As we start the new year and think about achieving success for the company and as individuals, it is important to set targets and expectations to measure performance. Many businesses look at the overall performance or year-end results and consider how to measure this, and how various aspects should be weighed based on their importance to the company and individuals.

Some of the biggest mistakes that businesses make are having indicators or objects come due at the end of the year, and making it too complicated. All employees are not equal, and some may believe that they don’t need to create or have objectives – I disagree. It’s important to focus on creating the right number of objectives per person, not too many. Ideally, every person should have 3-5 objectives. Some will be individual, some will be company-centric. These should be reviewed with end dates throughout the year.

However, after reading the book “The 12 Week Year,” I believe that there is a better approach. Their method focuses on breaking down the business year into 12-week segments. Setting objectives at that increment keeps them relevant, allows more frequent reviews and helps individuals maintain focus. When you have year-end objectives, people will delay working on them until closer to the due date, which can lead to mistakes or leave them incomplete.

While creating these objectives, use the SMART approach (Specific, Measurable, Attainable, Relevant, and Time-bound). This makes the process very workable, and when complete everyone will understand what is expected. These 12-week groups will fulfill an annual business review since they should all build to a complete year.

Some key components of this process are:

• Discussing the importance of setting these goals.
• Each employee understanding their role and responsibilities.
• Highlighting the importance of time management and meeting deadlines.
• Understanding the expectations of work quality.
• Open communication with regular check-ins.
• Continuous feedback throughout the entire process.

There have been debates about the level of individuals that participate in this process. Some believe that if someone has over 10 years with the company there isn’t much room for improvement, and it wouldn’t correlate to the overall view of their total compensation. I disagree, especially when a business pays out bonuses, profit sharing, and wage increases.

Increases to an individual’s base wages can be determined by several factors including overall performance, wages as compared to the market, and time with the company. All of these should follow the company’s philosophy on pay. If the company uses local market data points and sees someone is over the midpoint of the range, then that employee most likely will not see an increase, or if they do it might be very small. However, if they are below the midpoint then they should see an increase. 

With that said, performance should trump all payouts regardless of where they are paid. Without a performance management program including performance expectations, how would you justify that?

Everyone can and should participate in this process because everyone is a piece of the corporate puzzle.

If you have interest in a third party reviewing your practices to see if they are aligned with the company goals and best practices, please contact me at richard@teamhrtime.com or 908-963-3294.