Managing poor performance – identifying objectives

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This is part 3 of a series of discussions with our HR expert coaches on managing poor performance.  We kicked off the series with a post from Marg Lennon on identifying the issues involved in poor performance. Last week Paula Liverani-Brooks spoke about setting expectations.  Paula continues her discussion this week:

Paula Liverani Brooks executive coach
Paula Liverani Brooks, executive coach

One trap inexperienced managers often fall into is making assumptions – i.e. this is how I like to be managed, hence that is how I will manage others. ALWAYS ask, do not make assumptions, keep that dialogue going and get honest feedback.

If you are using all these strategies and the person is still struggling, it is time to get help. Your own manager and your HR Business Partner are good starting places. You should be having conversations with them, just as you are doing with your team members. They will be able to guide you, ask you questions you may not have thought of and, when things are not working, help in setting up a formal performance review.

Always take notes during your meetings and KEEP THEM! You can send an email to yourself with the dates in which certain conversations were held, especially if they were difficult ones! If you are having performance issues with someone from your team you may need to start a Performance Improvement Plan (PIP). To do this, you will need to “re-tell” the story. If you have forgotten incidents and dates and have not kept emails from the time you have asked them to do something, it will be a difficult process to start.

Remember that you are doing this to help the individuals in your team grow and make sure you are improving their performance but also to use it as examples of the (great or average) jobs they are doing when give them feedback. Be fair – everyone needs encouragement!

PIPs are a way to make official the fact that someone’s performance needs improvement. Good PIPs are specific, great PIPs cover all areas of improvement, give examples (which should have been shared prior to the PIP – this is NOT a surprise party!) of the things that have happened, and be very specific in terms of what you would like to see from now on in terms of KPIs and behaviours. As I said at the beginning, behaviours are always more difficult to correct and it’s more difficult to put an improvement plan around them. Difficult, however, does not mean impossible – so get help from your HR BP to make sure you are covering all bases and that your expectations are crystal clear.

A PIP may of course lead to a formal warning and, if the objectives are not met, at the end may also lead to termination. The person needs to be informed of all of this as you go in – your HR BP can guide you through the legalities of the formal process. Remember that the person has a right to discuss your observations and may come back with observations that differ from your own. Hence the importance of keeping accurate notes and emails.

I have seen PIPs work and this is usually when there is a genuine understanding of what has not worked and a commitment on both sides to make it work. I received a phone call, just yesterday, from a manager who was telling me about someone we had taken through a PIP together and how he was still grateful of the effort we had made to make sure the person was placed in a position in which he could improve. Those are the win-wins you are trying to achieve.

Being a manager is hard work. As Jack Welch said, “My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too.”

Contributor: Paula Liverani-Brooks is an executive coach based in Sydney and is available Australia-wide by arrangement. Paula is a Human Resources leader who has extensive experience in multinational organisations ranging from Bio-Tech to Consumer Goods and Financial institutions.

How does short-termism affect performance?

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Does managing with a short term view affect performance compared to managing for the long term? McKinsey Global Institute and FLCT Global have recently published the results of their research showing that surveyed companies with a long term view consistently outperformed their short term peers across most financial measures from 2001 to 2014.

The long term companies had the following results by 2014:

  • average revenue growth – 47% higher;
  • average earnings growth – 36% higher; and
  • average market capitalisation – 58% higher.

Executive Coach Exchange pixabay unsplash viewThey also added nearly 12,000 more jobs on average than their peers from 2001 to 2015.

What were the criteria used to judge whether a company had a long term view?

The research focussed on companies that were large enough to be under short-term pressure from investors, boards and others, with market capitalisation of over US$5 billion in at least one year during the survey period. They were evaluated against industry peers in an attempt to remove other factors that would affect performance.

The survey was based on five key assumptions:

  • Investment – ratio of capital expenditure to depreciation – assuming that long-term view companies will invest more, and more consistently.
  • Earnings quality – accruals against revenue – assuming that long-term view companies will prefer cash flow rather than accounting decisions.
  • Margin growth – assuming that long-term companies are less likely to seek unsustainable margin growth.
  • Earnings growth – assuming that long-term companies will prioritise the absolute rise of earnings over earnings per share.
  • Quarterly targeting – the incidence of making, or missing, earnings-per-share targets by less than US$0.02. This is based on the interesting assumption that long term companies are less likely to make an all-out effort to hit earnings targets by small amounts, where doing so will divert resources from greater business needs. They are correspondingly more likely to miss earnings targets by small amounts, which could have easily been achieved with the same diversion of resources.

Indicators of short-termism included:

  • cutting discretionary spending, and delaying new value-adding projects, to avoid earnings misses;
  • higher levels of stock buybacks; and
  • lower capital investment.

The study acknowledges that there are limitations in the methodology, as the assumptions had to be based on hypotheses about how a company with a long term view might behave compared to one with a short term view, and the study showed correlation rather than causation. The study was also based on US companies only.

Interestingly, the short-termists outperformed the long-termists in the financial crisis of 2008, with the long term companies taking greater share price hits, but in the following period the long-termists’ recovery was significantly better as they added an average of $7 billion more in market capitalisation than their competitors.

But perhaps the most thought-provoking findings were about those companies that began the survey period with a short term view, but gradually migrated to the long term category. The leaders of 14% of the companies in the survey were able to shift their companies’ behaviours from short to long term, with corresponding performance improvements.

The authors will next be focussing on finding out what practical steps these leaders took to achieve this turnaround.