Gruntled Employees

The dumbest managerial tool: annual performance reviews

A recent article in The Wall Street Journal discusses some of the problems with annual performance reviews and how a few companies are abandoning them. In the article, ("Performance Reviews Lose Steam," Dec. 19, 2011), Rachel Emma Silverman mentions that even HR professionals recognize the flaws in the system:

Performance reviews have long received poor grades, even from those who conduct them. Nearly 60% of human-resources executives graded their own performance-management systems a C or below, according to a 2010 survey by Sibson Consulting Inc. and WorldatWork, a professional association. And one academic review of more than 600 employee-feedback studies found that two-thirds of appraisals had zero or even negative effects on employee performance after the feedback was given.

Silverman writes that about one percent of companies are ending the practice, citing a report of the Corporate Executive Board. Well, it's a start, I guess.

In Chapter 8 of Firing at Will, I discuss annual performance reviews at length, calling them "the dumbest managerial tool." Here's why:

First of all, emphasizing that employees’ performance should be measured on an annual basis suggests that there’s less reason to measure it on a more-frequent basis. That’s insane. First of all, who can possibly remember how a particular employee was performing ten or eleven months ago? So what ends up happening is that the past month or two get undue weight in the “annual” evaluation.

Second, if the purpose is to correct poor performance or behavior, why would you wait till the end of a year to do that? Performance and behavior issues need to be dealt with when they arise, not saved up till the end of an arbitrary twelve-month period. Similarly, if the appraisal is intended to reward good behavior or performance, why in the world would you wait? “Hey, Alice. That thing you did back in March was terrific. Way to go.” Alice: “Huh?”

Third, if the purpose is to tie the evaluation to a decision about a possible pay increase, that’s also foolish. In a well-run and well-managed company, pay decisions should be made on the basis of the employees’ individual contributions on an ongoing basis, not based on the mere fact that they avoided attrition for another calendar year.

My fourth problem with the annual basis is that managers tend to blow it on the timing. I always did. An evaluation that was intended to go out in early January would just as likely get finished in late March. That’s normal, because managers usually have more-important managerial tasks to accomplish, like running the actual business.

The problem is, if you tell your employees that you’re going to do annual performance appraisals in January, they’re going to expect to receive them in January, along with some sort of a pay raise. When January slips into February and then March finally comes around, those employees are going to be unhappy with you, even if they know you’ve been busy doing real work.

Companies end up using performance reviews as a crutch in place of actually managing their employees real-time. In fact, the reviews do more harm than good. Don't be part of the 99%. Get rid of annual performance reviews, and instead teach your managers to manage.

Millennials don't want 9 to 5

Dan Schwabel writes at TIME.com that millennials are forcing employers to think differently about how they structure the workforce:

Aside from the early adopters of workplace-flexibility programs, many other companies are hesitant because of the traditional “command and control” approach laid out for older generations. The challenge these companies face is letting go and trusting their young employees — even when they are telecommuting or using Facebook regularly at work.

Many companies fear that, without structure, employees will be distracted, not as engaged and less productive. In fact, the opposite is often true. A trusting work environment breeds more-loyal employees and increases efficiency.

via moneyland.time.com

Firing at Will listed as "Hot New Release"

As many of you now know, my new book Firing at Will: A Manager's Guide was published by Apress last week. It's an unlawyerly guide to the riskiest thing you can do at work with your clothes on: firing employees.

So far, so good. Amazon is currently listing it as number 7 on its Kindle list of "Hot New Releases in Business Management & Leadership." (It's right behind the Steve Jobs biography. No, not that Steve Jobs biography. The other one.)

You can order the Kindle version here, the paperback version here (convenient for stocking stuffers), and the Nook version here. If you have any friends or family members who are managers, supervisors, or employers, Firing at Will can make their lives 37 percent easier (that number completely made up; your mileage may vary).

Checking on the spider

One of the benefits of closing my law firm and working out of a home office is that I'm there when my daughters get home from school. And because of this, I discovered a ritual that's been going on for quite some time without my knowledge.

My youngest daughter, Samantha, who's eight, gets off the school bus every day near our house and races to our front patio. Before she goes to the door, though, she stops and checks the bushes next to the patio. For months now we've had this ginormous spider living in the bushes building this incredible web. It's big: one of these days I expect to see that it's caught a squirrel or maybe the neighbor's poddle for lunch. (Take a look at the photo. The spider is the huge brown blob on the left. Click the photo to biggify.)

Every day, Samantha stops, looks for the spider, makes sure it's still alive, checks out the progress of the web, and sees what other unfortunate critters it has caught. Then, satisfied, she comes into the house and tells me about her day.

Managers could learn a lot from this spider-checking process.

Too many managers rely on performance appraisals and timesheets to see how their employees are doing. They would be much better off getting out of their offices every day and checking in on their employees rather than waiting for the employees to come to them with their problems.

When I would tell other lawyers that I had gotten rid of timesheets in my firm, they would always ask me, in outraged or incredulous tones, "Then how do you know if your associates are working?" And I would smile calmly and say, "By managing them." I'd explain that I'd go around and check on my lawyers and see how they were coming with their various jobs and projects. This would give me much more information than looking at an entry that said, "4.3 hours — Attention to brief."

Managers: go out and check on your spiders every day.

Fist-bump fireworks and other employee metrics

Managers often struggle with how to measure employee performance. It's natural to shy away from purely subjective ways of judging how well your employees are doing. It's much easier to have an objective metric that you can just look at to track your workers' results.

Ironically, employers generally base their hiring and firing decisions on primarily subjective opinions about the employees. But when it comes time to actually manage them, employers long for something they can look at in a spreadsheet. Law firms, accounting firms, and other professional-knowledge firms are the worst offenders, using the timeworn metric of billable hours to substitute for subjective evaluations of performance.

Many employers use annual performance appraisals to rate employees' performance. They figure that it's easier to check off a few boxes and plug in a few pat phrases than to actually (and subjectively) evaluate performance. In Firing at Will, I describe the annual performance appraisal as "The Dumbest Managerial Tool." To find out why, and to learn about better alternatives, check out the book. (It's in Chapter 8.)

Many employers have asked me how to measure performance if they don't use billable hours or annual performance appraisals. The answer I give them is to look around their business, figure out what really matters, and measure that. Professional-services visionary Ron Baker devotes an entire book on the subject called Measure What Matters to Customers: Using Key Predictive Indicators (affiliate link). In it, Ron talks about the sort of KPIs that professional firms could use, such as turnaround time (which is really the opposite of billable hours), innovation sales (selling new services), customer loyalty (retention rates), share of customer wallet, and others. (Ron prefers "key predictive indicators" to the more common "key performance indicators" because the former is forward looking.)

At Shepherd Law Group, we unintentionally developed a way of recognizing whenever one or more of our lawyers had a successful client outcome. It didn't matter what it was: winning a discovery motion, landing a new client, settling a case. We would note the successful event by exchanging "fist-bump fireworks." This was a goofy ritual of exchanging fist bumps followed by a slow descent of wiggling fingers to connote fireworks. This came from a silly but memorable McDonald's commercial. (I've looked all over the web to find it, but was unsuccessful.)

Although we never put this into practice, we could have tracked FBFs — either as a firm or by lawyer — and charted our performance. Naturally, a greater number of FBFs per month or per quarter would be a positive result. This might sounds like a silly performance metric to you. But as the saying goes, "You can manage what you can measure." Measuring FBFs or other key predictive indicators will help you manage toward having more occasions for them.

What KPIs could you institute in your company? Share them in the comments.

Vote "Yes" on social-media law

It's kind of exciting to witness the birth of a new area of law. (OK, maybe it's only exciting to lawyers. Look, we need the excitement, all right?) When new things arise in society at large, the law has to play catch-up. Thus the civil-rights advances in the 1960s led to discrimination law. The rise of the Internet in the 1990s led to a brand-new area of Interwebs law. Terrorism at the turn of the century led to a body of terrorist-related law (not to mention the whole PATRIOT Act). And so on. Since law is an industry that tends to favor precedent and authority over innovation, it can take us a while to get our act together.

Now it's social media's turn. Over the past five years, it has become clear to even the most Luddite of lawyers that social media is not a fad, that it's here to stay, and that it's rife with issues that will eventually involve lawyers. Which means we're going to need an area of law called social-media law. (Yes, with the hyphen. When you use it as a phrasal adjective before a noun, you hyphenate it. End of lesson.) And which also means we're going to need social-media lawyers.

[Important aside: I am not advocating that we need to hyperlegislate social media, and I am not saying that it's a good thing that we need lawyers in this area. It's just a fact. When humans interact, they get into disputes. You can choose to resolve disputes with lawyers, or you can resolve them with fisticuffs. Your call. Plus it's hard to punch people over the Internet.]

Right now, with a vacuum in the area of social-medial law and a dearth of social-media lawyers, employment lawyers are stepping up to fill the void. Unfortunately, most of them are taking what I call the "No" approach. These are the folks who are drafting blog policies like Harvard Law School's. (See "A two-word corporate blogging policy.") And LinkedIn policies that try to prevent departing employees from keeping their own contacts. (See "Who owns an employee's LinkedIn contacts?") And Twitter policies designed to, well, keep people off Twitter. (See "A twitterable Twitter policy.")

[By the way, Doug Cornelius (@dougcornelius) has accumulated an amazing database of well over 200 social-media policies on his Compliance Building blog. Most of them are exactly what I'm talking about — written in the "No" approach.]

As employment lawyers, they know all about drafting employee policies. But more often than not, they don't know much about social media. Which is a problem. When I see an announcement for a lawyer seminar on social media, I check out the bios of the lawyers presenting to see what their social-media creds are. I look to see what their blogs are called, how many Twitter followers they have, and how active they are on LinkedIn. What I usually find is nada. No blogs, no Twitter. No Klout score. Maybe a perfunctory listing on LinkedIn. In other words, they're not exactly social-media mavens.

[Quick note on Klout: By mentioning this new social-media "scoring" site, I'm not saying that it has any particular importance. It's just one company's way of measuring an individual's traffic on the Interwebs. For a decent introduction to Klout, read this article by The Boston Globe's Beth Teitell, "Ascent of the social-media climbers."]

And if they're not active in social media, they're much less likely to understand what makes social media the human phenomenon that it's become. Which means that they're more likely to tell their corporate clients that they should fear social media, and that they need prohibitive policies to minimize the chance of Very Bad Things happening.

I for one prefer the "Yes" approach. Yes, social media is here to stay. Yes, employees are going to tweet and Facebook and make connections with people on social-media sites. Yes, these employees can act as effective brand ambassadors for their companies, and they should be encouraged to do so. Yes, sometimes Bad Things relating to social media might happen, but we'll deal with them. We don't need draconian policies to prevent people from acting like idiots. People are going to do that from time to time anyway. Why throw out the good along with the bad?

If you have a company who wants restrictive social-media policies to prevent your employees from connecting with other people over social media, absolutely do not call me for help. (Or fax me. Or telex me, or whatever you guys are still using for communications.) You're not going to like what I'm going to tell you anyway.

But if you have a company and you understand that social media is a way for your company and your people to interact with the world, and you want guidance in this new area of social-media law, call me (617.439.4200). No, better yet: reach out to me on Twitter (@jayshep) or LinkedIn. I look forward to connecting with you.

• • •

Update Right after posting this, I noticed an article on Inc. magazine's site, "How to Avoid a Social Media Lawsuit." (Yeah, no hyphen; right off the bat, you know it's suspect.) It pretty much proves my point. All kinds of "No" approach here. Even worse is an older linked article called "How to Write a Social Media Policy." Besides advocating that companies consider eighteen different policies, it also recommends a $149 "social media policies toolkit" so that you can roll your own. Yeah, you should definitely do that. If you're an idiot. Unbelievable. [Hat tip to @kevinokeefe.]

Who owns an employee's LinkedIn contacts?

Or Facebook friends? Or Twitter tweeps? If an employee is using these social-media sites in his or her professional capacity, does the employer have the right to take the contacts away once the employee leaves?

The correct answer is: shut up.

Seriously. If you're an employer or a manager and you're seriously asking these questions, you just don't get it when it comes to social media. You're missing the whole point of these social-networking sites.

Now pause for a minute before you go ballistic on me in the comments below. Remember: I'm a management lawyer. I'm on your side.

But the whole point of having your employees on these sites is to broaden the reach of the company's brand. Making connections with other people — customers, prospects, vendors, referral sources — by combining the employees' personalities with your company's brand identity is what it's all about.

And there's a trade-off here. Your company's brand reputation (ideally) helps your employees raise their own personal stature online. But if they leave your company, voluntarily or not, they have that stature to take with them. And there's nothing you can do about it. That's the implicit bargain you make with your employees when you use them as ambassadors for your brand.

That's why it drives me batspit crazy when I see other employment lawyers sounding alarms of doom and drafting small-minded policies about retaining social-media contacts for the company after the employee's departure. See, for example, "Who owns the salesperson's LinkedIn accounts?" Or a similar article here. There's even a discussion on this at LinkedIn itself.

Seriously, cut it out. If employees put themselves out there in cyberspace, even on the company's behalf, they can take their online connections with them when they leave. If you can't abide that, then maybe you do need a policy barring social media. Just don't come to me for that, because you're not my kind of employer.

On the other hand, if you're the kind of enlightened employer who sees the real value in having your employees connect with people who might lead to more business, and you understand that there's always a risk that those contacts will leave with your departing employees, then definitely give me a call. We're kindred spirits, and I can help you.

One more thing: Much of my legal work involves noncompetes and trade secrets. And one of my favorite tools for investigating whether a departed employee is violating agreements or stealing trade secrets is searching through social-media sites. Just because I sound all "Kumbaya" about social media doesn't mean that I won't use it like a hammer to win a lawsuit. (Just sayin'.)

What do you think? Does your company have LinkedIn policies about whose contacts are whose? Do you think you need them? Sound off in the comments.

500,000 reasons to worry about retaliation claims

Good news, you're thinking. Your company's just been sued for sex discrimination, but your lawyer tells you that her discrimination claim stinks. You're almost certainly going to beat it. W00t! Squee!

Not so fast with your w00ts and your squees. As employment lawyers, we see this scenario play out far too often. Company gets hit with a weak discrimination claim. Turns out something bad happened to the plaintiff after he or she complained about the bogus discrimination. Wa-bamm! Now the company's stuck defending a much stronger retaliatory-discrimination claim.

This happened the other day here in Boston. The state's Probation Department faced a sex-discrimination claim (among other things) from an assistant chief probation officer. The case went all the way to a jury trial, which is unusual (less then one percent of these cases try). The Suffolk County jury found in the Department's favor on the sex-discrimination claims, but ruled for the plaintiff in her retaliation claim. It awarded her $6,000 in compensatory damages, and … wait for it … half a million dollars in punitive damages. Plus, now she's entitled to her attorneys' fees.

Now to be fair, the Probation Department has been having a bad year as the subject of daily newspaper stories about corruption and patronage. (For The Boston Globe's extensive coverage, click here.) But the lesson is still an apt one. In this case, after the employee complained of sex discrimination, she was stripped of supervisory duties and reassigned to cover the front desk. In its defense, the Department said that her performance had declined. Maybe it had. But that's a weak defense in a retaliation claim. (For more coverage of the case, see Marcella Bombadieri's piece in the Globe.)

Employers: When you're facing a potential discrimination lawsuit, you have to be extra careful to avoid doing something that could end up giving the employee a much stronger retaliation claim. It's a delicate situation to be in, but the wrong actions by the employer can be just the thing that the plaintiff needs to end up with a windfall.

For tips on how to treat a complaining employee, tweet or direct-message me at @jayshep, or send me an

Uniting two airlines by focusing on culture

Nice interview in today's Wall Street Journal with Jeff Smisek, the new CEO of United Continental Holdings. Smisek was previously the CEO of Continental Airlines, which is merging with United Airlines. The interview (sorry, it's behind Rupert's paywall) by the Journal's Susan Carey, focuses on the challenges he faces merging two huge companies in a moribund industry. Continental, which we've written approvingly about before (see "If you treat me with respect, I'll do more for you"), has a better reputation for employee satisfaction than United does, which is known for having disgruntled employees. United is much larger than Continental.

So what's Smisek's biggest challenge and solution for making this new behemoth work? Fixing the corporate culture:

I am going myself to focus very heavily on the culture. Culture is incredibly important in a service business. I can lecture about service and we can train about service, but the employee is not going to give good service unless the employee wants to. They want to give good service if they enjoy coming to work, trust their co-workers [and] are given the tools they need to do their jobs.

In discussing the turnaround at Continental, Smisek talks about paying attention to the so-called little things, like keeping the plane cabins clean. Not just because it was disrespectful to the customers, but because it was disrespectful to the flight crews, who spent much more time in them.

Over the next two weeks, I'll be flying more than 20,000 miles on United, so I'm hoping to see the early results.

What do you think? Have you seen examples in your workplace where focusing on employee gruntledness translates into improved customer service? Or is it just a lot of happy talk? Share your thoughts in the comments below.

Maybe we're becoming more gruntled

Or maybe our bosses aren't as bad as they used to be. This according to a scientific completely unscientific internet poll conducted by Monster.com. The job-board website surveyed 2,150 visitors to its site and asked questions about their feelings toward their supervisors. According to a press release, 41 percent reported that they would never quit a job because of their boss. Monster took this as reflecting "an increasing tolerance among Americans for 'nightmare' bosses." It then concluded that this change in attitudes — lo and behold — was because of the economy:

In sum, according to Monster’s August poll findings, current economic conditions and an uncertain job market have changed Americans’ perceptions of their supervisors. The perceptions of American workers will be interesting to monitor going forward, as the economy begins to turn around – particularly if workers adopt a more critical view of their bosses and the decisions they make.

Whatever. I'm not going to put any stock in an internet poll, especially one where the self-selected respondents are people looking for jobs. And the too-obvious blame-the-economy-for-everything deal is getting kind of old now. More importantly, managers should not let internet polls make them think for a second that they need to work at keeping their employees gruntled.

What do you think? Are you happier with your boss than you were two years ago? Why? Or why not? Did the economy cause the Patriots to lose to the Jets? I'm thinking so. Sound off in the comments below.

Hat tip to The Boston Globe for the story.