Every company has them. At Geonetric, we call them “huddles” – a chance to sit down, one-on-one with your manager to discuss your performance, your role, your goals, and areas for improvement. They usually happen every few months, or in some cases, annually. Overall, they foster great conversations, and often bring about resolutions to problems that have festered for a while. They’re the perfect time for managers to deliver a “thank you” for a job well done.

And that’s why we’re getting rid of them.

With about five years of consistent data from huddles across the company, I can say pretty confidently that they don’t directly improve organizational performance. In fact, I would argue that performance appraisals are detrimental to a high performance culture. They’re a crutch for managers, and an enabler of poor communication.

Let me tell you why.

• Conversations that need to happen should happen immediately. Quarterly or bi-annual huddles become an excuse to delay difficult conversations until the problem is no longer relevant.
• Feedback should be given verbally, in a real, honest-to-goodness conversation. Written communication is useful, but often is written down only after multiple occurrences. Verbal, immediate communication is more likely to actually change behaviors – which is the whole point of the feedback.
• Management feedback isn’t all that valuable anyway. Managers aren’t domain experts in most cases. Instead, we want to emphasize peer feedback – directly and frequently.
• Positive feedback should also be immediate. Why thank someone for a job well done today… three to six months later?
• Fostering peer feedback is part of a healthy culture. A culture which puts the responsibility for difficult conversations primarily on managers is dysfunctional. Adult professionals can – and should – be able to approach each other regularly with candid, constructive criticism and praise, instead of asking managers to deal with every problem.
• Goal setting should be a regular part of the work process. Performance appraisals are an HR process appended to the side of work people are already doing, to give the illusion of “control.” We found that our huddle “goal setting” was really an attempt to reverse-engineer what people did on a daily basis in an attempt to document how it fits into bigger picture goals. In other words, paperwork for the sake of paperwork. If someone isn’t doing “the right thing” then the work process itself is the problem.

And so, we’re trialing the idea that huddles are unnecessary with our software engineering team through the end of the year, to see what happens. Luckily, our software engineering team has been steeped for five years in the idea that they should be self-organizing using Agile development methods, so this change is a bit less radical to them. But it’s still an experiment that conflicts dramatically with typical command-and-control models that are so prevalent in corporate America today.

I’ll report back around the end of the year to tell you how it’s going – and if we expand this concept across the whole company. My guess: we’ll have better performance and a healthier culture without the regular performance appraisals. And we’ll ditch huddles permanently for everyone in 2013.

Have you found success at your company with performance appraisals? Or do you find them ineffective? I’d love to hear your comments about what’s working out there, and what isn’t.

And if the idea of working for a company with a culture that encourages candid, constructive criticism and praise between peers and co-workers sounds like the type of place for you, make sure to take a look at the open positions Geonetric has available.

I belong to a number of CEO peer groups, and I have the opportunity to learn from some brilliant small business owners, and they learn from me. Last week we had a fascinating conversation about a fairly well-known concept called The Saltshaker Theory, which apparently inspired a book called Setting the Table.

The Saltshaker Theory goes something like this: it is the role of the business founder/CEO to apply constant, gentle pressure on the organization to set the standard and vision for the company. The author illustrates this point by clearing a table, and asking his friend to put the saltshaker in the middle of the table. The author moves it slightly off-center. The friend must move it back. Again, the author moves the saltshaker, and gives this sage advice:

“Your staff and your guests are always moving your saltshaker off center. That’s their job. It is the job of life. It’s the law of entropy! Until you understand that, you’re going to get pissed off every time someone moves the saltshaker off center. It is not your job to get upset. You just need to understand: that’s what they do. Your job is just to move the shaker back each time and let them know exactly what you stand for. Let them know what excellence looks like.”

At first blush, this seems elegant and obvious. Of course the leader’s role is to define the level of excellence for the organization and continually demonstrate it by nudging the organization back toward the target.

While I concur that the leader’s role is to articulate the vision, there are two things subtly wrong about the analogy:

1. It reinforces a cynical view of the team and treats them as children. Apparently, it is the “law of entropy” that your team will fail to live up to your expectations. “That’s what they do.” Always. Without you, as the magnificent leader, to put the saltshaker in the right place, your team will clearly perform poorly.
2. It perpetuates a culture of reliance on the leader to define and continually reinforce the standard. Why is it that you must move the saltshaker back? Is your team apparently incapable of understanding your intent – that the saltshaker should be in the middle of the table, and move it back there, should it somehow get off center? They must rely on you to tell them it’s not right.

So, in my view, the Saltshaker Theory is an interesting concept, but ultimately it doesn’t work for a high performance, professional team.

In fact, I think it’s completely wrong.

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In addition to celebration, our monthly all-hands company meetings focus on incredible levels of transparency.

We’ve been very deliberate about weaving transparency across the company in ways that are rare in corporate America. In my view, that reflects our belief that we treat our team members as responsible professionals. Most companies keep even basic data about performance a secret – as if executives are the only people qualified to hear and understand it, or do something about it.

There are six categories of information we share at company meetings:

1. Client satisfaction survey data. Every company pays lip service to the importance of their clients or customers, yet most companies don’t even ask, or care, about feedback from them. And of the ones that do ask, how many share the results with the entire company? Client satisfaction is so important to Geonetric that every quarter we survey all clients – either electronically or by phone, for feedback on how we’re doing. The cumulative scores and summary comments – good or bad – are then shared with the entire company. Sharing this information makes it crystal clear to everyone that our jobs are ultimately focused on meeting our clients’ needs and making them happy. Without that – profitable or award-winning as we may be, we’ve failed. It also reinforces the idea that we’re all in the same boat together – our clients’ success is dependent on everyone at Geonetric performing optimally.
2. Employee satisfaction survey data. Twice a year, we ask our team members for feedback and input on what’s going right, and what’s not. The survey gives us a way to push team members to effect change by identifying areas that need attention. Being a fairly outspoken group, the feedback we get is often enlightening and eye opening! I would like to think that, as a small business CEO, I have my finger on the pulse of the company every day. But sometimes the survey identifies areas that I might not have realized were in need of attention. Or maybe something I don’t want to acknowledge is an issue. Sharing the aggregate results of the survey publicly reinforces accountability for me – I can’t exactly duck an issue I’m not comfortable with if it’s presented publicly for all to see.
3. Financial data. Some executive leadership teams seem to think that it’s OK to incent employees to accomplish financial goals (e.g. profitability) but then hide all of the pertinent information from them of how to get there. Especially when it’s bad news! In my view, this is a failure of typical American management. At Geonetric, every month we’re pretty much doing Open Book Management, sharing revenue and EBITDA information with the whole company. And yes, everyone is expected to know what EBITDA is – not necessarily how to calculate it, but what it represents to the business.
4. Sales data. Because we’re growing so fast, it is critical for us to keep everyone on the same page. We find that we need to regularly scale up new processes as new clients or types of work are added. Keeping everyone apprised of the various “waves” we might hit is one way we’ve absorbed a constant growth rate and maintained excellent client satisfaction rates and a 94% client retention rate for the past 13 years.
5. Process improvement metrics. Sometimes we’re working on challenges with a particular process, and so we focus on “what hurts” by highlighting an appropriate measure in front of the whole company – a painful exercise! For example, two years ago, we had significant challenges in having too many defects in the software released into the finished product each quarter. We undertook a painful but very successful effort to utilize Behavior Driven Development and other techniques to eliminate defects; we showcased defects per release in company meetings – until the number got so low it wasn’t important enough to include any more. In other words, acknowledging and focusing on problems company-wide works to steel the resolve of the team and keep problems front and center until they’re gone. It also forces accountability – we don’t have the option to simply ignore difficult problems when they’re publicly known and visible.
6. Community efforts. Unlike many large companies, we have our entire staff headquartered in one location: Cedar Rapids. So we take our Cedar Rapids community outreach efforts very seriously. We donate to local charities, we sponsor local events, we marshal teams for fundraising efforts, and we even knit hats for babies in local NICUs. We highlight these efforts in our company meetings to reinforce that – like our clients – supporting our local community is a goal at the highest level – as worthy as EBITDA or client satisfaction.

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