The single most powerful tool available to the CEO

July 29, 2012 | By More

Making millions every day – with minimum supervision. How do they do it?

It is the single most powerful tool available to the CEO in his arsenal of management techniques. Used with precision, the company can perform miracles, smashing sales records and revenue targets; each employee becomes properly empowered and self motivated with minimal supervision.

We’re talking about the least recognised of processes in the company – the performance appraisal.

When appraisals are done regularly, they can be short.

To many managers, the performance appraisal seems like a singular waste of time from HR, to be done once a year and to be gotten over with as quickly as possible so ‘we can go do more important work’. It is probably one of the most neglected activities by the CEO – who, of course, also have other more important things on his/her schedule than ‘baby-sit’ his senior managers, or so they think. This attitude shows a lack of understanding of what the performance appraisal can do. Lack of accountability is often the cause of management problems.

Fundamentally, all employees want to do a good job. At the end of the month, they want to know that what they have done is valued by the company – and that they are rewarded for it. We have all heard about the financial traders who regularly get tens of millions in bonuses, and wonder how can they justify that kind of pay.

How? Their reward system defines how much they are paid – which is directly linked to their performance, as defined by how much they make for the bank, i.e. Their results, and linked to their performance appraisal. They know if they achieve their targets, their pay will proportionally climb, sometimes exponentially. Their managers, vice presidents and above, do not have to monitor their work – just monitor their results at the end of each day!

There are three steps to appraising any one’s performance.

Everyone wants to improve. Management has to indicate how high.

  • The first is to define what needs to be done. These goals need to be specific, measurable, accountable, realistic and timely – SMART goals. At the bank, it is to achieve certain profit goals by the end of each day, with little or no restriction to creativity!
  • The performance of these goals are then linked to a reward system – typically it is the salary or some variable component such as commission, pay raise or bonus. In Silicon Valley start-ups, achieving some major milestone regularly culminates in a ‘beer-bust’ or company outing. Consider linking results to performance, and performance over time to pay raises.
  • When this review takes place is also important. At the bank, it is at the end of each day – i.e. they must achieve their targets by the bank’s close of day. At your company, this may be weekly or monthly, or depends on the project milestones or individual responsibilities. Each of these reviews contribute to the overall performance when it comes to the annual performance appraisal.

Doesn’t it feel like that sometimes?

The loudest complaint regarding the annual performance appraisal is that it is too time consuming – there are too many people to do it to, not enough time and so on. In following the three steps above and reviewing the results often, the annual performance appraisal becomes merely a consolidation of all the previous smaller appraisals.

Staff will already know how they are performing months before and would have had time to correct and improve before the annual performance review. You would also have been able to do coaching or performance improvements either with the staff concerned or made adjustments to the project schedule and/or business strategy.

This method is clearly scalable – the incremental effort to do performance appraisals is not proportional to number of staff as there is likely to be more delegation and less monitoring. Staff morale should be higher, teamwork more cohesive and results more visible earlier. The CEO (and managers) end up having more time to focus on strategic issues important to the business.

If you need help in your team or want to learn how to implement the most powerful tool available to manage your business, don’t hesitate to contact us. Make that a goal.

 

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About the Author ()

EngTong, pioneer and innovator. Graduated from Imperial College London with an MBA from Cranfield School of Management. Lived in Scotland, England, California, Beijing and led teams in Italy, France, Japan, Taiwan and Malaysia to do the impossible. Now based in Singapore and believes the future is to blend the sophistication of western management practices with the strength of Asian Values. Trained as a Chartered Engineer. Member of IET, Associate of City and Guilds and a certified SixSigma Champion.

Comments (2)

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  1. Rochele HC Hirsch says:

    I like the S.M.A.R.T. objectives, especially if they are based on a well-designed and strategic job description that nests appropriately with the strategy of the organization. Job descriptions need to include information on how the position “serves its constituents,” what the products and services are for various categories: strategic, operational, administrative, personal development — and personnel development. Also, who they interface with, what the outputs are, and what is their competitive advantage in their position. Clarity in how they fit in and serve the organization, coupled with SMART objectives can lead to some great discussions … and performance.

    • Error: Unable to create directory uploads/2017/08. Is its parent directory writable by the server? ET says:

      Rochele,
      Thank you for those insightful comments. You are absolutely right, the better refined those objectives are, the more powerful the tool in aligning personal goals to those of the organisation’s – for an extremely powerful win-win situation.