The 4 Most Urgent Business Issues Are People Issues

Leadership. Retention and engagement. Reskilling HR. Talent acquisition and access.

Of all the critical issues faced by business and HR leaders today, those four are the most urgent, according to a recent survey by Deloitte Consulting LLP and Bersin by Deloitte. (You can read more about the survey in the report, “Global Human Capital Trends 2014.”)

1. Leadership

The need for strong leadership is, of course, a perennial challenge. But the report makes it clear—this challenge is accelerating “at all levels, in all geographies, and across all functional areas.” The reasons? The rapid pace at which today’s businesses move and change. Globalization. The speed and magnitude of technological change. The list goes on.

2. Employee Retention and Engagement

These issues have never been so prominent (among business leaders or in the media) as they are today. Unfortunately, as the Deloitte report points out, these issues have no clear owner in most organizations, neither within HR nor within the business at large. This creates a dangerous potential for inertia. “Companies should redefine their engagement strategy to move from keeping people to attracting them and creating a passionate compassionate place to work,” the report states.

3. Reskilling of HR

For many of us in HR, this is the issue that hits closest to home. After all, we’ve been working attentively for the past decade or so on transitioning from a largely administrative function to a more strategic one. And the Deloitte report acknowledges this to some degree: “… the HR and talent functions are in the midst of a transformation.” But then it goes on to say: “HR is not making the grade as companies move away from HR as people administration to a focus on people performance. An essential part of this change is the upskilling, reorganization, and transformation of HR and its relationship with business leaders and issues.”

Clearly our internal transformation isn’t complete. We must continue to strengthen our role as a strategic partner to senior and functional leaders. We can do this, in part, by advancing our methods of gathering, analyzing and sharing actionable people data. And we can improve our recruiting and hiring practices so they foster a better quality of candidates and new hires. And we can further develop our abilities to drive passion, engagement and innovation among our workers.

4. Talent Acquisition and Access

As a growing number of analysts have advised, many of our companies will not face a shortage of workers in the next several years. What we will face is a shortage of the right workers—people possess the skills, mindsets, behaviors and goals that truly are in line with our organizations’ needs. Our success depends upon our ability to find these people efficiently. “Tools such as LinkedIn, Facebook, Twitter, and others are changing recruiting into a strategic function focused on marketing, branding, and new tools and technologies,” the Deloitte report declares. Of course, using the tools to find the right talent is just the beginning. Then we need to develop them and retain them for the long term. And these challenges bring us right back to the three urgent issues covered above.

It’s no coincidence that people issues are our four most urgent business issues—or that these issues are so deeply intertwined. After all, our businesses are built upon our people.

Unless we do a better job of recruiting, managing and developing them for the long term, our sense of urgency will quickly turn to desperation.

The Price We Pay for Bad Managers

“Currently, 30% of the U.S. workforce is engaged in their work … (while) the vast majority (70%) are not …” -- Gallup’s State of the American Workplace report

This statistic sent a shockwave through the business community when it was first published. But the Gallup report actually begins with another and equally important insight that deserves our attention. Gallup’s Chairman and CEO, Jim Clifton, opens the report by telling America’s business leaders: “The single biggest decision you make in your job—bigger than all of the rest—is who you name manager. When you name the wrong person manager, nothing fixes that

bad decision. Not compensation, not benefits—nothing.”

Clifton estimates that bad managers are costing the U.S. an estimated $450 billion to $550 billion annually through the active disengagement they create.

Why are there so many bad managers, and why are they doing so much damage? A 2013 article in U.S. News and World Report offered seven noteworthy reasons. Here are the top three:

1.     Managers were promoted into management roles because they were good at something else. As the article points out, “Management is often just the next rung on the ladder, but the skills needed to succeed at management are very different from the ones that got them this far.”

2.     They get little or no training in how to manage well. New managers often receive precious little guidance on “how to take on their crucial new role and are left to just figure it out as they go along.”

3.     Managing well is hard. It requires an understanding of challenging concepts such as “how to set goals that are the right mix of realistic and ambitious; how to give feedback that's clear, specific and actionable; how to stay involved without being overly hands-on; (and) how to hold people to high standards without being a tyrant,” among others.

Clearly, with losses of $450 billion to $550 billion a year, we need to choose our managers with greater care. Managing others is demanding and it requires a whole host of people and business skills that must be deftly exercised. If we’re going to give our managers every chance to succeed, they need better training and more coaching in the art of leading others.

Employers spent an estimated $62+ billion on training in the U.S. alone last year. But I’d be willing to bet that a relatively small portion of that went into training our managers to be better managers. It’s time we started making and taking that investment seriously.

Are You Ready To Create the Organization of Your Dreams?

It’s not beyond your reach!

Not according to the authors of a 2013 Harvard Business Review report, “Creating the Best Workplace on Earth.” They affirm that you can indeed create your dream organization—i.e., one that operates to its fullest potential and gets people to deliver their best work day in and day

out—if you nurture six key attributes:

1.     Let people be themselves.

2.     Unleash the flow of information.

3.     Magnify people’s strengths.

4.     Stand for more than shareholder value.

5.     Show how the daily work makes sense.

6.     Have rules people can believe in.

The authors identified these attributes by talking with and surveying hundreds of executives across the world over the course of three years. They admit that few organizations possess all six attributes … that there are costs and complexities associated with implementing them … and that creating a dream organization is definitely “aspirational.”

Even so, these attributes are found to varying degrees within the most productive and successful companies on the planet. So they represent a useful blueprint for those of us striving to transform our organizations into dream organizations. By choosing a few of these attributes and doing what we can to nurture them within our own companies, our employee engagement and commitment levels could soar.

And, as the authors of the HBR report point out, focusing on employee engagement and commitment can pay powerful dividends:

“Research from the Hay Group finds that highly engaged employees are, on average, 50% more likely to exceed expectations than the least-engaged workers. And companies with highly engaged people outperform firms with the most disengaged folks—by 54% in employee retention, by 89% in customer satisfaction, and by fourfold in revenue growth. Recent research by our London Business School colleague Dan Cable shows that employees who feel welcome to express their authentic selves at work exhibit higher levels of organizational commitment, individual performance, and propensity to help others.”

Creating “the organization of your dreams” or “the best workplace on Earth” might sound like pipedreams to some but the potential rewards are very real. And that makes these dreams worth reaching for.

Negative Feedback Can Be a Positive Experience

A couple of weeks ago, we published a post examining the myth that everyone hates performance reviews. It referenced a study that looked into how people respond to receiving negative feedback in a performance review.  The upshot: not a lot of folks enjoy negative feedback. Big surprise, eh?

But the fact remains … negative feedback is an inevitable and invaluable part of performance reviews. After all, managers need to let their direct reports know where and when they’re missing the mark. But there are constructive ways of delivering negative feedback.

Here are a few things to keep in mind when it comes time to provide negative feedback to your employees:

·      “The purpose of a fair 360 review is to maximize performance and not punish the employee in any way.” That quote is from an interesting article on the HR Daily Advisor’s website, and even though it’s about 360 degree reviews the point is valid for all performance reviews. The article goes on to remind us that one of the main goals of performance reviews is to boost productivity. That won’t happen if a manager uses reviews to punish, threaten or browbeat employees—even those whose performance is missing the mark.

·      The ultimate goal of performance reviews is to inspire success, not highlight failure. Performance reviews are one of the tools we use to get our people to perform at their best and hit the targets we set for them. In addition to showing them specifically where they’re living up to or exceeding expectations, we also need to show them where they’re falling short. But we need to do so constructively—by offering useful insights, guidance, understanding and patience. We want (and need) our people to succeed. Replacing them is costly and time-consuming. So it’s in our own best interest to inspire and coach them to want to do better, especially during performance reviews that contain negative feedback.

·      Don’t just dwell on the past. Performance reviews offer the perfect opportunity to inspire your people by talking about their future. Think of the signal you send to people when you provide them with fair and necessary negative feedback but then move onto discussing their future (the kinds of roles and work they want to take on in the next three to five years, the kinds of learning and development resources they’re interested in, etc.). You’re showing them that there is still a place for them within the company, despite temporary performance hiccups, if they raise the bar.

It all comes down to this: performance reviews are only as effective as we allow them to be. If we do a poor job of delivering negative feedback—or positive feedback, for that matter—the review won’t do our people or our organizations much good.

If we learn to inspire success and ignite the desire to do better in our people, then the performance review can be a truly transformational experience.

Let’s Not Panic Over the Quit Rate. But Let’s Not Ignore It.

New data shows that workers are not afraid to leave their employers, even during economically challenging times like these.

The U.S. Labor Department recently reported that roughly 2.4 million American workers quit their jobs in November of 2013. More remarkably, the percentage of workers resigning from their jobs—known as the “quit rate”—is now higher than it was before the recession: America’s quit rate was 1.8% in November 2013 … up from 1.2% in September 2009.

Okay, there’s no need to push the panic button. A significant share of this spike in the quit rate came from low-wage jobs in the food services and retail industries. Even so, the quit rate should serve as a useful reminder to all of us about the importance of retaining our top talent. After all, they’re the most valuable workers we have. They’re also the ones who have the most employment options and, therefore, the easiest time walking out the door.

We now know that today’s employees are motivated to remain loyal to their employers through a complex mix of intrinsic and extrinsic factors. Intrinsic factors include how connected they are to their work, the sense of fulfillment and pride they get from their work, and the feeling that they are making a valuable and valued contribution to the organization, among others. Extrinsic factors include compensation, non-cash rewards, performance reviews, promotions and demotions, and the like.

Of course, savvy employers address all of these factors and the corporate world has given more and more attention to the intrinsic factors they once ignored. Many employers, for example, are building employee engagement levels by giving workers more mentoring, offering them exciting “stretch” assignments, and giving employees roles and responsibilities that are more closely aligned with their personal career objectives.

At the end of the day, retaining our top talent is all about rewarding and compensating them effectively. And that means much more than “paying” them appropriately. The most effective rewards strategies are total rewards strategies, which encompass compensation, benefits, learning and development, career advancement opportunities, and more.

If you’re interested in reading more about total rewards strategies that can help your organization retain its top performers, download a copy of our white paper, “Put Your Money Where the Motivation Is: Compensation Strategies to Retain Your Best People.”

Hating on Performance Reviews—and the Old Switcheroo

"Study finds that basically every single person hates performance reviews.”

With a headline like that, it’s no wonder a recent Washington Post article continues to get attention. The problem is it’s not true—not even according to the research the article cites as its

source.

The research was conducted by psychologists at Kansas State University, Eastern Kentucky University and Texas A&M University, who “looked into how people respond to negative feedback they receive in a performance review,” according to the article. It also says the researchers “asked 234 staffers at a large southwestern university to rate their feelings about a performance review they received three months earlier.”

Based on those facts, it’s a little difficult to understand how the Washington Post can justify the headline it ran. Okay, it’s VERY difficult to understand. But we definitely understand why they ran it: it’s a sure-fire attention grabber. It’s like a lot of recent headlines that hate on performance reviews.

Although it seems fairly obvious, we’d like to point out that there’s a significant gap between everyone hating performance reviews and a few statistics showing 234 individuals at one university generally don’t like getting negative feedback during a review (who does?) and some portion also disliking a recent review.

If this research does highlight anything it’s not that everyone despises performance reviews. It’s that many managers continue to do a less than stellar job of conducting reviews. If they truly want to help drive employee performance effectively, managers need to learn to be more constructive, guiding and mentoring—even when they’re providing negative feedback.

The Washington Post article is really just the latest in a long line of articles that pull the old headline switcheroo. Dozens of pundits and bloggers have written headlines like, “It’s Time To Eliminate Performance Reviews,” and then offered advice on how to conduct performance reviews properly. Clearly, it’s a popular attention-getting device.

Even so, performance reviews continue to be a necessary and effective tool for helping our employees grow, develop and even excel. But we need to conduct reviews appropriately and in ways that reinforce our employees’ commitment to doing the best work they can.

To read more about performance review best practices and how to rethink your appraisal process, download our white paper, From Dread to Moving Ahead - Taking the Pain Out of Performance Management.

Performance Measurement Is Not a CYA Activity

Here are a few lines from the recent Forbes article, ‘If You Can't Measure It, You Can't Manage It': Not True, by Liz Ryan:

“Measurement is our drug in the business world, because we believe that by measuring everything and sending the good news upstairs to the C-suite we can ward off the bogeyman of business, namely Getting On the Boss’s Bad Side. Measurement is our favorite CYA activity. It’s an inherently fear-based process, because the reason we measure everything in business is to prove to someone who’s not in the room that we did what they told us to do. … Measurement is our opiate of choice in the business world precisely because it temporarily allays fear all the way up the ladder.”

Yeesh! There’s no mistaking Ms. Ryan’s contempt for much of the measurement being done in today’s business world. My own feelings about measurement—and her opinion of it—aren’t nearly so black and white.

On the one hand, I wholeheartedly agree with the spirit of what she’s written. Measurement as a CYA activity is a colossal waste of time, energy and focus. On the other hand, I completely disagree with the way that she has characterized measurement—especially when I think of it in the context of performance measurement.

• Performance measurement isn’t about CYA. It’s a legitimate and proven way to drive employee performance toward delivering specific outcomes. In this sense, performance measurement is a CYW activity—an ongoing effort to Calibrate Your Work to the evolving goals, targets and strategies of the company.

•  Performance measurement is not about sending good news upstairs to the C-suite. It’s about keeping our leaders honestly informed of the performance of our individuals and teams. Sure, some of the news will be good. But, if we’re doing our jobs well, much of what we report will be about critical skill gaps, talent shortfalls, training and development needs, turnover forecasts—in short, the “bad news” our senior leaders need to proactively manage the business in a truly strategic fashion.

•  Performance measurement is not inherently fear-based for many organizations. It’s a process driven by the need to have our people achieve specific goals and deliver specific outcomes. These goals and outcomes are tied directly to the company’s competitive position and its ongoing success. Savvy employers don’t rely on fear to “motivate” people; they give their workers the feedback, guidance and developmental mentoring that will enable them to excel. Engagement, not fear, is inherent in sound performance measurement.

•  Performance measurement is not an opiate meant to sedate us. Quite the opposite. Performance management is meant to be a wake up call, when necessary—a cold dose of reality that opens our eyes to our own shortcomings and weaknesses. But it’s also meant to keep us aware of everything we’re doing well. We need both sides of the story to build performance-driven, winning cultures. Information is the key, and a great deal of this vital information comes out of the performance measurement process.

Again, I understand and agree with the larger point that Ms. Ryan was making about the business practice of mindlessly “measuring everything.” And I understand that some employers still haven’t gotten everything right when it comes to performance measurement.

But I also believe there’s only one way we’ll all get better at managing and maximizing the performance of our people—by measuring it and then taking action either to support or change it.

Can Performance Reviews Actually Help You Improve Employee Engagement?

The simple answer is yes—if you leverage reviews to develop targeted learning plans for your employees. More on this in a moment …

Gallup’s most recent State of the Global Workplace report is an ongoing study of employee engagement in the workplace, and it contains more than a few striking statistics. Here are two

that hit us like a sledgehammer:

·       Only 13% of employees worldwide are engaged at work.

·       In the United States, 30% of employees are engaged at work.

The good news (if you can call it good) is that our domestic engagement rate tops the global average. But it still leaves a lot to be desired. A stunning 70% of our workforce is either only moderately engaged or outright disengaged from their work.

The Gallup Business Journal website recently published an article titled, “5 Ways To Improve Employee Engagement Now,” which is worth reading. It offers sound insights on how to gather truly accurate engagement data from your own workforce, where to focus your engagement improvement efforts, and why frontline managers are so critical in building and maintaining employee engagement.

Another powerful way to enhance your organization’s engagement levels is to leverage information from performance reviews to help you develop targeted learning plans for each of your employees.

This is an often-overlooked strategy for building engagement because many managers treat performance reviews as a mere formality or a necessary evil. The fact is every performance review is an opportunity—an opportunity for managers to develop and mentor their people, and an opportunity to gather crucial information about the areas in which employees excel and struggle. This information is developmental gold. It should be used as the basis for selecting learning curriculum that will build up strength and close skill gaps.

By developing targeted learning plans for your employees, you openly demonstrate your commitments to them. You actively support their personal and professional growth. And you significantly boost their chances of advancing within the organization.

This won’t go unnoticed by your employees. Indeed, they’ll reward you with their loyalty and a deeper level of engagement.

The Pros and Cons of Tying Compensation to Performance Reviews

At Reviewsnap, we've seen firsthand the benefits delivered by a pay-for-performance structure that closely ties compensation to the performance review process. However, this isn't the right approach for every employer or every company culture.

 

Like most human capital challenges, tying compensation to performance reviews has its share of pros and cons. Here are a few of the most critical:

The Pros:

1.     It takes the “mystery” out of pay increases.—Employees often complain that raises and reviews are based on intangibles (how well their manager likes them, office politics, etc.) and not applied consistently. By tying reviews to compensation, performance clearly becomes the determining factor in compensation. The stronger the performance, the better the raise. But this approach demands that managers measure performance as accurately and objectively as possible, basing their reviews on concrete performance metrics and pre-communicated goals. If they don’t, it undermines the entire intent of pay for performance.

2.     It attracts top talent.—Research continues to show that top performers still cite pay as a main motivator. As Kerry Chou, Senior Practice Leader of Compensation at WorldatWork, noted during the company’s Total Rewards 2013 Conference and Exhibition, a recent WorldatWork survey revealed that better pay is the number one reason key people leave one employer for another.

3.     It can make administration easier.—With performance reviews tied directly to compensation, many employers find it improves the efficiency of integrating pay increase information into their payroll systems and generating follow-on reports. When compensation isn’t tied to the review process, HR or payroll staff members often have to take special steps to manually enter increases into the payroll system.

The Cons:

1.     Objective reviews aren’t easy to provide.—In order for pay for performance to work effectively, employees must be “rated” in some way but the rating must be objective and evenly applied. This simply doesn't work for all company cultures. For these companies, pay for performance can actually be counter-productive and introduce an air of unhealthy competition among employees who need to collaborate. In short, if the review process is perceived to be unfair, highly valued qualities such as trust, cooperation and teamwork can go right out the window.

2.     If the process isn’t clear, it can be confusing to employees.—Under pay for performance, a manager needs to be crystal clear in communicating precisely what is driving compensation. Is it goals, for example, or competencies? Let’s say a company's review process is based primarily on competencies but this isn’t clearly understood by an employee. She works hard all year to achieve specific performance goals and exceed targets. When she receives a lower-than-expected raise (because her communication with key team members has been consistently poor, for instance), it’s no wonder that she’ll go away disappointed, demotivated and confused. Bottom line, employees need to know how exactly they’ll be judged and what will drive their dollars.

3.     Compensation can overshadow the importance of reviews.—When a salary discussion comes on the heels of a performance review, it can be difficult for the employee to focus on the feedback he’s been given. Helpful critiques (both positive and negative) and guidance are eclipsed by the amount or lack of pay increase. Some employers overcome this by separating the review and the compensation discussion by several months. Others hold compensation discussions just once annually, while they hold several performance reviews throughout the year. If multiple performance reviews are held, employees must understand that compensation changes are based on the entire year’s worth of reviews—not just the most recent one.

At the end of the day, each employer must decide the compensation and performance review strategies that best fit its culture. Whatever your final choices are, remember they’ll form bedrock of how your employees feel about working for you—and how dedicated they’ll be to giving you their best efforts day after day.

Communicate your strategies and expectations clearly. Give your people well-defined guidelines. And empower your managers to reward top performers appropriately. These are the keys to compensation and performance success.