The Three Levels of Employee Performance Explained

One of the things that I found with this as a CEO and as an entrepreneur is that we have to really do a good job managing expectations, expectations of clients, managing expectations of team members, managing expectations of strategic partners, and just making sure that we're all on the same page so that there aren't any misunderstandings. Entrepreneurs are the greatest group to have influence over making the world a better place, making the world a more innovative space, bringing more value to the community. In North America, 90% of the economy, the back phone is small to medium sized business. Good day and welcome to the Wealthy Entrepreneur podcast. I'm your host, Bob Govreau. It is great to have you here with me today. I just want to remind you that this is the place where we dissect the elements that contribute to entrepreneurial success from mindset and leadership to profits and revenue. This episode is focusing on managing employee performance metrics and managing employee expectations on competition compensation. And I'm going to jump right into it today. But super grateful that you're here joining me. You know, I've had this conversation with a number of entrepreneurs over the last, I don't know, a couple months, maybe even the last six months. And one of the challenges that we've seen and I think it's maybe just some of the ways that society has sort of become over the last couple years. It's a, there's a lot of what about me sort of mentality and you know, me first versus bringing value to other people. And one of the things, things that I found with this as a CEO and as an entrepreneur is that we have to really do a good job managing expectations, expectations of clients, managing expectations of team members, managing expectations of strategic partners and just making sure that we're all on the same page so that there aren't any misunderstandings. And specifically I want to talk about today, misunderstandings with team members. And recently, I'm going to share with you guys. Recently I had a strategic planning session with my team as we head into a new year. We always talk about what some of the big plans are for the year, some of the exciting things. You know, our theme for this year is momentum and client success, which is great. So momentum, meaning, you know, we've had a lot of great progress. Let's continue that progress. No major shifts in strategy, but just continue that momentum and focus on client success and communication. And again, I feel like for many of us we've seen that a lot of people just have a misalignment with, you know, expectations of what people are entitled to and, you know, I had to approach this with my team because as we continue to grow and add more people like you as an entrepreneur, if you're going from solopreneur to building a business where you've got a business and you've got multiple employees or you want to get to a place where you have multiple employees, you know, we have to manage expectations. And I've talked about this before, and I will always talk about this. You know, the. The new employment or the new employee employer relationship has to be focused on one of transparency of care, but on alignment in making sure that everyone on the team understands exactly what's expected of them and how that they will be treated and the opportunities that lie ahead based on how they perform. And because I feel like with all the changes, you know, people have expectations that they don't need to perform, they don't need to work as hard in order to continue to get just be handed performance increases and compensation increases. And I feel very strongly that this is just based on misalignment. So I want to share with you guys how I presented this to my team at our strategy day. And I think it was fairly effective because overall, you know, there were a lot of gratitudes related to any compensation increases and those where there wasn't compensation increases, there was an understanding as to why and the things that need to happen in order to get to the next level. So I'm going to share with you my approach. So when I talk to my team, I want to make sure that we're managing expectations and that they understand that there's one of three sorts of employee performance levels. And I've characterized it as. As three. Others might characterize it differently, but mine is of three. The very first level is the underperformer. Now, the underperformer is an individual who we've identified within the organization is struggling to meet their output or their objectives. And, you know, in our organization, there's lots of support, right? We're a team. If somebody falls off and, and is struggling, whether there's things going on in their. Their personal life or their professional life, and they're just not able to get the outcomes and the results that they need during the day. We work with them. You know, we don't immediately cut people off. I know people say, you know, higher fat or higher slow fire fast. You know, I don't necessarily believe in the fire, the fire fast. Certainly there's circumstances where if it's a cultural misalignment or, or if there's a poison inside the organization, yes, maybe fire fast, but if it's someone who's struggling to hit their productivity levels, you know, we're here to support. We invest too much time in making sure we find the right people who are a good fit with the organization. We're not willing to just say, oh, you're, you're struggling. See you later. Although it does happen over time. If we can't get people back in line, I don't want to suggest that. I just want to say we want to make sure that we're supporting people and this is our take on how we do this. So the underperformer, typically this person knows that they're underperforming. It's been identified because we have weekly check ins with their managers based on expectations, how are they performing? And so there should be no surprises. When we identify somebody and say, you know, you're underperforming, they're already aware of it because of the consistent alignment of here's what's expected, how are you performing? And so we said in this case, or I said, in this case, you know, if you're an underperformer, you're likely on a performance improvement plan, which means the team is working with you to try and revise your goals or revise the processes in how you get to the outcomes that you need to, to be successful in your role. Cause ultimately what we're trying to get is, is them up to level two. So if you're in level one, you're underperforming. And if you can't get to a point where you are performing at a satisfactory level, not at a high, but at a satisfactory level, then we're going to have to have more difficult conversations because, you know, we need everybody to perform so that we deliver client success. And so it's very important for us on our mission to empower entrepreneurs to have, you know, informed and confidence in financial information so they can use that information to change the world. You know, if our team isn't performing at a certain level and our resources aren't able to get there, we're, we're falling short of our mission. So we don't want to see that happen. And I'm committed to that. So if they're on a performance improvement plan, and again, I'm sharing this to my team saying if, if this is you or you're underperforming, just know that, you know, there is a window of time, which is not short, but it's not long, where we feel like you have the opportunity to be corrected in your outputs and in your performance to get you back up to a satisfactory level. And so if you are in this Level 1, you are not getting a performance compensation increase. Right. Just be aware, there's no raise, there's no increase at all. In fact, you're likely overpaid for what you're producing at this point. So let's work with you to get you to the next level. Okay, so that's level one. Level two is where we've hired somebody and they're performing exactly what we've said in our employment agreement. Hey, employee, you know, we've brought you in, this is your responsibilities, this is what we're expecting of you for this sort of compensation in exchange. And if you hit this level, this is level two, then we are extremely grateful you've done exactly what's required of you. We appreciate you as a team member and we look forward to continuing to pay you in order to be doing this work. Now, we, we will continue to revisit the compensation to make sure that it's at market level. We like to pay market or higher to our employees. So we make sure that that's in fact in there. And we likely will add an inflationary increase in this. As long as the market value is requiring us to give somewhat of an inflationary increase. Because if somebody was paid more based on expectations that they were going to get to another level and they never did, you know, then we're probably overpaying them. So don't expect an increase there. But if, if you're meeting what was required and you know you're doing a good job. Thank you very much. We appreciate you. You're helping support our mission and we're likely going to give you an inflationary increase. So what that looks like is like a 1 to 3% sort of increase. So don't expect something substantially higher because you're really giving us what we're giving you, which is an agreed upon. You're giving us this service, this output, and we're giving you this money. You haven't done anything to really suggest that that needs to increase. We just continue to work together and both of us be happy. So that's level two. Now level three is where we get into the interesting category and I'll share with you how I identified this with my team. But level three is when you have someone who comes in and goes above and beyond. They're the person who doesn't necessarily come in early and stays late, but, but it's really the productivity or the care factor. Of the come in early and stay late. You know, they're always supporting other members of the team. They're going above and beyond to make sure our clients are happy. They will stay late if it's needed. Their deadlines are always met. You know, they're likely doing what's beyond, what's expected in their role. So if we go back to the, hey, we hired you for this much, you know, you're likely delivering higher than that value. And you, you're really creating a position of where you, the employee, are irreplaceable or, you know, we definitely don't want to work without you. Right? You're creating a position where you've got a little bit of power and influence because we know how valuable you are to the company. Now everybody's valuable to the company, but these people are irreplaceable, right? They're the ones that keep the team together. They're the, they're the ones that continue to deliver at a higher standard than everybody else. Now with my team, and I'll tell you how this, I approach this every single month. We share, I share as the CEO in a video to my entire team that they have to watch. It's part of their job. They watch the deployment video. Here's the goals. Let's make sure everybody knows exactly what's expected of them. Let's make sure the team knows exactly what's expected. Let's make sure that the organization knows what. What we as an organization are trying to accomplish this month, it's on target for this goals. And we do this with these core values with, based on this purpose, this mission. And so I share that every single month. Now throughout this video, I tell them I'll be tracking who is contributing to this. But I ask in these videos for people to come in and offer value, right? Or create a cultural enhancement. So a lot of times I'll say, who's someone on your team? I want you to throw a shout out, who's someone on your team that always goes above and beyond to make sure that, you know, the team is supported. Another time I'll say, you know, who goes above and beyond to make sure that the clients are taken care of? Who's someone from a different department that has gone out of their way to make sure that you in a different department get. Gets answers that you need? Who is someone that is a leader in the organization that you wouldn't want to work without? So I ask these questions every single month. And by the end of the year, essentially the team has Identified without me even having to be part of a performance evaluation. The team has identified who those invaluable people are to the rest of the team. And it just so happens to match up that those are also the high performers when it comes to performance evaluations. So when I told my team this and I said, okay, so, you know, here's. Here's our third tier of people who are high performers. And guess what? You guys have already been identified, right? You are the consistent names that show up in that monthly shout out from the rest of the team that says you are going above and beyond. Those are the people who should have an expectation that we're going to take care of them. And here's the interesting thing. Those are also the people that don't necessarily have an expectation that they're going to have a 20% increase either. You know, they're happy in their jobs and they're, they're excited to be recognized for doing a great job, but they've created themselves in a position of being invaluable and irreplaceable because it's hard to find those people. And even in every organization, you know that this is the lower percentage of your overall team. And you know, the goal is to get everybody in this space. So this year I said, hey, you guys have already identified and I gave a few people on our team some shout outs. I said, you know that Melissa on our bookkeeping team is somebody who is constantly being shouted out that is going above and beyond, right? She's someone who we continuously hear her name as someone who's supporting the rest of the team, who's doing an incredible job. She's also one of the people that I get messages about from the clients that say, you know, I just have to say how great Melissa is. Right? So Melissa, we make sure Melissa's taken care of when it comes to performance compensation time or compensation adjustment time, because she's always the person that everybody is. Is raving about, right? And it's so important that Melissa know this and that we reflect her compensation accordingly, right? We continue to show her care. We give her opportunity for advancement, we invest in her learning, her growth, but we also give her additional compensation because she's proven herself to be invaluable. And so when I did that, you know, we ended up giving out our. Our compensation adjustments after. And there were really only 2 out of 106 that came back and were somewhat questioning why they didn't get an increase. We went back in and said, do you feel like you have gone above and beyond and hit that third category? Or do you feel like you're doing what you were paid to do? Like, don't have an expectation here if you're not delivering here? So I think this is a really great framework for all of us, whether we put it in writing. I know a few clients of ours have put this in writing. In fact, I had a CFO meeting with one of my clients yesterday and they had somewhat outlined this. I shared this framework, they were going to modify theirs and, and include this. I also shared it with someone to say, hey, people are really pushing me on compensation and really trying to justify higher rates. I said, give them this framework. Give them the framework of the three sort of sections of where they can be participating. Are they below? Right. If you're below, don't expect anything. Be grateful that you still have a position and a team that's supporting you to try and get back into place. If you are just doing what you said you would do, great, you're getting compensated for that. We appreciate you. We're so grateful for you. We're glad to have you on our team. But if your expectations are that you're getting a larger increase, then we need to find a way to get you to the next level. We'll support you to get there. We want you to get there. We want to pay you more because you're producing more for the benefit of the company, which is the benefit of the mission, which is supporting more entrepreneurs. If all of my team is able to get to that level, our level of client success and continued support of our clients is going to be higher. So use this framework for yourself. Use this with your employees. I can tell you, I did test it, we implemented it, I did it live a presentation and just, you know, so everybody knows it overwhelmingly was well received and well understood because everyone now had a basis for understanding what the expectations were for them to get not only where they are now, but to get to that next level. And I think it's important for us to all also reflect and provide examples to our team. And this is where managers come in, you know, managers to share with their team what getting to level three looks like. What is an example in their specific role of what they can get to. So anyway, that is my take on this. This is how we manage employee compensation objectives and manage the expectations of those employees, because we want to ensure that we're aligned. If we're not aligned, then that's when we have employee retention issues. And then we're constantly trying to find new people so let's make sure that we're aligned. Guys, this has been the Wealthy Entrepreneur Podcast. My name is Bob Govreau. It's been great to have you here with me. Hopefully this was really insightful. If you felt it was insightful and you know someone that you think could benefit from this, grab a copy or a share Share this out we're here to help support entrepreneurs to become as successful as they possibly can so that we can change the world together. Listen. Entrepreneurs are the greatest group in my opinion in the world who have influence over making the world a better place in making the world a more innovative space, bringing more value to the community. I know in North America, you know, 90% of the economy, the backbone is small to medium sized business. That's who we're here to support because we feel together we can make a dramatic impact of positive change in the world. So if you know somebody who you think would benefit from that, who's struggling with managing employee expectations related to compensation, share this with them. This framework, it definitely works. If this is something that you've enjoyed, leave a comment Give us a like make sure you follow this podcast. We do release a podcast every single week. It would be great to be able to notify you when the next one comes out. We love to have our followers in here. Being up to date, I will always bring insights along my journey of what has worked for me and for the thousands of businesses that we support across North America. So continue to follow us and hear and listen to that. Leave any comments any questions below. Happy to answer that. Otherwise, make sure you check out our team goVROCPA ca check out the Hire us page or Join us page on our website. Our our website really is focusing on that side of marketing towards potential candidates that we make sure that the candidates that are coming through are aligned with our values and then we continue to focus on making sure that we're aligned as far as expectations go, which is what I've shared today. So hopefully this was insightful. Feel free to share this out. Leave any comments make sure you follow us so that you hear next time. This has been the Wealthy Entrepreneur Podcast. Thanks for joining me. We'll see you next time.