Are You Spending Money on Performance Reviews or Putting Energy Into Performing?

April 2, 2012 by  Filed under: Management 

The other day, I was reading through a strategic management book by one of the most popular authors on the topic. One of the chapters specifically discussed performance reviews, and their usage in management. It made a good case for why they were important, and how companies that employ them were able to increase efficiency, shareholders equity, and profits through this process of self-evaluation.

Having been a Franchisor before retirement I knew that we had to continually evaluate our franchisee’s performance to help them make more money, thus more royalty income for us at headquarters. Still, I also understood that performance evaluations and reviews cost us money to complete, and often it didn’t motivate the franchisees to perform better, rather it just gave us a snap-shot of where we were at and what we needed to do to better ourselves in the market place.

What we eventually determined was that we’d be better off to spend the money on coaching and consulting, mentoring and helping our franchisees market their businesses locally. In other words, teach them and give them the tools to succeed and accomplish their goals, which were our goals as well; extend the brand name, and make more money. Indeed, over the years doing little consulting on the side, I’ve been weary of the whole “performance review” concept, and would advise that companies take all that energy and money and use it to train and motivate employees to perform better rather than only looking backwards at what happened.

One challenge in modern corporations is that everything must be documented and thus, it’s much easier to terminate an underperforming employee for cause. As much as I understand that challenge, I would also submit to you that it’s much better to have that employee perform at optimum and then keep that employee because they are a complete standout and are helping the company achieve its objectives and bottom line.

Additionally, it makes sense to allow the synergy of super performers leading by example to shine and rub off on the corporate culture. That’s a far cry better than penalties or scare tactics all too often used to put the fear of god into employees to meet minimum standards or lose their jobs. Indeed, I had half a notion to include a quote from a Dilbert Series cartoon here, but thought otherwise. Nevertheless, suffice it to say that sometimes corporations are short-sided and do some very stupid things.

What I hope you will take away from this is to consider the actual costs in doing these so-called performance reviews against the cost of motivating your team to perform better. Please consider all this and think on it.

Lance Winslow has launched a new provocative series of eBooks on Modern Management Concepts. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank;

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