the positive qualities they possess that many others do not. Thirdly, they evaluate their areas for improvement. Finally, they list their operational goals, or what they want to achieve in the next 12 months with the company.

Step 4: Conduct year-end manager review

Each employee then meets with his or her manager to discuss the review. After these meetings, managers complete a review form assessing employees' performance. The manager review form is basically a condensed version of the year-end review that employees fill out. We weigh the two reviews, and determine any promotions, compensation adjustments, changes in employees' roles, etc.

Step 5: Create a 12-month performance optimization plan

Next, we create a new 12-month optimization plan for each employee. The new plan considers all of the information brought to light from the reviews, and includes the goals we want employees to reach, skills and competencies to hone, and so on. We discuss the new optimization plans with employees to gain their understanding of what's included. Employees then begin implementing their optimization plans.

In this manner, our review process becomes a continuous conversation throughout the year, not just a year-end touch point. Our process ensures employees always understand what we expect them to achieve, and helps them optimize their performance to constantly propel our company forward.

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