IN PARTNERSHIP WITH

H U M A N C A P I TA L S T R AT E G Y

Module 4
Readings
2 HRS
PERFORMANCE MANAGEMENT
AND INCENTIVES

As an organizational leader, you want your
employees to do their best work. To enable
this, you have to show that you care about
them personally, but also be unafraid
to challenge them directly to help them
improve.
the traits of a manager or a good employee.
There’s a strength section, and there’s a
development section.”
Fundamentally, David says that he coaches
his managers to ask four key questions in a
review:

+ACUMEN Human Capital Strategy

In this module, we’ll specifically look at
how you can help the people you hire stay + Knowing what I know about this
motivated, and give them the feedback they person’s performance, would I hire
need to do their best work. To get started, them again?
review how David at Ethiochicken explains
+ Would I always want this person on
the performance management system his
my team?
company has developed.
+ Is this person at risk for low
Case Study: Ethiochicken performance? If so, let’s put them
Like most entrepreneurs at the helm of a on a performance improvement
growing organization, David at Ethiochicken plan and give them 60 days to
worries not just about how to hire the best correct the issues that have been
people, but also about how to understand identified.
their performance once they’re hired. He has + Is this person ready for a
implemented a performance management promotion within the next 6-12
process that enables managers to monitor months? If so, what milestones will
progress so that they can understand they need to definitively reach and
who is developing, who might need more what support can we provide to get
attention, and who should be recognized them prepared for a new role?
and transitioned into a new role.

David and his managers spend a lot of

To facilitate this process, the company has
time thinking about how they can help
decided to conduct annual and semi-annual
Ethiochicken’s employees set audacious
reviews. “We assess everyone,” David says,
goals, achieve milestones, collaborate
“We evaluate people on how often they
effectively with their team, and receive
exhibit our values and how often the exhibit

2
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U N PA C K I N G
“PERFORMANCE MANAGEMENT”

feedback to help them improve. These are Performance management is about

all elements of performance management setting goals and then evaluating progress
that we’ll explore in this module. As David’s against those goals. Though the format
experience underscores, although a great may differ, good performance
deal of energy is often focused on the hiring management boils down to:
process, it’s also critical to invest in the + helping employees set ambitious
processes to help your employees operate but achievable goals

+ACUMEN Human Capital Strategy

most effectively once they’ve been hired.
+ giving and receiving productive
feedback from managers and, in
Unpacking “Performance Management”
some cases, peers
When you hear the term “performance
management,” most people think about + structuring fair and motivating
annual reviews. However, performance outcomes that result from the
management is not something that should review process—whether that
happen only during a certain time of the means promoting someone,
year. Instead, you should strive to create offering someone more
a culture and processes that allow you to development and coaching, or
offer continuous feedback and recognition deciding that it is time for the
to your employees. Patty McCord, the employee and the company to
former head of HR at Netflix, wrote in a part ways
Harvard Business Review article “If you talk
simply and honestly about performance on In this module, we’ll:
a regular basis, you can get good results— + review best practices for
probably better ones than a company that developing a strong performance
grades everyone on a five-point scale.” management process

+ help you understand what’s

unique about managing
performance in an impact-
oriented organization

+ introduce you to how to infuse

your organization’s values and
culture into your performance
management processes
3
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STRUCTURING EFFECTIVE
PERFORMANCE MANAGEMENT
IS “PERFORMANCE MANAGEMENT”
FALLING OUT OF FAVOR?
In 2015, the Society for Human Resource
Management reported that 6% of Fortune
500 companies were abandoning annual
performance reviews because of “managerial
dissatisfaction with reviews, their time-consuming
nature, the awkward dynamic they create
between managers and employees, and the
unhealthy competition they can foster among
co-workers.”
Yet, a 2016 response in the Harvard Business
Review by Lori Goler, Janelle Gale and Adam
Grant argued in favor of keeping performance
reviews, stating, “The reality is, even when
companies get rid of performance evaluations,
ratings still exist. Employees just can’t see them.
Ratings are done subjectively, behind the
scenes, and without input from the people
being evaluated. Performance is the value of
employees’ contributions to the organization
over time. And that value needs to be assessed
in some way. Decisions about pay and
promotions have to be made… Performance is
always rated in some manner. If you don’t have
formal evaluations, the ratings will be hidden in a
black box.”
You can read both of the articles hyperlinked
above to get an understanding on the debate
and determine whether you think using
numerical rating scales for performance reviews
will be useful in the context of your organization.
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Structuring Effective
Performance Management
Part of developing an effective performance
management system for your company
is determining the cadence of how often
your employees will cycle through the
process of setting goals, receiving feedback
+ACUMEN Human Capital Strategy
via a formal review, and seeing outcomes.
Like we mentioned, it’s often desirable to
create a culture where feedback can be
shared in real time (or close to it) instead
of letting frustration accumulate or strong
performance go unrecognized. Regular
feedback can be given in the weekly one-on-
one meetings between managers and their
direct reports, or between peers.
However, in addition to this relatively
unstructured real-time feedback, most
nonprofits also find it helpful to implement
a more formal review process so that they
have a consistent way to track performance.
As a leader, you’ll have to determine how
often you want to implement this type of
formal review process. In a profile in First
Round Review, Max Ventilla, the CEO of
AltSchool, observed that “the standard year
is far too long for startups, where things
could be totally different in just a quarter.”
So he decided to implement reviews
quarterly and streamline the process to
ensure they get done more efficiently.
4
GOAL SETTING AND
GOAL SCIENCE

By the numbers, AltSchool has found that it Goal Setting and Goal Science
takes: Once you’ve figured out the cadence and
structure of your performance review
+ 2 hours for the average employee system, you’ll want to make sure your
to complete their quarterly review company is setting appropriate goals. This
will ensure that there are measurable
+ 5 hours for the average manager to
targets that people can benchmark progress

+ACUMEN Human Capital Strategy

complete their quarterly reviews
against when it comes time to conduct
+ 16 hours for the average person reviews.
the Calibration Committee to
complete their quarterly reviews. Before we jump into the specifics of how to
(The Calibration Committee set effective goals—which we imagine that
consists of AltSchool’s senior most of you have learned at some point
leadership at the VP level and before—here are some striking statistics
above who read all completed from a First Round Review article about goal
reviews to identify trends, science. Take a minute to reflect on these
potential inconsistencies, and red facts and think about how they might be
flags.) reflected in your own company:

AltSchool structures their quarterly process + Organizations that use formal

so that each employee completes self- goal setting exercises are 3.5x
reviews, peer reviews, and manager reviews. more likely to be in the top tier of
financial performers every year.
We encourage you to skim this article to get + Only 7% of employees report fully
a better understanding of their full process. understanding their company’s
As you read, reflect on which of their business strategies and what’s
processes might be useful to adapt for your expected of them to help achieve
own organization. company goals.

+ The average employee can only

work toward 3–5 goals at a time.

5
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GOAL SETTING AND
GOAL SCIENCE

+ Only 1 in 2 senior leaders revise Senior leadership should make sure that
their goals throughout the organizational goals, strategy, and priorities
year, and only 1 in 5 frontline are clearly communicated across the entire
employees revise their goals in a organization in a way that is clear and
year. visible so that everyone can track collective
progress, and understand how their work
is contributing to the bigger picture. Then,

+ACUMEN Human Capital Strategy

All of the facts above are striking, but the
managers should communicate their
concept that only 7% of employees report
functional or team level goals to individuals
understanding their company’s strategies
on their team before each employees begin
and how their individual performance might
drafting his or her own goals. Having
affect those strategies might strike you as
functional or team level goals ensures that
particularly noteworthy. How do you think
each part of the organizational structure is
you could avoid building an organization
contributing to the larger strategic priorities
that faces this challenge? One way is to
of the company, and also gives individuals
make sure you’ve established clear linkages
an immediate group of colleagues who can
between organizational goals, team goals,
collectively hold each other responsible for
and individual goals.
progress.

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GOAL SETTING AND
GOAL SCIENCE

Goals at any level should be “SMART”: Here are some examples of how the first
goal could be improved. How do they
+ S: Specific compare to what you came up with?
+ M: Measurable
+ A: Actionable + Appoint an operations/project
+ R: Relevant (& Realistic) manager by 06/2017
+ T: Timely

+ACUMEN Human Capital Strategy

+ Prepare plan for next installation
of eFront software system by
To help you get a sense of why SMART
06/2017
goals are important, read the following
examples of weak goals. As you read, think + Add an independent Director on

about what you could do to make each one the Board by 09/2018

stronger. + Raise $250k to fund social impact

analysis and lean data projects for
+ Manage existing portfolio to 5 portfolio companies
achieve objectives & social
impact goals
Developing Positive Goals
+ Build solid pipeline of future “Studies have shown that framing goals
fundraising leads positively leads to greater achievement.
+ Improve media exposure to help Instead of stating your goal as, “Try not to

brand exposure miss more than 3 out of 15 questions,” you

should word it as “Try to correctly answer
12 out of 15 questions.” This prompts people
to try their best, not simply avoid failure—
language has a critical impact on outcomes,
even if it seems nuanced.” (First Round
Review)

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DELIVERING
FEEDBACK
Delivering Feedback using the SBI Method
Once you have your goals set, then you
need to be continuously giving people
feedback to help them see how their
individual and collective efforts are tracking
against your benchmarks. Where are they
making progress and where do they need to
improve?
Sheila Heen and Douglas Stone, the authors
of Thanks for the Feedback, note that feedback
is crucial because it “improves performance,
develops talent, aligns expectations, solves
problems, guides promotion and pay, and
boosts the bottom line,” (“Find the Coaching
in Criticism”). Kim Scott prefers the term
“guidance” which she says is “fundamentally
just praise and criticism.” Whereas “feedback
is screechy and makes us want to put our
hands over our ears. Guidance is something
most of us long for,” (“The Surprising Secret
to Being a Good Boss”).
While we all know that feedback is
important, the practice of holding difficult
conversations with employees where you
have to convey areas for improvement is
a process that can still be daunting and
anxiety-inducing. The key is to deliver
feedback in ways that are measured,
professional, and constructive, while also
making sure that your message is conveyed
directly, without unnecessary sugarcoating.
All use, reproduction and distribution of this work is subject to a CC-BY-NC-ND license.
How do you do that?
Kim Scott suggests that the first thing you
should do is ask for feedback yourself.
Before you start criticizing others, step up as
a leader and ask others to provide you with
guidance. Ask questions like “What could I
+ACUMEN Human Capital Strategy
start or stop doing to make it easier to work
with me?” When people offer ideas, thank
them and receive them graciously. This will
establish a culture where feedback is openly
given and encouraged.
When you need to give feedback to others,
one practical framework to try is the
SBI Method which stands for Situation >
Behavior > Impact. Here’s how it’s practiced:
Situation: You describe a specific situation to
remind a person of the context (for example:
“Yesterday when we were at the copy
machine” or “A few minutes ago when we
were in the sales meeting”).
Behavior: You note a specific behavior that a
person performed (for example: “you raised
your voice when I was trying to explain the
sales pitch”).
Impact: You described the specific impact
the behavior had (“which meant that I never
had a chance to explain my idea for this new
vending machine which I think could help
8
DELIVERING
FEEDBACK

us reach this population of coffee farmers She uses her Radical Candor Framework
we’ve been trying to reach.”). to help you understand the sweet spot for
where good, effective feedback should fall:
Here’s the difference between ineffective
general feedback, and feedback given using
the SBI Method:

+ACUMEN Human Capital Strategy

Ineffective feedback: “You’re really rude.”

SBI Method: “Yesterday in the meeting when

you interrupted me, it made me feel like you
don’t value my opinion.”

Ineffective feedback: “You are lazy and

difficult to work with.”

SBI Method: “When working together on

Project A, you often missed deadlines or did
not respond to emails, which delayed our
team’s progress and created extra work for
others.”
Delivering Feedback
Using Radical Candor™
Kim Scott, who we mentioned before, is a
former Google manager who thinks that
the key to being a good boss is to be able
to “challenge directly” and show you “care
personally” at the same time. The ability to
strike this balance is something she calls
radical candor.
If you’re interested in learning more about
this approach, we suggest listening to
her podcast series where she talks about
ways bosses can deliver effectively candid
feedback. The bottom line to keep in mind
is that you want to avoid being insincere,
too nice, or obnoxiously aggressive. Instead,
there is a way to deliver feedback that
can both demonstrate personal care for
someone and also show ways that they can
get better. As a manager, this is a useful
balance to strike.

9
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CASE STUDY:
AMAL ACADEMY

Amal Academy has learned the importance
of providing continuous feedback to
employees and establishing clear criteria
for performance evaluation. They’ve come
up with a 3-part framework that offers
just the right amount of structure and just
the right amount of flexibility for a social
Although evaluating someone on “values”
might seem abstract or challenging, Ali
and Sarah say they’ve actually found this
essential:
“We’ve now hit a point

+ACUMEN Human Capital Strategy

startup. They focus on giving feedback and
where we know we have
evaluating employees in these 3 domains: to articulate and reinforce
our values,” Ali says. “As an
+ Values: How well does
organization grows, you’re
the employee model the
organizational values? going to be putting out fires
+ Core Activities: How well does the and be pulled in all different
employee perform their core job directions and it helps to
responsibilities? In Amal’s case,
have values as a beacon
this includes interaction with
Fellows and training delivery. or guiding light to make

+ Everything “Beyond the Job decisions about what you

Description”: How well does the ultimately want to achieve.”
employee step up and engage in
other aspects of the organization—
particularly as it scales?

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CASE STUDY:
AMAL ACADEMY

Accordingly, they’ve prioritized deliberately
codifying their values and emphasizing
them with employees. They publicly praise
employees who take concrete actions
to embody them in a daily basis and
incorporate them as formal evaluation
criteria in the performance review process.
These metrics are tracked in dashboards and
then discussed in recurring 1:1 meetings.
Eventually, they will also be discussed end of
year performance reviews.
Finally, Amal has also found it important
to acknowledge that in a rapidly scaling

+ACUMEN Human Capital Strategy

They also focus on evaluating how startup, people are often asked to pitch in
well an employee performs their core and contribute in ways that might not have
responsibilities. They had program managers been captured in their initial job description.
and associates develop a list of all of these Accordingly, they look at ways employees
responsibilities themselves and identify are contributing to functions like marketing,
associated metrics. human resources, managing logistics and
engaging with alumni.
The list of things they came up with
included things like:

+ Retention rates of fellows in the

cohorts they manage

+ The level and detail of feedback

they provide to fellows

+ NPS scores for their training

sessions

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LISTENING TO
FEEDBACK

Listening to Feedback rather than letting your own prior

There is a lot of research and published experience with that particular
guidance on how to deliver feedback—but person get in the way.
what about listening to feedback? How do
+ Sort toward coaching: Heen and
you make sure that you are able to take in
Stone explain that “Some feedback
new ideas, suggestions, or even criticisms
is evaluative (‘Your rating is a 4’);
from your peers, managers, or direct reports
some is coaching (‘Here’s how you

+ACUMEN Human Capital Strategy

and use it productively?
can improve’). Everyone needs
both. Evaluations tell you where
Here are the tips that Heen and Stone,
you stand, what to expect, and
authors of Thanks for the Feedback, shared in
what is expected of you. Coaching
the Harvard Business Review:
allows you to learn and improve
and helps you play at a higher
+ Know your tendencies: Reflect on
level.” Try to hear feedback as
how you’ve reacted to feedback
guidance or coaching on what
in the past so that you know
you can do better in the future,
how to calibrate your responses
rather than just focusing on it as
accordingly. For example, if you
criticism of work you’ve done in
know that you always overanalyze
the past.
feedback, call out this tendency
in yourself and try to avoid going + Unpack the feedback: Before you
too far down a rabbit hole in the reject a criticism or suggestion as
future. being unhelpful, take the time to
better understand it. Sometimes,
+ Disentangle the what from the
the feedback you receive might
who: You’ll likely have an existing
be vague, so you’ll need to ask the
relationship with the person
person who delivered it to offer
who is giving you feedback—and
you more context or examples.
that relationship might be one
Sometimes it also won’t be clear
that comes with baggage. Try to
what the person will want you
disentangle the message from the
to do differently in the future.
messenger and try to listen to the
Make sure you follow up and
substance of what they’re saying,
drive towards understanding this.

12
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HOW TO STRUCTURE A
PERFORMANCE REVIEW MEETING

Instead of rejecting the feedback How to Structure a Performance

out of hand as being unhelpful Review Meeting
or too vague, take the time you You’ve mastered the basics of setting
need to reflect on it and then ask goals, delivering feedback, and listening
clarifying questions if needed. to feedback. Great. Now, how do you tie
it all together and deliver an effective
+ Ask for just one thing: Instead of
performance review meeting? These are

+ACUMEN Human Capital Strategy

waiting for your annual review,
typically one hour sessions that should
ask many people—not just your
be a two-way conversation between the
manager—for periodic feedback.
employee and the manager. In advance,
A question Heen and Stone
the manager should have assessed the
recommend posing is: “What’s one
individual’s progress on each of their goals
thing you see me doing (or failing
using a framework like the one below:
to do) that holds me back?”

+ Engage in small experiments: Not

convinced that a piece of feedback
you’ve received is valuable? Try
DID NOT Did not meet critical aspects
acting on that person’s advice MEET of goal or make substantial
in a small or temporary way. For progress. 
example, if someone tells you that
NOT MET, BUT Did not meet critical aspects
you should contribute more in
PROGRESS of goal(s), but did make
meetings, try picking a meeting MADE progress on certain areas. 
and making at least 5 comments.
Reflect on the experience and MOSTLY Mostly achieved goal(s)
ACHIEVED including most critical
decide it’s something you want to
aspects of goal(s). 
continue doing move forward.
ACHIEVED Fully achieved goal(s) in all
aspects and without any
We recommend checking out the whole
exception. 
article for more detail: “Finding the Coaching
in the Criticism.” EXCEEDED Fully achieved goal(s)
in all aspects and also
exceeded in certain aspects
unplanned. 

13
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HOW TO STRUCTURE A
PERFORMANCE REVIEW MEETING

As the manager, you should then come into + What future career growth
the meeting with some clearly formulated opportunities do you see? What
messages that you want to deliver. Usually, new or expanded roles or stretch
this should involve preparing a review in opportunities might be possible?
writing. For example: Or what type of progress will you
have to see before someone is
+ Review the individual’s self- ready for those new opportunities?

+ACUMEN Human Capital Strategy

evaluation (if they completed
one) and compare it to your own
Once a manager has thoughtfully prepared
assessment or the assessment
a written review and thought about their
completed by the team. Where do
desired outcomes for a review conversation,
they diverse or converge?
they should consider how their employee
+ What’s your overall impression of will react. To facilitate productive discussion
how the person’s achievements between the manager and a direct report, it
align with their goals? Did they can be helpful to ask things such as:
accomplish what they set out to
for this specific period of time? + Do you feel challenged, valued,
and engaged in your current role?
+ What are the person’s greatest
strengths? What are specific + What skills would you like to
examples of when he or she develop to further contribute to
displayed those strengths? How this organization’s mission?
can you leverage those strengths
+ What opportunities might help
further?
you expand your contributions to
+ What are his or her areas for this organization?
development? Again, it’s useful
if you can provide examples and
formulate 1-3 specific suggestions
to improve performance.

14
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MAKING PERFORMANCE
DECISIONS

The meeting will not always go as you
intended because it should be a two-way
conversation. If you are anticipating a
particularly tough conversation, here are
some tips for how to keep the meeting
productive:
Employees should also set new goals or
objectives as a result of the feedback they
receive in a review. For example, they might
need to develop a technical skill (“be able to
deliver effective presentations to prospective
investors independently”) or achieve more
nuanced results such as “be able to project

+ACUMEN Human Capital Strategy

+ Don’t expect team members to manage something that is more complex
immediately disclose their views than X, with more stakeholders and a larger
and feelings on the feedback. budget” or “be able to provide direct and
Give them some time to process candid feedback to their peers more often.”
the feedback and answer your
questions (pauses can be good Making Performance Decisions
thing). The process of giving and receiving
feedback is essential to the health of your
+ Allow periods of silence for the
organization. But the goal of a feedback
person to absorb the information
structure is ultimately about managing
and respond—some people
and optimizing performance. In addition to
need more time to fully process
giving feedback, there are two other tools at
information than others.
your disposal as you manage performance
+ If you are speaking for the entire across your organization: incentives
session, it is unlikely the team to encourage good performance, like
member will internalize the promotions and bonuses, and ameliorative
feedback; give opportunities for measures for addressing subpar
team member to give input and performance.
engage in discussion.

Incentives vary widely by organization since

It’s always useful to close by discussing the it is up to you to determine what “success”
next steps—such as whether someone can looks like in your organization, and how to
expect a raise or promotion or what the reward people appropriately.
criteria will be to earn one in the future.

15
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C R E AT I N G
INCENTIVES

What do your employees value? For the Here are a few best practices to keep in mind
purpose of this course, we will briefly cover when setting up your promotion process:
three components: promotions, bonuses,
and non-monetary rewards. These are all + Set clear criteria for promotions
tools to consider for incentivizing your and communicate that criteria
employees to continuously improve. Keep often with your team; managers
in mind that what we map out here are should be comfortable explaining

+ACUMEN Human Capital Strategy

general guidelines. We suggest that you these criteria.
conduct additional research on the common
+ Have a central coordinating HR
practices and standards that will be both
person or executive committee
legal and competitive in your geography
who reviews promotion
and sector.
nominations across the
organization to ensure standards
Incentives: Promotions
are applied consistently.
Promotions are distinct and separate from
performance reviews. While a performance + Start conversations early if

review is a single snapshot of one’s someone is expecting a promotion

performance in a given time period, a that s/he will NOT get. Ideally, the

promotion may be based somewhat on the performance review should not

results of a given year, but also reflects a deliver many surprises.

broader view of someone’s capacity, and a
reflection of their technical skills, leadership
skills, and the breadth of responsibilities.
One of the most common mistakes
managers make when handling promotions
is failing to clearly lay out the criteria for
advancement with their teams, which can
lead to a sense that they promotions are
arbitrary, and based on politics rather than
performance.
Are people really motivated by promotions?
The article “Warning: This Is Not Your
Grandfather’s Talent Planning” talks about
the importance of paying attention to
the specific roles and needs of your team
members.
Kim Scott points out that at varying times
in their careers, employees may either be
in “Superstar mode” or “Rockstar mode.”
People in “superstar mode” are those

16
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A D D R E S S I N G S U B PA R
PERFORMANCE
who are “going to change everything,”
and will have a dramatic impact on your
organization. People in “rockstar mode”
are great at their job, and serve as a “force
and source of excellence and stability
on a team,” but aren’t actively seeking a
promotion or to move into their boss’s job.
Both are important and valuable within
your organization, but it is important to
understand the relationship between those
modes and your approach to promotion.
The article also warns us not to “create
an organization that is so obsessed by
promotion and status” by having the wrong
structure around promotions within an
organization.
Incentives: Bonuses
One way to incentivize employees and
managers is to pay them a bonus. A majority
of long-term executive bonuses are tied to
performance, and are typically paid out after
the close of the fiscal year.
Incentives: Non-Monetary Rewards
Not all incentives have to cost money
directly. By offering employees things like
sabbaticals, secondment, mentorship
opportunities, benefits, awards, and
additional learning opportunities, you
can also incentivize people to stay at your
organization.
All use, reproduction and distribution of this work is subject to a CC-BY-NC-ND license.
Read this article by psychologist Dan
Ariely about how to decide whether to use
monetary or non-monetary rewards. Hint:
the research shows that money isn’t nearly
as compelling as compliments or pizza.
Addressing Subpar Performance
+ACUMEN Human Capital Strategy
The best approach to planning for
circumstances in which you’ll need to
address subpar performance is to implement
robust feedback processes. Consistent,
timely feedback ensures that both you and
an employee are sufficiently and quickly
informed whenever their performance does
not meet expectations, and you are in the
best position to address that situation before
it becomes a larger issue. In the following
module, we’ll discuss various strategies for
developing the skills and expertise areas of
your employees. However, not all issues will
be a lack of experience or expertise that can
be addressed through training and learning.
It is important to note that just because an
employee is struggling in one position or
team, does not mean they are necessarily
a bad fit for your company—be careful to
distinguish issues of skill from issues of
culture fit, and consider whether a transfer
to a different team or position might allow
for a better use of that person’s skills and
temperament.
17
A D D R E S S I N G S U B PA R
PERFORMANCE
In cases of subpar performance, you
should begin to address the situation by
consistently giving an employee clear,
constructive feedback about how they can
improve their performance. If you’ve done
so over a significant period of time and yet
seen no change, you will need to consider
terminating that person’s position with your
organization. This is also the stage at which
you should consult with your legal counsel
to make sure you’re taking the appropriate
steps to justify termination.
Realizing that you need to fire someone
is never easy, but it is important to frame
the situation appropriately, and in a way
that will let you manage the situation with
respect and grace. HBR’s Step-by-Step Guide
to Firing Someone suggests, “The appropriate
metaphor? A no-fault divorce. As painful
as divorce may be at the time, it allows two
people to correct a mistake and move on
to a more satisfying future. Handled well,
termination works the same way.”
One of the most important things to
remember is that, while you certainly want
to be compassionate towards everyone you
work with, your greatest responsibility is to
your organization and the impact it’s trying
to create—and to your current team, whose
work is hindered when someone is not
contributing, or is actively disrupting.
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Michael Lopp, VP of Engineering at Slack
(a cloud-based collaboration platform),
offer these guidelines for considering the
firing process in the First Round Review
article, “The Best Approach to the Worst
Conversation”:
+ACUMEN Human Capital Strategy
It is always your job as a manager to know
when there is an issue, and to take action. If
you’ve gotten to the point where you think
you need to fire someone, you should’ve
already taken significant steps to try to
address the issue, and to document each
of your conversations and ameliorative
actions—and you should’ve consulted a
professional about what is legally necessary
and appropriate for the situation. As the
article notes, “Particularly when it comes
to letting people go, you’re stepping into a
minefield. You have to be open to asking for
help. Even when people are employed at-will
there can be legal ramifications. There can
be consequences for your brand. The list
goes on. If you don’t have an HR person or
agency, ask your investors, ask your advisors.
If you even have an inkling you could get
sued, ask a lawyer. Don’t wing it.”
The first step in most processes of
addressing subpar performance is to discuss
the issue with the employee, and to institute
a Performance Improvement Plan (PIP). A
PIP “usually takes the form of an official,
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PERFORMANCE
written agreement drafted and overseen by
HR that outlines exactly how an employee
needs to very quickly get better at their job
in order to keep it.” Lopp advises that, in the
best of circumstances, PIPs are used early,
and initially without serious consequences
(as soon as a situation becomes a problem,
and long before that situation begins to feel
like a lost cause). “Lopp recommends what
he calls a pre-PIP—essentially an agreement
made between a manager and employee
to improve performance without signing
anything with an unspoken ‘or else’ at the
end of it.” Read more about the steps of
preliminary and formal PIP processes here.
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Ultimately, addressing subpar performance
is first and foremost about identifying issues
quickly and precisely, and ensuring that
you as a manager are providing sufficiently
detailed, frequent, and targeted feedback for
your employees to address those issues. If
those feedback processes are unsuccessful
+ACUMEN Human Capital Strategy
in changing an employee’s performance, the
next step is to seek advice from your legal
and/or HR professional(s), and to institute a
formal process, like a PIP, that is drafted in
consultation with those professionals.
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PERFORMANCE
However, you’ve ideally implemented
hiring practices, feedback processes, and
performance management techniques that
allow you to avoid the situation entirely—
and to react proactively if there is every a
question of subpar performance. Consider
these processes as a last resort, and focus
your attention not only planning for a final
firing conversation, but strengthening your
other process to prevent ever needing to fire
someone.
Sam Altman, the president of Y Combinator,
states his perspective on when it is
necessary to fire people in a startup very
clearly: “Fire people when it’s not working. Firing
people is one of the worst parts of running a
company. Every first time founder waits too long.
Everyone hopes an employee will turn around.
But the right answer is to fire fast when it’s not
working out. It’s better for the company. It’s also
better for the employee. But it’s so painful and so
awful that everyone gets it wrong the first few
times. In addition to firing people who are doing
bad at their job, you also want to fire people who
are (a) creating office politics and (b) who are
persistently negative. The rest of the company is
always aware of employees doing things like this.
And it’s just this huge drag and completely toxic
to the company.”
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Do you agree or disagree with Sam’s
perspective? He says that deciding whether
or not to fire someone can actually be very
straightforward: “If someone is making all the
opposite decisions as you would as a consistent
thing over a period of many weeks, you’ll be
aware of it. In theory, it sounds complicated. But
+ACUMEN Human Capital Strategy
in practice, there’s never any doubt.”
Looking for tactics on exactly what to see in
these difficult situations? Here are some tips
from Inc. Magazine.
Conclusion
Incentives and ameliorative measures are
a means to an end. To implement the most
appropriate ones, you need to step back
and think about how your employees are
motivated. This requires building personal
relationships with them in order to help
them fulfill their professional potential.
In the next module, we’ll turn to how
you can structure further learning and
development on the job.
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