It’s Time to Take a Serious Look at How You Evaluate and Compensate Your Employees

Article originally published in the Philadelphia Business Journal on June 26, 2018

What is your company’s approach to assessing the performance of its employees, sharing feedback with them, and compensating them properly for their performance? Do you and your employees think that your approach is effective? What changes would you make?

In June 2015, I wrote an article to guide business leaders in how to improve their compensation and performance review system based on the work we undertook at my former company, PQ Corporation. This is an update of that article. Adobe Systems followed a similar path when they revised their employee review system in 2012.

For years, many employees at PQ felt that the employee performance review and compensation system was not effective. The opportunity to improve the system occurred when I was appointed president of one of the company’s operating divisions. I convinced the other two operating division presidents that changes were needed, and we received approval from the CEO to design a new system.

Working with the HR department and with the assistance of outside advisors, we made changes to the system, which we tested with a focus group of employees that included upper, mid-level and first line managers, as well as individual contributors. This was key to making the new system a success. We wanted to involve employees, so they would have ownership in the new system, which remained in place with only minor modifications some 15 years later when the company was sold.

So, what were the key elements of the new performance management and compensation system?

Performance was assessed on achievement of business and personal objectives

Managers were also assessed on the effectiveness of their leadership and management style. As part of this process, all employees were asked to assess their own performance. Managers gave informal periodic performance feedback to their employees, in addition to more formal annual feedback.

360-degree interviews were used to get a full picture of an employee’s performance

Annually, 360-degree interviews were conducted with the manager’s direct reports to get a sense of the effectiveness of their management and leadership style, tone and culture within their organization. These types of interviews were also conducted with the individual’s peers to learn about their teamwork and collaborative skills.

After I was named CEO of the company a number of years later, I continued to undergo a 360-degree review conducted by the chairman of the board. This was some of the most valuable feedback I received to improve my performance as chief executive officer.

Employees were not force-ranked

Our company did not force-rank employees – one of the best ways to adversely impact collaboration and teamwork. We did not want employees competing for salary increase dollars.

Employees were informed if they were meeting, exceeding or falling short of expectations and coached on how to improve their performance. This was done periodically throughout the year. We parted company with those employees who fell short of expectations and did not improve.

Compensation system was fully transparent

Salary ranges and midpoints of jobs were benchmarked using market survey data. Performance criteria were defined for the midpoint and for the 75th percentile of the salary range. To be paid at the midpoint, an individual’s performance had to meet the definition of midpoint performance. To be paid at the 75th percentile, performance had to meet that definition of performance.

To be paid above the midpoint, the employee had to significantly exceed expectations on a sustained basis over time. If an individual was being paid high in the range, they would need to sustain that performance each year, or their salary increase would be less than the annual salary structure movement, and they would slip back in the range.

How the performance review and compensation worked was explained to all employees in a very transparent way. There was no need to keep anything from them. This significantly increased the trust level between manager and direct report.

The response to the age-old question: I am not happy with my compensation

When an employee shared that they were not happy with what they were paid, they were told that they were compensated commensurate with their performance, and that if they wanted to earn more, they had to improve their performance or get promoted to a higher paying job.

Of course, the effectiveness of any performance review and compensation system depends on a fair and realistic assessment of an individual’s performance.

Were there sufficient salary increase dollars for promotions and to pay top performers?

Delays in filling open positions and adherence to the definitions of midpoint and 75th percentile performance usually provided more than sufficient salary dollars in the budget to make proper decisions about each employee’s salary increase.

If there were insufficient salary dollars to reward all of the high-performing employees within a unit, approval was granted to exceed the salary budget, but only after the manager of that unit demonstrated the need. The last thing you want to do is give a lesser salary increase to a high performer. You might lose them.

There is no reason why your company’s performance management and compensation system should not be transparent and easily understood by your employees. It will remove any doubt that they are being treated in a fair and equitable manner. This allows employees to focus on their job and not compensation issues. It will also help to retain top performers, helping your company perform better in the long run.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at 

Dealing with Toxic Individuals in the Workplace

Article originally published in the Philadelphia Business Journal on April 10, 2018

At some point in our careers, nearly of all us will find ourselves working with bosses, direct reports or peers who lack ethics and integrity. These people are toxic and hinder the organization’s ability to achieve its objectives.

Toxic people will throw others who stand in their way under the proverbial bus for their own purpose of advancing through the organization at the expense of others. They will complain about others and talk behind their backs to undermine them.

Those who are toxic are not trusted by their peers or direct reports. The actions of everyone they work with have a defensive component, which hinders any group from becoming a high-performance team. Toxic people within the organization don’t realize that their personal integrity and reputation is a valuable asset. It determines if people want to deal with them.

Toxic people are good at managing up, so their behavior may not be transparent to their boss. Eventually, the boss learns about them and everyone hopes that sooner or later they will be terminated.

So, what do you do if:

You work for a toxic boss

Do your job and do it well. More than likely, you will not be permitted to make many decisions without the boss’s approval, so over-communicate to make sure you are both on the same page.

Ensure you are part of an informal network within your organization. It’s a source of mutual support on developing strategies to deal with toxic individuals.

You may decide to transfer to another position within the organization or the company. Or, you may decide to wait until your toxic boss leaves the company or is fired. You need to weigh your alternatives and decide on your personal course of action.

You work with a toxic peer

As in the case of working for a toxic boss, do your job and do it well, and develop informal alliances with others. They are a great source of information as to what your toxic peer is saying about you. Be on guard for criticism of your work behind your back.

Don’t play the same game as your toxic peer. Let your results speak to the quality of your work.

You have a toxic direct report

If one of your direct reports exhibits toxic behavior, that individual must be confronted and told to stop. They will deny the accusation. Expect them to be defensive. They need to know that if their behavior continues, they will part company with the organization.

How can you understand the interpersonal styles of the individuals that report to you? How can you tell if you have a toxic individual working for you?

As the leader, you need to periodically talk with those within your organization below your direct reports. Hold skip level meetings with them and ask how things are going and what they are working on. Ask questions for understanding, but never violate the chain of command by telling them what to do.

If the people within your organization trust you, they will tell you if there is a toxic individual within the organization. If one of your managers objects to you talking to their direct reports, it’s a dangerous sign they want to keep information from you.

The other way of obtaining information on your direct reports is through a 360-degree interview process, where information about an individual’s effectiveness is obtained through interviews with those within the organization with whom the individual interfaces.

There are those who say that 360 results should only be shared with the individual for personal performance improvement. I disagree. The results also should be used by the boss for a performance assessment.

You are a toxic individual

As a toxic individual, you need to realize that your behavior will not lead to sustainable success. Eventually you will be terminated, and your reputation ruined. No one will trust you nor want to work with you. There is a valuable adage, “never burn your bridges.” So true.

Rex Tillerson, former chairman and CEO of Exxon Mobil and the former secretary of state under President Donald Trump, in his departure comments to employees of the U.S. State Department, stressed the importance of “honesty and integrity in all that you do.” Tillerson said, “Never lose sight of your most valuable asset, the most valuable asset that you possess – your personal integrity.”

He continued, “[Your integrity] … belongs to you, and [will] always … belong to you and you alone. Only you can relinquish it or allow it to be compromised. Once you’ve done so, it is very, very hard to regain it. So, guard it as the most precious thing you possess.”

Tillerson’s comments are an important message for all of us. Don’t do things that will damage or undermine your integrity or reputation. Aside from being the wrong thing to do, it’s just not worth it.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.