Beyond the Performance Review

In my town, there’s a lawn service that comes by three or four times a year to examine the grass for diseases, apply a little fertilizer and some other treatments […]

In my town, there’s a lawn service that comes by three or four times a year to examine the grass for diseases, apply a little fertilizer and some other treatments to keep things going, and after about 10 minutes, head off to the next lawn.

This also is how performance evaluations are generally done in most organizations. Every year or so, the boss does a performance review on the employees. We get checked off on a 10-point scale or some other device. The boss drops a little encouragement on us—or some other treatment—to keep things going. It takes about 10 minutes, and then we can all get back to work.

The annual, semi-annual, quarterly or whatever performance review is universally disliked. Employees are confused, because they don’t understand what they’re being evaluated on. Bosses hate doing it, because they don’t believe in the process, and they fear the confrontations that sometimes arise.

The old notion is that the leader evaluates people’s performance, sometimes using a set of subjective criteria that is sprung on them at the end of the reporting period. This, of course, is absolutely insulting, which is why so many managers themselves don’t get good performance scores from their people.

The old-time performance review has become a meaningless ritual, a holdover from the Industrial Age mindset of treating people like interchangeable parts in a machine. If you’re a business leader in the 21st century, you know that employees are by far your most important asset. You treat them as volunteers, just as you treat customers as volunteers, because they choose to volunteer the best part of themselves—their hearts and minds—to your firm. And they have more choices than ever about where and what they will volunteer.

I was in a group once where someone asked, “How do you shape up lazy and incompetent employees?” One man responded, “Drop hand grenades!” Several others cheered that “shape up or ship out” approach to supervision. But another person in the group asked, “Why don’t you do that to your customers? Just say, ‘Listen, if you’re not interested in buying, you can just ship out of this place.’”

He said, “You can’t do that to customers.”

“Well, how come you can do it to your employees?”

“Because they work for you.”

“I see. Do they work hard? How’s the turnover?”

He answered, “Are you kidding? You can’t find good people these days. There’s too much turnover, disloyalty, absenteeism, moonlighting—people just don’t care anymore.”

Some organizations talk a lot about the customer, and then neglect the employees who deal with the customer. This mindset produces unmotivated employees, worker-manager disputes and poor business results.

The top leaders of the 21st century realize that the implied contract between supplier and customer also is in force between the leader and the led. A customer comes to you for a service, for value. If you’re smart, you will understand as much as you possibly can about that customer’s idea of good value—about the “win” for the customer. The same is true of employees. Intelligent leaders seek to deeply and accurately understand the “wins” for their employees. Instead of reviewing performance, they sit down with their employees and make “win-win agreements.” The employee defines what the win is for him or her, and the leader defines what the win is for the organization.

A win-win agreement always contains the same basic elements. First, you define together the goal of the agreement—the desired result. Then you define, again together, the guidelines, resources and accountability mechanisms you will use—that is, how and when you will account for progress on the goal. Finally, you define the wins for both of you if you achieve the goal—and the consequences if you don’t.

Developing win-win agreements is the central activity of good leadership. Employees manage themselves within the framework of the agreement. Leaders keep the resources flowing and the pathway clear. And when it comes time to do the performance review, there’s no longer a visit from the lawn inspector. The employees evaluate themselves.

Stephen R. Covey, Ph.D., is co-founder of FranklinCovey and author of the best-selling “The Seven Habits of Highly Effective People” and “The 8th Habit.” He can be reached at

August 2005 Table of Contents