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202 Lead with Courage

of errors made and subjectively by the amount of stress you see in the
workplace and what other employees tell you.

You may be able to readily identify the skills you need from new employ-
ees, but you can also do a more objective analysis by identifying the total
skill set you want from your employee base. Find out what you already
have by doing a skill-set inventory, and then hire for the qualities you
find are still missing.

Hiring Right Is Key

Recruiting and hiring are often done in haste, leaving the company to re-
pent in the long run. To counteract this tendency, set up your hiring pro-
cess at a time when more rational heads prevail, and make it difficult, if
not impossible, to hire unless the process is completed.

Today, there™s a reason to be concerned about negligent hiring. Negligent
hiring means you and your company can be sued if one of your hires in-
jures other employees, especially if you could have foreseen a problem
but did not do a thorough check of the new employee before hiring.

The following five essential hiring practices should always be

1. Require outside testing. Allow a competent, impartial profes-
sional interviewer to administer both paper and pencil and
verbal tests. Professional testing firms can administer valid
psychological tests for intelligence, stability, even determina-
tions of addictive or dishonest personalities, as well as skills
tests of important technical abilities in your workforce. I find
testing often validates a suspicion I already had but wasn™t
yet ready to come to terms with.
2. Conduct a rigorous personal interview. This includes asking gen-
eral attitude questions, how you would manage your boss
questions, how you would manage your staff questions, ques-
tions relating to the applicant™s understanding of the financial
workings of a business and your department™s role in the
Driving Employees to Peak Performance

business™s overall success, questions relating to the appli-
cant™s ability to set goals and his or her expectations about
achieving goals, questions relating to specific skills required
for the job, and general communications required by the job.
3. Arrange a peer group interview. This part of the process encour-
ages applicants to speak more freely and helps determine
how comfortable they will be in working with their peers.
Follow up with a meeting of everyone involved in the hiring
decision to determine if there is a group consensus about the
applicant™s suitability for work at your company.
4. Do a background check. Don™t neglect this, even if it is an em-
ployee™s cousin or your competitor™s best salesperson. It™s
very easy to set up an account with an investigative firm on-
line and to relatively quickly and inexpensively find out if the
applicant has a criminal record or a history of DMV problems,
lawsuits involving previous employers, workers™ compensa-
tion claims, and so forth.
5. Do a reference check. You can conduct these over the phone,
but they may involve a request in writing. Reference check-
ing is less effective than it used to be, although you may still
find a few people who are willing to talk. Most former em-
ployers play it safe and verify only dates of employment and

Finally, I recommend including a statement on the application that infor-
mation given by the applicant must be true and that it will be checked. I
immediately disqualify anyone who is dishonest about any information
that is pertinent to the hiring decision”that includes fudging on job ti-
tles, years of service, and salary history.


Productive and positive communication with an immediate supervisor, as
well as with coworkers, is a make-or-break issue for most employees. As
we all know, the business world necessitates both formal and informal
communication. Formal communication flows from the supervisor and
204 Lead with Courage

follows the policies and procedures in the company manual. Informal
communications are those that flow from other employees about “the way
things are really done around here.” When these two sets of communica-
tions are out of balance, morale at your company will likely suffer.

Make your internal computer network a resource for every kind of data
your employees need. Virtually all of the worksheets covered in this
book can be filled in with your company™s information and made avail-
able for employee reference. Your employee handbook should also be
made available online. Surveys can be conducted completely via e-mail,
and you can also make yourself accessible by e-mail for questions or
comments. Performance review and other forms, as well as other human
resource communications, can take place through an effective human re-
source information system (HRIS) designed for your size of company.

By no means should communication be conducted exclusively via com-
puter. Always conduct employee orientations and performance reviews
face to face. Create other avenues for informal, face-to-face feedback as
well. Mark these appointments on your calendar so time won™t slip by
and opportunities won™t be missed. Chats over morning coffee, celebra-
tion lunches, afternoon walks, and brown bag resource talks all are valu-
able opportunities for discussing issues or developing rapport.


The Virginia-based AES Corporation is the largest global power
company in the world. Founded in 1981, the company has 158 fa-
cilities in 28 countries and employs approximately 36,000 people
around the world. AES believes that every employee should par-
ticipate in the strategic planning process, even in the design of his
or her own workplace.

AES promotes adherence to four principles: integrity, fairness, fun,
and social responsibility. The company conducts annual surveys of
employees at individual locations and companywide to ensure that
it™s standing by these principles. The surveys are designed to deter-
mine whether employees follow the ethical principles both with
other employees and with customers and suppliers.
Driving Employees to Peak Performance

Provide Regular Feedback

The idea of providing regular feedback is to let employees know how
they are doing individually, in their departments, and as a part of the
company as a whole. Feedback is often subjective by necessity, but it can
be objective as well. The best kind of feedback is the kind employees seek
out, not the kind that™s forced on them.

You can take certain steps to maximize the effectiveness of the process of
giving your employees feedback. For instance, if your intranet has easily
available sales data, sales employees will look at it often and judge their
need to change performance accordingly. In this manner, you can em-
power your employees to change their behavior on their own or ask for
help before they are “graded.” In addition, you can give employees copies
of all of the evaluation materials that will be used during their employ-
ment (surveys, annual review forms, team feedback tools) at their orien-
tation. By showing employees how they will be evaluated, you™ll help
them understand what is expected of them.

Review Performance

Managers are taught to conduct formal performance reviews annually,
but it™s a good idea to conduct additional, informal, mini-goal-checking
sessions at least quarterly. Schedule these sessions when you will be
fresh and when your mind won™t be elsewhere. Conduct them off-site if
that will help ensure you won™t be distracted. If you put a lot of thought
into the process upfront, your employees will do most of the preparation
for the sessions themselves.

As a prelude to a review session, it™s useful to ask employees for feed-
back about what is standing in the way of their progress. Many human
resource professionals advocate asking employees to formally rate them-
selves and then compare their rating with their manager™s rating during
the formal session. I find this leads to a lot of anxiety and not much dia-
logue. If you ask people what is holding them back and what you can do
to help, they will candidly explore their own weaknesses from a place
where they are open to feedback.

During the review meeting, turn these areas for improvement into goals
for the coming year. Ask the employee to consider ways to create goal
206 Lead with Courage

statements with measurements by quarter. These goals then become top-
ics for your quarterly reviews.

Many companies make use of team performance reviews in addition to
the traditional manager™s review. In these reviews, members of a peer
group evaluate an employee. Although I see tremendous value in the
concept, I have found that the average employees today are not ready to
accept criticism from peers; they barely tolerate it from their supervi-
sors. Peer reviews can create anger and resentment rather than increased
learning, unless months of preparation precede the feedback. The best
way to transition into this system is to make it available as a tool for self-
evaluation to those individuals who seek promotions. If employees are
open to learning about how they are perceived because they want to use
this information to increase their opportunities, they will better be able
to accept the negative messages.

Also plan to conduct regular manager reviews to evaluate managerial
effectiveness. Employees need to know they will have the opportunity to
speak candidly about their manager™s behavior.


Determining proper compensation is one of the most complex aspects of
running a business. It™s wise to seek outside assistance when designing a
compensation program to ensure that it is fair and appropriate. A com-
pensation professional will evaluate and compare the jobs in your orga-
nization to one another, as well as to similar positions on the open
market, to determine a fair and competitive package. The compensation
professional can also assist in devising the correct formula for incentive
compensation, that is, bonuses for doing an outstanding job.

You don™t want to overpay, but don™t make the mistake of negotiating
hard to underpay. It™s not worth the time and expense you™ll face when
you need to replace high-quality employees who depart after a year or so
because of subpar compensation.

Benefits form a significant portion of the compensation package. Regard-
less of the other benefits you may offer”retirement, vacation, and so
forth”try to provide the best health insurance coverage you can. This is
the benefit that makes the most difference to employees and their fami-
lies in the short run.
Driving Employees to Peak Performance


Companies schedule regular meetings for all sorts of other tasks. We
can™t expect improvement in our human resource issues unless we regu-
larly devote time and attention to meeting these challenges.

An employee-ranking system is a simple tool managers can use to share
their concerns about their department™s employees. Managers can use a
simple 1 to 10 rating scale, in which they assign 9s and 10s to superstars
and 4s or below to employees who no longer belong in their current jobs”
or perhaps even with your company. Managers can rate employees in a
variety of categories and dimensions to reach a composite score. Some of
these dimensions include character, communications skills, and technical

The intent of this process is not only to review employees, but also to hold
managers accountable for constant improvement in the caliber of the per-
sonnel they hire. It™s a way to get managers thinking about what they can
do each month to create more 9s and 10s.

Manage the Managers

Between the tasks involved in recruiting and hiring and those involved
in discipline and termination lie the continual assessment and improve-
ment of your employees™ knowledge, willingness, and action on the job.
This brings us to the subject of employees who rank all the other em-
ployees”your management staff. Managers should rate 8 and above on a
1 to 10 employee rating system, or, if they are new, reach that rating
within six months. There should be little flexibility with this decision.
Managers who rate lower than 8 are not likely to possess the qualities
you want as a model for the rest of the staff. Remember, a manager™s key
role is to coach great performance out of others.

Don™t Tolerate Destructive Employees

We all make the mistake of keeping employees around long after they
know and we know they are not right for the job. Some behaviors should
never be tolerated in the workplace. They are toxic to your culture and
will hurt your work environment immeasurably if not checked. They may
seem harmless in small doses, but they can create a pattern of behavior
208 Lead with Courage

that can ruin a company. Employees whose actions reveal lack of charac-
ter and resulting unethical behavior should not be allowed to continue
destroying the company.

You may think judging employees™ ethics is inappropriate”that they
should be judged on work performance alone. But whether you realize it
or not, you set ethical standards for your company through many avenues,
such as your own behavior, the rules in your employee handbook, the per-
formance review process, the compensation system, and how and whom
you promote. You also set standards by the behaviors you encourage and
tolerate in your employees.

Studies confirm that the single biggest determinant of ethical behavior
of employees is the behavior of top managers and their ability to commu-
nicate culture effectively. If top managers aren™t willing to walk your
talk, expect employees to follow suit.


1. Gossip. Rumors can be incredibly disruptive to a company. A
lack of information can get rumors started, and frank expla-
nations can usually stop them. However, some employees
thrive on the admiration of others when they seem to be “in
the know.” Define gossip as clearly as you can and tell em-
ployees what you expect them to do when they hear it. First
and foremost, that you don™t repeat it. Along the same lines of
gossip, remind employees that all e-mail sent or received on
company computers is considered company business and not
private correspondence.

2. Violence or threatening or abusive behavior. Termination should
be immediate for any employee who engages in any form of vi-
olent or abusive behavior. Workplace violence includes threat-
ened or actual abuse and can be verbal or physical. These
behaviors only escalate with time and are never excusable.
Any employees involved in workplace violence should leave
the workplace immediately and be placed on a paid leave of
Driving Employees to Peak Performance

absence for a few days while you investigate the situation and
consult with your attorney. Don™t assume this couldn™t hap-
pen in your company”it™s estimated by the Occupational
Safety and Health Administration (OSHA) that two million
Americans are victims of workplace violence annually.

3. Dishonesty and theft. The term theft can include the theft of
time, office supplies, and the use of office equipment for per-
sonal projects. Set standards for what is acceptable use of
company assets. Security experts say as many as 30 percent of
workers steal, resulting in an estimated loss of $50 billion a
year from U.S. companies and contributing to as many as one-
third of business bankruptcies.
As for dishonesty, I have a zero-tolerance approach. I dis-
missed members of my accounting staff for what may seem to
be petty reasons: one for using $5 of petty cash as personal
lunch money, another for telling me he was home sick when he
was out of state on a long weekend vacation. If key staff mem-
bers are not honest with you about small things, how can you
be sure they will tell the truth “when it counts?”

4. Substance abuse. Substance abuse is more rampant than most
employers know. The U.S. Department of Health and Human
Services estimates that from 6 to 11 percent of adults are sub-
stance abusers. Substance abuse costs U.S. employers an esti-
mated $100 billion a year. Call your attorney to make certain
you follow the Americans with Disabilities Act (ADA) re-
quirements. Illegal drugs are expensive and have led finan-
cially desperate employees to commit fraud. They have also
been implicated in violent behavior in the workplace.


Compliance with the myriad employment laws is essential to avoiding
lawsuits, fines, and even criminal prosecution. There are so many laws
and regulations that it takes a professional in this area to provide ade-
quate protection for your business.
210 Lead with Courage

The administrative portion of the human resources function can often be
done most cost effectively by outsourcing it to specialists. Outsourcing
can be done effectively for writing and updating employee handbooks,
designing compensation programs, administering employee surveys, ad-
ministrating benefits (including creating benefit statements), and pro-
viding training for many types of skills.

Employee handbooks are essential for companies with more than a
dozen employees, and it™s helpful to post the handbook on your intranet.
Make sure the handbook reflects your culture and isn™t a cold introduc-
tion of rules and procedures. Rules should only make work easier or cre-
ate a cultural accountability; don™t expect them to cover every situation.
Our handbook always included expectations, not just rules. The hand-
book must be updated at least annually to keep legal requirements cur-
rent. When a handbook is introduced or updated, it should be carefully
explained at an employee-wide meeting. Drafting of new policies can
and should be a highly participative process to allow employees the op-
portunity to think through the kind of behavior and expectations they
want to have of one another. In addition, be sure that you are personally
willing to live with each policy in your handbook.

One of the most important provisions of the handbook is that employ-
ment is “at will.” Subject to various state laws, this means that your em-
ployment relationship with your employees is at your discretion; that is,
you may fire them at any time except for reasons that are illegal. Specifi-
cally, state that employment can be terminated at any time without cause
and that nothing in the handbook should be construed to be a contract of


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