In last week's message, I talked about the recruitment process, and how to improve your interviews to make sure you select the right person for your business.
Today, I want to discuss the role of performance appraisals and how to recognise and reward the right employees. You have to get this right if you want to be building a high performance team.
In my opinion performance appraisals are often not structured and so they get people into a lot of trouble. In my experience, it’s best to run them twice a year.
So here’s an approach that works well:
Schedule the first performance appraisal in November. This is when you review the journey of the last six months and the gap that may need to be considered in terms of any personal development plans. This is when you identify and bridge weaknesses.
In May, you conduct the second appraisal, which covers performance and a pay increase – if an increase is deemed appropriate. Too many businesses hand out pay rises simply as a standard condition of employment. This is not the way to build a high-performing business.
I have discussed many times how A-graders are not primarily motivated by salary. They know that if they are aligned and committed to what they do, the money will follow.
Pay increases need to be well deserved. The targets for them need to be well established beforehand, and then they are paid if these conditions are met and not paid if they aren’t.
Everything relies on performance as a whole and your performance as an individual. If you’ve achieved in the right areas of outcome-based results you will get the increase. It’s all about what shows up on the scoreboard, and making evidence-based decisions.
If the business is investing back into resources to go to the next level, there is no remuneration increase for anybody. The business is in reinvestment mode. This is an investment in the job security of everybody in your team, which is its own reward. Your team either belongs and are invested in that or they’re not.
Recognition and rewards
Don’t think it’s a God-given right for your team to receive a pay rise. Don’t take the easy way out. You must draw a line in the sand: ‘This is how we recognise and regard our great people. If this standard isn’t met, there will be no pay rise.’
Getting this wrong could be the biggest issue for your business culture in the future. I’ve seen great businesses unravel because of poor management of pay rises. Too many people think it’s standard to receive the 5% or 10% pay rise just because they turn up, but loyalty and commitment are in the heart and mind, not the back pocket.
Being rewarded for your contribution is not to do with the back pocket. It’s about building a reputation and making your contribution. Don’t get me wrong – share the profits appropriately, but set the ground rules up front and stick to them.
Everybody must know the conditions, and everybody must stick to them, top to bottom.
Have a think about why you hired somebody. It’s actually really simple. You didn’t hire them because they met the job description, or accepted the salary you were offering, or they had the right experience.
Ultimately you hire people to add value to the business. That’s it. End of story. If you can’t point to your scoreboard and demonstrate the contribution a person is making, you have to start asking yourself what you are going to do about it.
Treat your team as an investment, not a cost. The right people will return your investment many times over. Paying the right money will help you attract and retain the right people, and your business will reap the rewards.
Many businesses have problems paying the right money. Business owners think low salaries are a great way to cut costs, and then they scratch their heads wondering why they don’t get the right results. Your ability to attract and retain the best people will be highly compromised if you don’t pay the right money.
You don’t have to go overboard, but you do have to pay people salaries that reflect their value to the business. If you don’t, one of your competitors will, and that’s how you lose the best people.
Keep in mind that your best staff are always those with the most options, so you must pay them what they deserve to keep them.
Power to you!
Founder, CEO - Business Benchmark Group
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Stefan Kazakis on 5 May 2018
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