Tag Archives: Morale

How Do You Improve Performance Reviews? Three Approaches

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Situation: A CEO’s company sets objectives for employees; however these objectives frequently aren’t met. There are lots of excuses for not meeting objectives. Most frustrating, employees are eager to share good news, but hide bad news and performance issues. What have other CEOs done to prevent these problems? How do you improve performance reviews?
Advice from the CEOs:
• A service company instituted frequent measurement of performance against objectives. Top staff monitors key metrics in weekly meetings that last at most one hour. They use a problem solving approach to address obstacles and to correct performance. The CEO oversees the direction with staff making and instituting changes to correct low performance. The key is in the metrics. Metrics must measure meaningful performance and must be tied directly to company objectives.
• A light manufacturing company had a history of holding on to non-performing individuals for too long. The CEO addressed this by instituting objectives and eliminating non-performers. The result was reduced complacency and improved morale. Performing employees had been tired of taking up the slack for non-performers. Document non-performance and establish a solid case for eliminating the non-performing employee. Documentation is critical to avoiding wrongful termination suits.
• A general observation: if a company has objectives, but lacks either meaningful metrics to measure performance against objectives or a regular review process to assess performance against objectives, then the objectives are meaningless. The CEOs’ experience is that establishing meaningful SMART (Specific, Measurable, Appropriate, Realistic, Time-Bound) objectives and regularly assessing performance in a collaborative team atmosphere are the most important ingredients to an effective performance management system.

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How Do You Make Hard Decisions on Employees? Four Points

Situation:  A company needs to adjust expenses to control costs. It’s largest expense item is payroll. They are evaluating three options to adjust staff costs to anticipated revenue. Alternative A – Cut everyone back to part-time. Alternative B – Cut a few employees, but keep retained employees busy. Alternative C – A balanced approach between these alternatives. From others’ experience, which is best? How do you make hard decisions on employees?

Advice from the CEOs:

  • The unanimous response from the group – for employees, Alternative B is the most positive approach. Extended cutbacks in hours has been painful for all and led to grousing. Once staff were cut it helped retained employees to focus on their work.
  • When it comes to vendors, use Alternative A – don’t pay everything that you want to pay, but pay what can be paid consistently and predictably. It is critical as this is done to make sure that promises are kept.
  • When it has been necessary to make cuts – how has employee morale been maintained?
    • In the short term, those who remained have been happy to have a job. Longer term, companies have had to do more than this.
    • One option is to set quarterly revenue and expense targets. When gross or net margin targets have been exceeded, companies committed to share some of the excess with employees.
  • Before making any decisions, have a meeting with employees and openly ask them what they’d like to see that will help to build company culture and enthusiasm.

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How Do You Adjust to Tight Cash Situations? Eight Options

Situation: A company is faced with a tight cash situation. A combination of increased interest rates, a business slowdown, and slow deliveries from suppliers have contributed to this. The CEO needs to find ways to stretch available cash, or to rely on other alternatives to assure that commitments are delivered to clients. How do you adjust to tight cash situations?

Advice from the CEOs:

  • One company actively and consistently uses their bank line of credit to cover end of quarter payables. They pay this down promptly as cash comes in.
  • Profit sharing represents 20 -25% of another company’s total compensation. When profits are down this gives them some cushion because payouts are lower.
  • One company maintains frequent and open communication with their vendors. This makes it easier to get them to work with the company when cash is tight.
  • Another company has vastly increased sales activity. This has helped to improve the business pipeline, and this in turn improves the story that they can tell their bank and vendors. It helps to reassure them that they are a good partner and a good credit risk when cash is tight.
  • It’s a good idea to maintain regular contact with the company’s best funnel clients – the ones who bring in new business. As a result if their competitors are struggling then they get a shot at their business.
  • It is better to cut select people than to put a large number of people on extended reduced time. Hard as it is to let people go, this is better for morale.
  • For less skilled operations work, one company used to use temp workers. When they’ve discussed the need to cut back with permanent employees and asked about this work, they were told that they could cover this work in their available time. The team really pulled together and were grateful for the opportunity to remain full-time.
  • Another company continues to model their pipeline, and plans for adjustments in customer demand. This enables them to act sooner rather than later when adjustments are needed.

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How Do You Handle Underperforming Employees? Four Points

Situation: A CEO has several employees who report to a single manager but who are not performing to expectations. The manager is seeking the CEO’s assistance. When faced with a similar issue in the past, the CEO has turned up the pressure on an individual until he or she decided to leave on their own. Is this the best option? How can she resolve this situation and, at the same time, improve company morale? How do you handle underperforming employees?

Advice from the CEOs:

  • Letting underperformers go sends a positive message to the rest of the team. It reinforces the message that a high level of performance is expected, and that a low performer won’t be allowed to penalize the overall performance of a team.
  • There is a serious downside to just turning up pressure until an individual leaves.
    • Even low performers usually have friends among the staff.
    • Turning up the pressure on an individual without telling them why creates an impression of unfairness. “Why is Joe being asked to do all of this – particularly when it doesn’t look like he can handle the work?”
    • The most serious downside is that a high performer becomes fearful that the company may have the same “unfair” expectations of him.
  • It is healthier to sit down with an underperformer and face the problem. This also reduces exposure to charges of discrimination.
    • Plan a meeting with the manager and each of the under-performing employees. In each meeting, tell the individual that specific areas of their performance are not up to company standards. Provide objective, measurable examples. Listen to the individual’s reaction.
    • Work with the manager to develop a program with each individual to assess whether they are willing to improve their performance over a specified time frame. Inform them that there will be a decision as to whether they will remain on the team at the end of the time period. Again, listen to their reaction.
    • If an individual does not respond positively and improve performance, it will be necessary to fire them. However, they have received fair warning and a fair chance to demonstrate that they can produce the expected performance.
    • If an individual isn’t interested in performing to company standards, the assessment period gives them time to look for another job.
  • Because these individuals report to their manager, coach the manager on the process outlined above and have her oversee the outcome. Help the manager to make a call after a period as determined with the manager.
    • Continue to coach and support her during this process.
    • Make it clear to the manager’s team that she is in charge of this process.

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How Do You Address Employee Departures? Four Points

Situation: A CEO is concerned that three members of the R&D Team recently left the company. All were in their late 20s and were close. All three cited receiving better offers from another company. They have been replaced by what the company considers better talent. The CEO is concerned about the impact of this turnover on company morale and performance. How do you address employee departures?

Advice from the CEOs:

  • In working with Gen Y through Millennial employees, it may be necessary to adjust expectations in terms of employee loyalty, work ethic and longevity. Younger generations have a different perspective. Learn from this and adjust expectations accordingly.
  • Be frank with new employees up front. Plan their career progression out 36 to 48 months, and during this time give them great training. If they are interested in the company and career progression beyond this, discuss options with them.
  • Use outside resources to do a 2–3-month post-op on the three who left, as well as to help monitor employee attitudes on an ongoing basis.
    • The outside resource can conduct interviews by telephone, on a confidential basis, to assess the reasons why the employees left once emotions have died down. This resource should only provide summaries of the interviews without identifying which past employee said what. This will prompt them to be frank about their feedback. This can yield valuable lessons.
    • Similarly, use an outside resource to conduct confidential telephone interviews with random current employees on a periodic basis. Let employees know that they will be contacted by an outside agency on a random basis, and that their responses will be confidential. The purpose is to better respond to employee needs in the work environment. This will help to assess whether the departures were an extraordinary event or whether they are an early warning of more systemic challenges within the workforce.
  • The increased salary requests of those who left may be symptomatic of a “boom and bust” economy.
    • When things are heating up, and through an employment peak, there is increased pressure to raise wages, accompanies by increased turnover among employees who believe that they can make more elsewhere.
    • Most companies who are able to survive successive boom and bust cycles do not respond to the wage pressure, knowing that each boom is followed by a bust. Those who inflate their wages to keep up often end up dying during the bust.

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How Do You Get and Keep the Right People on the Bus? Four Solutions

Situation: A company is experiencing an employee turnover rate of 12%, vs. a company target of 6-7%. This has occurred due to a change in the company’s business environment during the recent downturn as they sought to optimize business practices. Long term employees no longer felt like the office was the “same place.” How do you get and keep the right people on the bus?

Advice from the CEOs:

  • Turnover has been a problem principally in the home office – the largest office – but has not been a problem across the rest of the country.
    • Has the company looked at what works in the other regions, vs. what has not been working in home office?
    • Could the problem be related to size and structure of the home office operation? The home office has 55 people whereas the other regions are composed of smaller working groups of 12-15 employees. Does it make sense to look at smaller working sub-groups within the home office, or some different structure that more closely mirrors the regions with low turnover?
  • What can be done to boost morale in the home office?
    • Try creating smaller working teams to mirror the smaller team atmosphere of the other regions.
    • Create a “small office” atmosphere. Build walls to visually separate subgroups – creating their own “space” to foster subgroup affiliation and bonding.
    • Increase the autonomy of the subgroups – and enhance the career path possibilities within the subgroups.
    • Focus on successes, what the “Teams” are achieving, and the contributions that they make to customers and the company. Express Team successes in terms of the impact that they’ve had on customers.
    • Look at the Olympic Team model – individual performers who support each other ferociously to accomplish Team performance goals.
  • Create a visual mural on a large wall representing – perhaps with some humor added – the vision of growth for the company and the opportunities that will accompany this growth.
  • Ask the home office team for input on how to build strong functioning teams or challenge them to define and build the teams.

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How Do You Create and Communicate Urgency? Seven Solutions

Situation: A CEO perceives that the company has a conflict between performance and planned timelines. Of concern is performance against key metrics like pipeline performance and closing new business. A sense of urgency isn’t present. How do you create and communicate urgency?

Advice from the CEOs:

  • Management knowledge of company financial status and performance against key metrics – particularly key drivers like pipeline performance – is critical to their being able to assist the company.
  • A company decision to focus on project profitability may have the unintended consequence of exacerbating the lack of urgency. If revenue growth lags, the only option for managers who are tasked to hit a profitability target is to cut expenses. This delays projects and can negatively impact morale.
  • Accountability comes from meetings. Not 1-on-1 meetings but team meetings. Peer pressure is an important component of accountability. Nobody wants to be the individual who is consistently behind on projects or initiatives.
  • The challenge may be more external than internal. When business closes more slowly then everything else slows down: hiring, new development, investment and profits. All of these are driven by new business acquisition.
  • Another CEO has same issue with her contracts. All contracts include a timeline. If work or deliverables slip, the customer wants to slow down delivery and billings. Her solution is to include stop work and delivery delay fees in the contracts.
  • What actions would others take to address this?
    • Institute progress payments. For example, instead of charging 50% up front and 50% on contract completion, shift to, for example, 50/30/20 with the 30% due on completion of project framework. This way, only 20% can be delayed due of customer timing issues.
    • Built financing into total pricing. The customer is free to delay projects, or aspects of projects, but there is a charge calculated into delayed delivery which covers the cost of money and additional management.

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Do You Focus on Taxes or Investment? Eight Considerations

Situation: A company’s accountants advise them to make distributions for tax purposes. Simultaneously, the company’s future is based on technology and staying ahead of the competition. This requires ongoing investment. Do you focus on taxes or investment?

Advice from the CEOs:

  • The focus of the answer is distributions and company morale, not tax planning. Think about the impact on the team. Are there considerable differentials in compensation within the company? If so, this may be impacting morale.
  • Differentiate bonuses from variable compensation. Make bonuses special. This starts at the top. The attitude should be that if someone works hard, they will be compensated. Once bonuses become assumed, they are just regarded as part of the overall compensation package.
  • Smaller geographical units can help retain a small company atmosphere and drive. As a company grows, similar results can be achieved with Tiger Team projects.
  • If the organizational structure enables this, foster friendly competition metrics between offices – and publish the results.
  • One company distributes performance data to top staff – with color-color coded red/yellow/green metrics based on performance. All red and yellow numbers require an explanation. The company has seen a significant reduction in red and yellow metrics since they started this.
  • At company meetings – publicize and recognize top 10 performers in various areas. Recognition boosts morale.
  • Company events boost teamwork and morale. These may include company barbeques, in-house cooking shows created and run by staff, and quarterly outings – bocce ball, tubing, sailing on the Bay.
  • Growth is accompanied by change. When a company starts it’s a mission. After 15 years it’s a job. This is a function of growth, and it takes ongoing creativity to keep individual employees excited about their job and role.

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How Do You Communicate a Company Sale? Six Guidelines

Situation: A closely-held, non-public company is in negotiation for a possible sale. The CEO seeks guidance on when and how to communicate this to employees. What event would demand communication? The CEO is concerned that if the sale falls through this may significantly damage employee morale. How do you communicate a company sale?

Advice from the CEOs:

  • The trigger point for any employee communication will be due diligence. At this point, you may have a serious buyer.
    • Going into due diligence, limit updates to those who will be involved in the process.
    • Most acquisitions do not go through, so a broader communication risks disrupting the company – unless you are very confident that the sale will proceed.
    • Prior to due diligence, there is no benefit to communicating any possible sale to employees.
  • What message do you deliver to those who will be involved in due diligence?
    • We are entering a due diligence. This is an exercise that we’re doing for our own education so that we understand the value of the company. This is just a drill.
  • Keep your eye on the business and don’t be distracted by the offer.
  • Have a good idea of an acceptable sale price.
    • For a company with intellectual property or significant assets, three to five times EBITDA is a good starting point – unless the sale is a strategic buy to the buyer.
  • A possible deal is often spoiled by terms and conditions that the buyer attaches to the deal.
  • One buyer (at any one time) is the same as no buyer. When owners get serious about selling the company they will need a broker to develop multiple buyers, to advise them through the sale process and to defend their interests.

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Can You Metric Company Culture? Two Suggestions

Situation: A company has done a number of things to build company morale. Participation is variable depending on the activity. The CEO wants to build a system to measure employee morale. What metrics do you use to measure changes in your culture over time?

Advice from the CEOs:

  • The Gallup Organization has focused on this issue perhaps more than any other organization in the world. They find that regularly conducting surveys allows you to measure and improve your culture over time. Their surveys focus on 12 questions that they have found most critical to employee morale within a company.
  1. Do I know what is expected of me at work?
  2. Do I have the materials and equipment I need to do my work right?
  3. At work, do I have the opportunity to do what I do best every day?
  4. In the last seven days, have I received recognition or praise for doing good work?
  5. Does my supervisor, or someone at work, seem to care about me as a person?
  6. Is there someone at work who is interested in and encourages my development?
  7. At work, do my opinions seem to count?
  8. Does the mission/purpose of my company inspire me make me feel that my job is important?
  9. Are my co-workers committed to doing quality work?
  10. Do I have a best friend or mentor at work?
  11. In the last six months, has anyone at work given me a review or talked to me about my performance/progress?
  12. This last year, have I had opportunities at work to learn and grow?
  • Notice that not one of these has to do with compensation or benefits. Rather they focus on employee perception of how they are managed, whether they have to do the tools to do their job, and feeling that others at work care about them.
  • Another measure to watch is employee retention – particularly of your best employees.

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