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Turning the annual review into something useful: Recognizing shortcomings and making positive changes improves employees and your business

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Turning the annual review into something useful: Recognizing shortcomings and making positive changes improves employees and your business

One day two decades ago, I sat at my desk, flipping through an employee's annual review and growing more frustrated by the minute. I remember thinking, "Man, what a waste of time. There's gotta be a better way to do this."

My compliance-conscious HR people had insisted I use the same tired performance review form that had been around since the dawn of the Industrial Revolution. You ask the same generic questions (repeatedly circling "meets expectations" or "exceeds expectations"), then drop it in the employee's cobweb-covered file.

W. Edwards Deming, the father of Total Quality Management, said the standard review "nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry, and leaves people bitter." No wonder so many leaders are contemptuous of it.

Sitting at my desk, I thought, "These multiple-choice questions are pointless. What should I be discovering about employees at review time?" Four themes came to mind.

1. What's he done in the past year versus what he said he would do?

2. What's he doing well that I can reinforce and affirm?

3. What could he do better, and how can we help him?

4. Where does he want his career to go, and how can we help him? I figured the best snapshot would require observations and suggestions from four perspectives -- the employee's, his subordinates' (if applicable), his peers', and mine.

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So I sketched out a Teammate Review Form. The employee being reviewed would fill out a form himself, and ask five to six subordinates and the same number of peers (all of whom I'd select) to do the same. (The employee's version also asks him to list his career goals.) The anonymous forms would then be submitted to HR, which would merge/purge the responses and compile separate results for peers and subordinates. That brand of raw feedback packs a powerful punch.

People respect the boss' comments, but nothing sinks in like a written self-appraisal and the straight scoop from colleagues.

Armed with this no-holds-barred input, I'd then sit down with the employee, his Goals Activity Report, and his individual operating plan (an annual list of goals derived from the company's strategic plan). His triple-decker review looked like this:

1) Review results. We'd briefly check the status of his operating-plan goals and any other high-priority objectives assigned during the year. This was largely an overview since I'd been monitoring his progress during our weekly one-on-one sessions.

2) Assess strengths and developmental needs. First, I'd ask the employee to read me the positive attributes he listed in his self-appraisal. I'd endorse his assessment, and then share his subordinates' laudatory observations: "OK, Joe, here's what your team members had to say. Four of them said you're really caring; three of them say you're running tighter, more effective meetings."

Next came favorable feedback from his peers: "Wow, a couple of your peers also noticed you've been more empathetic. You must be putting extra effort into that. Way to go." Then it was my turn. I'd affirm everyone else's positive remarks and compliment him on anything else I noticed over the past year. (Although I have a pretty good memory, I'd also rely on the reminder notes I dropped in his employee file throughout the year.)

Then it was time to move on to NTIs (needs-to-improve areas). I'd say, "Now, let's review everyone's tips, including your own, on how you can become even better." As he read aloud his own suggestions, I'd acknowledge each one with a head nod or brief comment. After reviewing what his subordinates and peers had written, I'd share my critique.

We'd then dive into the details and develop action plans to fix what we agreed needed fixing. If he had a temper, he might enroll in an anger-management class. If he regularly exceeded payroll projections, I'd get the CFO to mentor him. For broader NTIs ("Always running late"), we'd add to his Goals Activity Report his desire to be five minutes early to appointments; that way I'd be able to monitor his progress during our weekly one-on-ones.

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One more check-and-balance mechanism: I'd note the goal in the section of the performance review called Bring Up at Next Annual Review. (I always studied an employee's previous annual reviews in preparation for the upcoming one.)

The best employees were realistic about the review and used it to their advantage. "All that honest feedback taught me a lot about myself," said Hank, a key exec. "But if I had 10 or 12 things that needed improving, I was never crazy enough to think I could fix all of them. I'd pick out the top five and work on those for the year." Hank paid particular attention to the multiple complaints and ignored the one-offs. "Maybe you ticked somebody off and it was payback time," he said. "Welcome to the world of management."

After wrapping up the NTIs, I'd recap and affirm what he'd been doing well: "Overall, Joe, you're doing a super job. You've got a great outlook, a superior work ethic, and you interact well with others. I'm impressed with your determination to get on top of the challenges we discussed, like keeping your temper in check, clamping down on payroll expenses, and getting more disciplined."

3) Look to the future. I'd ask him to read me the career goals -- both two and five years out -- listed on his self-appraisal. If his abilities matched his ambitions, I'd help him determine the steps necessary for him to go from daydreaming to day-doing. If he wanted to nab a promotion, I'd suggest a seminar or mentor, which he'd duly record on his Goals Activity Report. I'd conclude the Roundtable Review by congratulating him and thanking him for his efforts.

Brad Burley credits the Roundtable Review for his promotions. "I was very comfortable expressing to my supervisor what my career goals were," said Brad. "Out of those discussions, I went from being a store manager to being a wholesale sales manager to being a regional manager. That kind of upward mobility was built into the culture."

The Roundtable Review is a potent developmental tool. So I was upset when a sales associate at our Milwaukee store told me he hadn't had a review in two years. I apologized and told the store manager and regional manager who were there with me to make sure his review was completed before the week was out.

At the next executive committee meeting, I brought up the incident and said lapses like that were inexcusable. I asked for a monthly listing of every employee whose Roundtable Review was 30 days past due. The company-wide memo that went out the next day said managers violating our review policy could expect to answer not only to their boss, but also in person to the executive committee. End of problem.

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Sauce for the gander

It was 1994, but I can still see the shell-shocked faces of the other CEOs. In Quebec City for an American Management Association conference, I had just shared the results of my annual Roundtable Review, in which the six vice presidents who reported to me anonymously listed their view of my strengths and NTIs. The NTIs were things like:

* You're very careful of your own time, but not always with others' time. You get too involved in micro issues and often cause meetings to run late.

* In quizzing deeply for problems, you come up with small, insignificant things that waste people's time on follow-up.

* You try to come across as caring, but you're not always genuine. Example: You asked an employee in the presence of his spouse the name of another employee's spouse. The first spouse then heard you go up and say, "How's it going, Mary?" The two spouses got together and joked about it afterwards.

The consensus of the other CEOs: "I can't believe you let your people talk to you like that." "Hey," I fired back, "if they're thinking it, I wanna know. At least then I can deal with it." Was it painful to read the negative stuff? Absolutely. You always like to think you're viewed by colleagues with equal parts awe and admiration. But don't kid yourself. If you're committed to being the best leader you can be, you've gotta let Toto pull back the curtain and expose the flaws of the great and powerful Oz (that would be you).

Yes, the "Tell me how I'm doing" step in the Ask/Tell Technique extracts some useful information, but there are some things employees just won't say to your face. Digging up the really good dirt requires three conditions:

1. Confidentiality. For my annual Roundtable Review, the people who reported directly to me wrote their critiques and submitted them to HR, who merge/purged the comments and presented them to me anonymously.

2. Receptivity. Solicited, brutally frank feedback must be accepted with grace. Early on, I often heard comments like, "You say you're open to us giving you feedback, but you should see your facial contortions when we do; it's a kill-the-messenger look." They were right. My spoken gratitude belied body language that said I'd rather be walking barefoot over hot coals. I had to train myself to listen reflectively, rather than defensively, because an organization isn't healthy unless its people can speak their minds, respectfully, without fear of reprisal.

3. Action. Confidential feedback has to be acted upon -- quickly -- lest your people quit bothering to drop comments into the pipeline. I basically had three responses: "That's valid and I'll try to do better," "I hear what you're saying but this is why I do it like that," and "I totally disagree and here's why."

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For the record, here's how I responded to the three NTIs listed previously at the next executive-team meeting:

* You're very careful of your own time, but not always with others' time. Very valid. I am re-committing myself to be more timely and to better respect your time and schedules.

* In quizzing deeply for problems, you come up with small, insignificant things that waste people's time on follow-up. Some nitpicking probably occurs. I'll try to be better at backing off if there really isn't a problem. But I know that real problems tend to stay hidden from leaders and surface only after deep probing. It's a "lesser of two evils" thing, and the way I'm going about it is better than not finding the bigger problems. Therefore, I will continue to actively seek out the challenges facing our team.

* You try to come across as caring, but you're not always genuine. With the number of employees and spouses we have, I'm not able to remember every name. I have asked, and will continue to ask, somebody's name when I don't know it. I will, however, make sure no one else hears me doing so. I would hope, though, that if someone does overhear me they would think, "What's wrong with asking someone's name?" After all, it's better than avoiding somebody or not caring that I don't know their name.

(In hindsight, I think I was a bit too prickly here. I see how people might find it insincere to ask someone's name from a third party and then approach that person like an old friend. I am more straightforward today and willing to tell someone that I'm embarrassed to say I can't remember their name.)

Sure, I was occasionally hurt and frequently humbled by the criticisms I received. But I tried hard to take them to heart and change what needed to be changed in order to become a better person and a better businessman. Burying my head in the sand was not an option.

As Winston Churchill said: "Criticism may not be agreeable, but it is necessary. It fulfills the same function as pain in the human body. It calls attention to an unhealthy state of things."

Best-selling author Tom Gegax, cofounder and chairman emeritus of Tires Plus stores, served as that company's chairman and CEO for 24 years. By the time he sold the company in July 2000, it had mushroomed from a concept sketched on a restaurant napkin to a market leader with 150 upscale stores in 10 states and $200 million in revenue.

Thanks to Tom's warm-hearted, tough-minded approach to management, and his team's relentless focus on customer service, the company's turnover rate ranked among the industry's lowest, and its guest enthusiasm index reached 98%. He was named Modern Tire Dealer's Tire Dealer of the Year in 1998.

In 2000, Gegax founded Gegax Management Systems (www.gegax.com) to help growing companies raise profits and reduce stress through fast and affordable business management guidance. His most recent book, "By the Seat of Your Pants: The No-Nonsense Business Management Guide," is already a national bestseller. It can be ordered on the www.moderntiredealer.com home page.

Gegax can be reached via e-mail at tom.gegax@gegax.com or by calling (877) TOM-GEGAX (866-4342).
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