Nailing Your Formal Performance Review

Episode #405 Nailing Your Formal Performance Review

TAKE CONTROL OF YOUR PERFORMANCE REVIEW

Once or twice a year, organisations take the time out to ask you a simple question: “How are you doing?“

The formal performance review strikes fear into the hearts of many leaders. You know your performance hasn’t been perfect and it’s easy to agonise over how your boss might evaluate you.

Because you’re not sure what to expect, you don’t know how to prepare, which makes it tempting just to throw yourself at your boss’s mercy and plead for leniency, hoping the good will outweigh the not-so-good.

If you manage this conversation well, it’s going to reinforce your value and shape how the organisation sees your future. If you don’t, it puts your career trajectory in the lap of the gods.

The difference between those two outcomes is simple: preparation.

In this newsletter, I give you a practical framework for nailing your formal review. From KPIs to performance standards, I show you how to read the room before you walk in; I tell you how to build a case to support your performance evaluation; and I show you how to take advantage of an opportunity that almost everyone leaves on the table.

ARE YOU MEASURING THE RIGHT THINGS?

I want to start with a quick story on KPIs. If your company’s large enough and mature enough to have a formalised performance review system, it normally means there’s some sort of KPI setting. And, quite often, KPIs go hand in hand with potential bonus payments.

One KPI story from my executive days is indelibly etched in my memory.

I once had a senior manager working for me who was accountable for asset management. She was extremely technical and very process driven. In my world, asset performance is judged by the availability and the reliability of said assets.

Whether you’re talking about machines in a factory… locomotives… power stations… gas pipelines… whatever resources you deploy should have a core objective to increase the availability of the assets, and to make them more resilient.

Now, it just so happened that when a particular half year review rolled around, her boss was on leave, so she was reporting directly to me. I had to undertake the formal assessment of her performance in the previous six-month period.

So, of course, I went straight to the outcomes. And the outcomes were… less than stellar.

Even though the company had undertaken some major maintenance work, the availability of the assets hadn’t improved one iota, and unplanned outages were still occurring with monotonous regularity.

I’m a simple man, so of course in my head, I wanted to compare the amount of money the company had invested in the assets with the outcomes of that investment.

But when I came to the formal review, I was disappointed. The KPIs that had been set had almost nothing to do with the performance of the assets. And this meant that in terms of the KPI assessment, I was snookered.

I was at pains to point out how poor the asset performance actually was. I had unequivocal examples using data and statistical analysis across multiple comparison periods. And it conclusively illustrated that the person most accountable for asset performance wasn’t doing her job to anywhere near the expected standard.

But despite my remonstration, she held firm on her story which (strangely enough) was justifiable.

When I said I had examples, for every page of data I had, she would have had 20 pages of supporting evidence. That’s what engineers do, right?

I wasn’t put off by this, but she just kept repeating the same line, over and over: “I have done everything that was asked of me.”

I couldn’t fault her on that. She was actually right. She had done everything that had been asked of her. It’s just that what had been asked had little bearing on asset performance.

She had a number of KPIs around developing processes and implementing systems. And to her credit, she had achieved those. But there was absolutely zero relationship between those deliverables and the performance of the assets.

And what hit me like a pie in the face was that I was helpless to do anything about it.

The value that’s encapsulated in KPIs has to be clearly identified when the KPIs are being set. By the time you get to the end of the period, it’s too late.

The end of my sad story of woe is that the asset performance was sh!t, and the accountable person got paid a big bonus for doing nothing to improve it. This is an age-old dilemma with KPIs: if you’re going to pay someone to make something happen, that “something” had better be useful.

TAKING STOCK OF WHERE YOU ARE

The reason I related that old chestnut of a story was to give you a frame for thinking about that before your performance review.

If you’re lucky, you’ll be able to explain how delivering your KPIs also created value, but it’s hard to do that in retrospect if the KPIs weren’t right to start with. And if they weren’t right, you may have to resort to the old, “I’ve done everything that was asked of me.”

But before we get there, let’s talk about preparing mentally for your review. Here are three useful things to think about before the meeting:

1. Anticipate your boss’s position.

Do you have any sense what your boss thinks? If a colleague of hers asked about you, what would she say? Would she speak in glowing terms and then perhaps add some caveats? Or would the first words out of her mouth be negative?

This is an interesting exercise for you to go through. If you don’t know the answer, think back to the little things that have happened. Think about facial expressions, and body language, and offhanded comments, as well as the things that she said directly to you.

2. Review your one-on-one interactions.

If you’ve had regular 1:1s, any notes, reflections, or record of these meetings is going to be super useful. If you’ve had regular one-on-ones, you’ll at least have some clue about what’s likely to come at you in the formal review.

If you’re sitting there thinking, “I’ve had plenty of one-on-ones, but I can’t remember what was said in them,” then this is a wake-up call. In future, you should record the meetings.

Ideally, you’d be able to record it fully on some sort of AI capture tool and they’re pretty commonplace these days. But at the very least, you should make a few bullet points that capture the substance of the meeting after it’s over.

3. Assess the previous feedback you’ve been given.

Has anyone from above, below, or beside given you any feedback during that review period? Anything specific that’s been said to you, positive or negative is worth recording.

If you had any negative feedback from someone more senior than you, it’s probably indelibly etched in your memory. And if there was anything, particularly from your direct boss, you want to show that you’ve heard the feedback, that you’ve understood it, and you’ve taken action to resolve the issue.

If you consider these three factors, you’re more likely to be able to read the play and turn up to the meeting prepared rather than potentially being blindsided. If you’ve been getting sufficient feedback during the course of the year, it’s going to be relatively easy and you’ll have a good sense of what to expect. But if you don’t, it’s a good wake-up call so that you can look to remedy that situation next year.

PREPARING FOR YOUR REVIEW

Let’s talk about building your evidence. Are you pre-populating the review template, or is your boss?

This matters. If you haven’t been told one way or another, then you should pre-populate it. This is the anchoring effect that we see in negotiations; once the performance data is out there, the conversation is held in reference to that.

There are three specific areas you may need to assess:

1. Your overall performance.

Before you look at specific targets, stand back and take stock of what you’ve achieved. Make sure you can clearly explain what you’ve delivered across the review period.

And when I say “you”, of course, I mean you and your team. You have to be able to articulate this really clearly. So pull out the one or maybe two big ticket items that will help you to set the scene.

Regardless of how the lower-level details of the performance review are assessed, this allows you to capture the moral high ground right up front. Be really explicit and, wherever possible, quantitative.

One powerful way to do this is to describe the value created by referencing a start point and an endpoint. For example,

“At the beginning of the year, our Opex burn rate was $800,000 a month. Now, almost a year later, we’ve reduced that burn rate to just $645,000 per month.

“We’ve done this with no reduction in service levels and only $500,000 in restructuring costs.

“This delivers an annualised saving of around $1.9 million. It falls straight to the bottom line and it increases our net margin by around 2%.”

Very specific, very hard hitting. Make sure you can explain precisely what you did to create that result and why it wouldn’t have been possible without your leadership.

2. Your KPIs.

It’s important to provide direct evidence for KPI delivery. Setting the right KPIs can be tricky (as we’ve heard), and this is why evaluating them can be difficult.

You need to be dispassionate and even-handed in your review. Imagine you’re assessing someone else, and be just as diligent with yourself as you would be with them.

If you missed any KPIs, you probably know all the reasons why; but don’t make excuses.

This is really important. If you didn’t achieve a KPI, and you didn’t give your boss early warning, you should explicitly recognise that fact. You can say something to the effect of, “I realise it was on me to renegotiate the KPI when I experienced the issues. I didn’t do that and I should have. In future, I’ll be much more diligent about giving you visibility of any issues as they arise.”

What you’ve done there is leave it to your boss’s discretion as to whether she shows leniency, or holds the line. At best, you’ll get a more favourable review. And, at worst, you’ve just learned something about your boss you didn’t know.

3. The performance standard.

Larger companies often have generic performance standards that they use to assess the performance of their leaders at each level.

Whereas KPIs talk about achieving specific deliverables, the performance standard is more about how you’ve performed in your day job. They’re normally holistic standards that look at the leadership performance across multiple dimensions.

For example, in CS Energy, every leader was assessed against the standard for their level in six categories:

1. Safety
2. Leadership
3. Management
4. Commercial performance
5. Working across boundaries, and
6. Developing capability.

If you’re preparing for your review, you need to go through each category to find examples for how you’ve met (or indeed, exceeded) the standard in each area.

I’m not going to go into any detail here, because we have a comprehensive section on performance standards in our Leadership Beyond the Theory Program.

Needless to say, preparing for the discussion with your boss is half the battle. Once you’ve done this work, the actual conversation flows pretty easily.

MOVING FROM PAST PERFORMANCE TO FUTURE PROSPECTS

There’s one other part of the performance review that’s often overlooked. Reviewing your performance for the year is one thing, but working out where you’re headed is another altogether.

Your prospects within the company depend largely on how the powers that be assess two things: your performance; and your potential.

Everything we’ve spoken about so far goes to past performance. Potential is related, but it’s really a different question.

As an engineer, you may be a high performer. But if you lack EQ, and your communication skills are remedial, it’s unlikely you’ll be successful in a leadership role.

High performance… low potential…

But many organisations don’t really differentiate performance and potential. They suffer from halo effect bias, assuming that performance in one area is going to automatically translate to performance in another. That’s why the Peter principle is alive and well.

The annual performance review is the perfect time to work out how the company sees you. So don’t be afraid to ask:

• “What does my future hold?”
• “What would you see as my next role?”
• “How can I prepare for that role?”
• “Is there anything lacking in my current performance that I’d need to develop before I would be considered for that role?”

You want to take this opportunity to see where you fit, and to align your expectations with your boss’s. In many cases, your boss won’t have thought this through at all, or if she has, she may not be willing to divulge her thoughts… especially if your aspirations don’t align with the company’s reality about where you are.

But it’s worth pushing.

If you know where you’re heading, you can plan to undertake the development you need. That might be an MBA… it might be a sideways move to get experience in another part of the business.

Whatever it is, don’t miss the chance to build on your past performance to shape your future in your boss’s psyche.

THE BOTTOM LINE

The end of year performance review can be daunting, but if you prepare thoroughly and bring solid evidence to support your performance claims, the process should be relatively straightforward.

If you find the process difficult because performance conversations are so rare, try to increase the frequency going forward; particularly if you’ve had any surprises.

Be as direct with your boss as possible. You can say explicitly, “I’m surprised by this feedback. In future, can we please meet more regularly so that I can fix any performance issues as they arise?“

The secret to performance reviews is preparing in advance so that you have the best chance of influencing the outcome. So, do your homework, prepare your case, and control the dialogue.

Your boss won’t always agree with your assessment. And, if that’s the case, you’re probably going to have to increase communication to close that gap… but that’s next year’s problem.

The leaders who nail their performance reviews don’t just get lucky; they get promoted.