6 Key Actions To Neutralize Performance Problems.

Two years ago, a client of mine - let’s call him Marcus, the founder of a 20-person logistics firm - was bleeding talent. His best drivers were quitting, and his margins were shrinking. The root cause wasn't the market; it was David, his lead dispatcher. David was consistently sloppy, missing delivery windows by margins just small enough to debate.

Instead of addressing it, Marcus engaged in a deadly mix of hope and avoidance. He didn't want to be the "bad guy." By the time Marcus finally sat down to address the performance problem, the damage was done. The team was exhausted from covering David's tracks, and trust in Marcus’s leadership was fractured.

In a small business, you do not have the luxury of hiding an underperformer inside a massive corporate structure. Working with employees to resolve performance gaps is not just a leadership responsibility; it is an existential requirement. How well you execute this depends entirely on your preparation.

Here are the six critical actions you must take before you step into a performance intervention:

1. Document the Gap

You cannot manage what you cannot measure. You must identify both the desired and actual performance in undeniable, behavioral terms. Do not use emotional language or vague character assessments.

Weak: "You are being lazy and uncommunicative."
Fact-Based: "You missed the Monday and Wednesday 9:00 AM huddles, and your weekly reports have been submitted two days late for the last three weeks."

Weak: "Your sales numbers are disappointing."
Fact-Based: "Your target is 40 outbound calls per day; you are averaging 18."

2. Calculate the Blast Radius

Determine the exact negative impact of the problem. In a small business, nobody works in a silo. How is this behavior affecting the rest of the team? Is your top performer working weekends to cover the slack? Is the client experience degrading?

Write down the specific, measurable ways this employee's shortfall is damaging the business. You will need this to pierce through their defensiveness and show them the broader consequences of their actions.

3. Define the End Game

Identify the realistic consequences the employee will face if the performance is not immediately corrected. Write them down. Never bluff. If the consequence is a formal written warning, say so.

If the consequence is termination, you must be fully prepared to execute it. Empty threats destroy your credibility faster than anything else.

4. Establish the Precedent

In a large corporation, you look at "past practices" to see what HR did five years ago. In a small business, you are actively building the culture with every decision. Ask yourself:

• How have I handled this with others?

• If I let this slide, what standard am I setting for the rest of my team? Consistency is your best defense against claims of unfair treatment, but more importantly, it dictates the caliber of your company's culture.

5. Choose Your Intervention Strategy

Determine what type of discussion is actually required. Do not conflate these three distinct lanes:

• Coaching: The employee has a skill gap but the right attitude. They need training, resources, or shadowing.

• Course-Correction: The employee knows how to do the job but is choosing not to execute. This is a behavioral issue requiring a firm realignment of expectations.

• Formal Discipline: The employee has repeatedly failed to meet documented standards, and you are beginning the formal offboarding process (PIP).

6. Fortify Your Position

Before initiating formal discipline, ensure your house is in order. In the modern business environment, a botched termination can result in frivolous lawsuits or unemployment claims that hike your insurance rates.

Review your employee handbook, ensure your documentation (from Step 1) is airtight, and if necessary, run your plan past an employment attorney (this is SO important). Measure twice, cut once.

Without question, the most critical component of solving a performance problem is your preparation. Walking into these meetings blind or driven by emotion is a rookie mistake. Preparation shapes the dialogue, strips away the emotion, and ultimately dictates whether you retain a reformed employee or successfully excise a toxic one.

Get Ready For Annual Reviews!

It's the most wonderful time of the year . . . Yes — it's that time to prepare for annual reviews. Most leaders look at this as a frustrating zone between a rock and a hard place (is this you?).

Why? On one hand, you're responsible for accomplishing the goals and objectives of the organization — for making sure the job gets done. On the other hand, you have to get that job done with and through other people. And those people have agendas of their own — agendas that sometimes run counter to the goals of the business and your personal expectations.

Add in that everyone thinks that they've done a spectacular job. Mix in the unrealistic expectations of the business (no big raises) and you have a volatile stew of emotions to quell each time of the year. So here's how you do it.

STEP ONE: Schedule all your reviews to occur in one day (this is usually the hardest step). Odds are you should have between 5-7 direct reports (any more and you are not really managing them correctly — a future blog post topic) — so make them 1 hour each — more than enough time. Most executives tend to procrastinate on this step — so get out your calendar and do it! If you can, try to meet offsite so you are not interrupted. I find that office reviews are easily interrupted and that disrupts the entire effect of the review — your personal one-on-one with your direct report.

STEP TWO: Meet with finance/HR and understand exactly how much money you will be working with in 2010. This will allow you to clearly define exactly how much you can increase your team's salaries (and their team's salaries). In larger companies, there usually is a matrix (which I hate) — I feel that the delivery of merit should come from the manager, not HR. At the end of the day, you need to know how big of a bag of money/benefits you have to work with.

STEP THREE: Develop a prioritization schedule of your team — this includes criteria to rank them. I break them up into three areas:

Outstanding Performers (OP) - Your "top of the line" people. They not only get everything done, they surpass your expectations. They are your right hand people (you would be SOL if they left tomorrow). You need to recognize them accordingly.

REVIEW: Keep them happy. Give them the kudos they deserve (and broadcast it to the rest of the team), give them the money (but not too much), and increase their responsibility and exposure in the organization (this is the most important area). Studies show that executives are motivated more by being in on things, exposure, increased responsibility than getting more money. Of course, money is good, but it wears off quickly.

Performers (P) - They do their job. Some do it better and surprise you, some make mistakes that infuriate you. But overall, they get their job done and cause minimal problems. If they left, it would be difficult, but not impossible, to find a replacement.

REVIEW: Your goal here is to turn this opportunity and move these people to Outstanding Performers. This is where the money comes in (show it to them). Acknowledge their work so far and give them more responsibility outside of their area. Recognize their accomplishments and discuss their misses. Your goal is to show them the map to move upwards.

Performance Problems (PP) - They are missing the mark in one way or another. It could be technically — not doing their job correctly OR socially — not communicating, managing, or playing well with others. They could be serial screw-ups, not in the right position, or not doing their job (lazy). They should be reorienting their vision upwards or you will be showing them the door.

REVIEW: These are the most critical. They are either moving up or out. They need to understand what they are doing wrong and show them how to rectify it. These people need to be managed closely — you need to be stern with them (no side conversations). No money — and a possibility that they might lose some money. Usually, PP executives walk away with a task to come back with a plan to do better. Candidly though, this should not come as a surprise to them - if you've been managing them correctly, they should have seen this coming for months. If not, don't wait until the annual review to dress them down.

STEP FOUR: How do you do your reviews?  It's easy (I did this for years and it works like a dream):

Outstanding Performers (OP) - You do these. It's important that YOU personally recognize their performance.

Performers (P) - They do their own. And then you edit accordingly.

Performance Problems (PP) - You do these. It's important that YOU personally provide discipline verbally and in written form.

STEP FIVE: Facts. Facts. Facts. Leave emotion at the door. Every review should focus on three areas: 1. What was expected of them. 2. What they accomplished. 3. How they accomplished it. That's it.

Feel free to add emotion after the review to either congratulate or discipline. My prescription is to increase the congratulations as much as possible and rein in the discipline as much as possible. Just my two cents.

That's it — if you have any questions or comments — let me know!