For the life of me, I cannot understand why some companies go out of their way to treat their employees poorly. It starts innocuously, like putting employees last in a mission statement. Then it morphs into thinking that people are really machinery (scientific management to the extreme) or a cost center rather than the deliverers of service and product excellence.
Our first example comes from companies that hire low-wage earners. Employers cutting peoples’ hours to avoid paying for benefits is nothing new, but the Affordable Care Act gives them another excuse to do this. And guess what? Many regret it because of the unintended, but obvious, consequences. You cannot say that you want to deliver great value to your customers while at the same time giving your employees lots of reasons to be unengaged. How can you expect people to show up on time and work hard when you keep their hours low (at a poorly paid job) to avoid paying for health insurance (or some other benefit)?
But, it is not just those at the bottom of the economic ladder that get poor treatment. Yahoo, which is getting its clock cleaned by its competitors, implemented a quarterly ranking system of all managers. You may be saying, “But, isn’t frequent performance management a good thing?” Well, yes, it is. But, Yahoo implemented a forced-ranking system on a 1-5 scale.
The forced ranking system where managers have to place people into “buckets”: 10% in “greatly exceeds,” 25% in “exceeds,” 50% in “achieves,” 10% in “occasionally misses,” and 5% in “misses.” To their credit, it’s not quite a bell curve, but the focus is clearly on the distribution of performance and not the performance itself. I consulted for a company that used a similar system and it made almost everyone miserable. You know who hated it the most? Those in the “exceeds” category, because they all thought they were in “greatly exceeds” and resented not getting the benefits (additional training, etc) that went with it. Those in the lowest bucket pretty much knew they were already there.
There’s a long list of companies that have abandoned this type of ranking system (Microsoft being one), yet this type of flogging continues to exist. I get the theory: We need to identify and fire poor performers as they are a drag on our business and we need to identify or best talent and develop them. But why the ham-fisted approach? Good performance management is about defining performance goals with the employees and measuring job output against those standards. Everyone can succeed or everyone can fail, but at least people are judged against their performance and rather than an arbitrary distribution.
Companies have to compete for top talent and a great culture is a great way to attract and retain productive people. Employees want to work in a place where they are engaged. Yahoo is saying, “Come here and be innovative while we constantly compare your performance against others in different jobs.” Not exactly a great pitch. Some restaurants are saying, “We don’t value you enough to pay a competitive wage (unless forced to by law) and we’ll cut your hours to save some additional money. But, please work hard and please our customers while you are here.” Not exactly a great way to deliver great service and keep turnover down.
Whether an HR employee or a consultant, our role is to show leaders the value of employees and the value they bring to a company. We should be fighting efforts that treat people like a cost.
For more information on effective performance management, contact Warren Bobrow.