Coinciding with much of what Professor Smith taught us Fall semester, Michael J. Maubossin, an investment strategist and author of The Success Equation, was featured in a video on hbr.org in which he suggests 4 tips to provide meaningful feedback to employees.
- Ignore the factors your employees can’t control
Companies that incent employees with stock prices ignore the fact that stock prices often follow market trends, so it can be an inaccurate measure of a company’s or employee’s success. Consulting firms sometimes reward based on days of utilization — a metric dependent not upon performance of the consultant, but upon how many consulting engagements sold by the firm’s salespeople.
- Understand the difference between luck and skill
The author presents a basic rule of thumb: if the person can perform a task poorly on purpose, then the result is likely based on skill. If not, then the result is based on luck. “You can’t lose the lottery on purpose, but you can lose the big sale.”
- Pick a metric that is persistent and predictive
In this context, persistent means that you get the same results time after time, i.e., accountants completing reports accurately and on time. Predictive means if employees do well with that metric, they serve the goal the company is trying to achieve. For example, timely financials correlate with building company value.
- Focus on employee behavior and process
A focus on process ensures the best odds for long term success of the employee and the company and is most conducive to identifying and correcting performance decreasing behavior.
In my experience, picking a predictive and persistent metric is the most important concept to keep in mind when developing a feedback program. Giving employees clear expectations provides them a means to guide and measure their behavior and allows management to more easily hold employees to the company standard.
I think stock options are often used to pay employees as a substitute for cash. It sounds good and helps attain important employees, but is not necessarily used as an incentive for performance.
Bob, I agree with that to an extent. My old company used profit sharing, and it turned into a reason to stay with the company (gotta get that big check at the end of the year!) — not an incentive to perform better. If the financial reward was more directly tied to individual performance, I think it would better incent employees.
This is a good article. This can be used not only as a manager but as a mentor. I also see these techniques as being used to judge whether you have received significant feedback. You could use these as a guideline for asking for feedback