In this episode, we discuss performance management and getting the most from your teams. We are joined by Jessica Zwaan, Author of the best-selling book, Built for People, and COO of Talentful.

We chat about: 

• Can traditional performance reviews truly capture an employee's value?
• Are OKRs just a trendy buzzword or a real strategy for driving company success?
• How can organizational network analysis uncover the real influencers in your team?
• What does it take to measure true employee performance in today's remote work era?

References:

Jessica’s LinkedIn

Website

Biography: 

Your company is building three products: A financial instrument, a customer product, and an employee experience. I advocate treating employees as customers purchasing an experience of work, and I encourage us to work like Product Managers in order to iterate and improve on that product. This paradigm shift positions work itself as the focal point of our strive for success, not just optimising the individuals as "human capital". Like the idea? I wrote a book all about it, called "Built for People" which you can buy basically anywhere books are sold.

To learn more about Beth and Brandon or to find out about sponsorship opportunities click here. 

Summary:

• Choosing a life partner and nannies as a "wife hire." 0:05
• Bethany discussed tips for choosing a partner for career success, including finding someone whose mother worked outside the home.
• Bethany values hiring a nanny for the mental load relief and organization.
• Performance management effectiveness and its various components. 4:40
• Brandon and Bethany discuss the ineffectiveness of performance management, with 64% of workers viewing it as a waste of time and 47% considering it a failure in their company.
• Jessica Swann distinguishes between performance assessment and management, highlighting the importance of individualized growth and development in the latter.
• Bethany expresses concerns about goal-measuring and its practicality in the workplace.
• Bethany and Brandon discuss the importance of organizational network analysis and its impact on problem-solving.
• Performance management and leadership development. 10:06
• Bethany suggests rolling out OKRs gently, learning along the way, and avoiding command and control.
• Brandon agrees, emphasizing the importance of measuring marketing and sales performance collectively and connecting it to business outcomes.
• Brandon and Bethany discuss the importance of effective performance management and leadership skills for line managers.
• Bethany questions the feasibility of performance management, citing potential biases and limitations in the process.
• Performance management and assessment in organizations. 15:27
• Jessica emphasizes the importance of understanding employee performance, citing it as the most critical question in HR.
• Bethany agrees, highlighting the need for effective performance management frameworks to assess employee productivity.
• Jessica argues that traditional performance assessment methods are inadequate for understanding team dynamics and impact on revenue.
• She provides an example of how organisational network analysis can reveal hidden high performers in a team, even if their direct impact is limited.
• Building employee lifetime value algorithm, identifying superstars, and optimizing team performance. 20:22
• Jessica and Brandon discuss building an employee lifetime value algorithm, with Pete Fader and Dan McCarthy as experts in the field.
• Jessica explains the importance of identifying team members who are most valuable to the organization based on their network analysis.
• Jessica highlights the need to evaluate the effectiveness of individual team members and determine their total available current value creation.
• Goal setting and performance measurement in organizations. 24:46
• Jessica and Brandon discuss goal setting and the importance of involving the right people in the process.
• Jessica provides a framework for setting effective goals, starting with top-line objectives and working down to individual levels.
• Jessica and Bethany discuss the challenges of measuring performance in a large organization, including the time and effort required to gather feedback and set goals.
• Jessica's team uses a lightweight model to track progress and identify areas for improvement, with a focus on individual and team effectiveness.
• Performance management approach at a professional services company. 29:31
• Jessica prioritizes systemic management over individual performance management.
• Jessica emphasizes the importance of individual performance assessment in a calibrated exercise.
• Performance management and goal setting, with a focus on organizational network analysis. 32:49
• Bethany questions the effectiveness of performance management systems, suggesting they may not be tied to valuable outcomes.
• Jessica emphasizes the importance of goal setting and connecting employee work to company success.
• Bethany reveals surprising insights from organizational network analysis: weak managers, strong teams, and misaligned goals.
• CEO discovers high-performing team members through network analysis, despite low manager performance, highlighting potential for growth.
• Performance management, OKRs, and calibration exercises. 37:15
• Jessica highlights the limitations of individual performance assessments, advocating for a more systemic approach.
• Brandon discusses calibration exercises as a way to connect pay to performance, but Jessica questions their effectiveness.
• Jessica and Bethany discuss the importance of context in decision-making, rather than just measurable goals.
• Jessica advocates for fewer, more impactful goals, rather than many goals with little impact.
• Measuring employee performance and accountability in a changing work environment. 41:55
• Jessica aims to simplify goals, prioritize impact, and hold team members accountable.
• Brandon and Jessica discuss the importance of measuring employee performance and accountability in a more autonomous workforce.
• Jessica advises CEOs to focus on employee lifetime value and return on investment to enable people operations teams to do their work effectively.

Brandon 0:05

Hello, everyone and welcome to another episode of the operations room a podcast for CEOs I am Brandon Mensing, joined by my lovely co host, Bethany errors how're things going, Bethany?

Bethany Ayers 0:16

It's been a long week. It's Friday, it feels like Monday was maybe three or four lifetimes ago, one of those weeks, one of those weeks where I ended up just reposting your post on LinkedIn because my brain was dead yesterday, I had nothing I could possibly add to the podcast in any way.

Brandon 0:36

No creative juices just squeeze out at that point. No,

Bethany Ayers 0:40

I was done. And yet, here we are on the Friday.

Brandon 0:46

Yes, yes, amazing. So I understand you did your second episode, what would you call it as like second kick at the can.

Bethany Ayers 0:56

So some people were calling it a webinar, but because you know me and anything formal and anything contained, and I just have an allergic reaction. So we'll maybe we'll call it the zoom. Our. So after her rific technical issues, what we talked about was how to choose your life partner. So you can have it all. It was for women, who are aspiring execs, or current execs, and so people who want to have full time corporate jobs. So we had some tips and tricks on how to choose well, in my experience, and I did this accidentally, myself, and subsequently have seen stats on this, that women who earn well and have big careers and are married and have children, their partners, mothers worked outside the home. So basically, if you're looking to maintain your career, partner up with a man who whose mother worked outside the house, my husband's mother worked outside the home, I did not have that as one of my criteria. But in retrospect, it was a very good one, as is having an awesome mother in law. And by awesome, I don't just mean giving you space and understanding that you're creating a new life and letting go of her son, but also has instilled in her son, that it's his responsibility to do his own laundry, clean his room, figure out his shit. And then the other women who shared their experiences, interestingly, their husbands has that same upbringing. So our little micro environments seem to play out the stats that have shown. Those are just a couple of hints. I think it just depends on what kind of life you're looking to lead, and therefore choosing thoughtfully. The one other hint is why I prefer to nanny over daycare, and realise that it had nothing to do with what's best for children because you get all these philosophical things of like, daycares better, because they're socialised nannies better because they bond with a single caregiver and her and they fight and it's like, they're gonna be okay. As long as there's love in your house. And there's stability of where they go. Babies are fine. Toddlers are fine, it really doesn't matter. But as a working mother, a nanny is so so much better for you. Because you basically hire in a wife. And so what you should be looking out for your when you hire a nanny isn't just that they're loving and care about children. But you should be hiring for nannies who will be proactive, and remove that mental load. Again, we accidentally hired an amazing nanny the first time. She booked all of their appointments, got them to the vaccines, had to sign the right paperwork booked in all of their classes, organise their lunches told us what to buy. And we even like, put all of the shopping online shopping cart, all I had to do was buy it. And when she left, and we hired other nannies because they were loving for the kids, none of them took that on at all fell on me. And I just collapsed after a while and couldn't do it anymore and hadn't realised how important having somebody who can do that thinking for you is if you're both gonna have high powered jobs.

Brandon 4:39

Bethany Ayers 5:35

as an employee, I've been subjected to all kinds of box ticking, stress making justifying processes. So I've definitely had ones where my bonus was tied to my performance, and so needing to prove things. But then there's also oddly aligned to maybe like the values and the framework, pages and pages of horror. I've been in organisations where there's just not been any performance management, and then at some point, realised, we should introduce some sort of 360 review. And then they never really went anywhere. And then, as an exec, see the point of it, see why we should do it. But then, so often, it seems to come down to a judgement call anyhow. Or if you try and take the judgement call out of it, it's too complicated. And you get too much about process and not knowing much about what's real.

Brandon 6:38

And you end up with a colossal time commitment that delivers back almost no value to the organisation. The question is, what are we trying to get out of it, and leadership and management making that very clear as to what the entire exercise is all about, is usually lacking. And it's usually the people person by themselves, with really no kind of buy in or support from wider leadership with the CEO as well. So with that, we talked to Jessica. So she talked about the separation of performance assessment versus performance management. And the way that you characterise this was that performance assessment really is levelling across the organisation for pay calibration purposes. And that systematic analysis of assessment is quite different from performance management, which is much more about the individual, and once one's and the career progression framework, and really working with that individual to help grow their skills and confidence over the course of time.

Bethany Ayers 7:32

So I think there was an another element on the performance assessment, which is, are you investing in the right areas? Is your business right sized? So it's not just looking at is that the right person in the seat? But should that seat exist? At all? And if it should exist, then do we have the right person for it? Which made a lot of sense? I'm not entirely sure. That the methodology required to do that? Is it people data that you need? Or actually, is it business data and metrics that can show you a really crude example would be the price per SQL for an SDR is five times more than an inbound, lead? And so how many SDRs? Do you need? Is it worth having the SDR team at all? And I don't see that you would really need a lot of people data for that, you to just kind of taking a step back, and what's the right structure of the business.

Brandon 8:28

So when it came to performance assessment, there was two sub components. One was, is that individual achieving their goals, which is what you're talking about. And the second one is this concept of organisational network analysis, which is how deeply that individual is connected to others, and how impactful that person is in helping others solve problems. So those two components that she's spoken about,

Bethany Ayers 8:53

I feel more comfortable on the network connectedness, and the importance of that, because often you don't know who those very important people are, who connect everybody together, which is its own skill, separate to how effective they are in their job until they leave and everything falls apart. And you realise what they did. And I think that's a great measure. I had more concern around how hard the goal measuring is. And not because it doesn't intellectually make sense that everybody should have goals and achieve those goals. But more just because in the practical world, and this harkens back to our OKR discussion. Are they the right goals? Are they achievable goals? And are people going off in a million different ways? And how aligned are they? And also how do your OKRs fit into these goals? So I guess combination of a bit worried about because you know how I feel about OKRs and then talking about something like Mark Logan's episode on giving agency And then this felt for me quite commanding control. But maybe actually it's not maybe it's just providing clarity. And it's all down to how you roll it out. And I think you can either roll it out in a very helpful way or in a horrific way. I

think the organisational network analysis, which is how deeply someone is connected to others, and how they're helping others to solve problems, that can be systematic, and that can be assessed systematically, in a way that is fair and clear cut and make sense. That is very valuable, I think. Because when you think about companies that I've worked in the past, you have no sense of this, there's no value placed on it, because they don't understand who's actually making an impact. At the end of the day, if we inherently believe in the cross functional kind of approach to these companies, where you solve problems, collectively having different skills where people are putting those skills together, and working in common purpose, being able to measure that in some form, feels very powerful outside of achieving goals in this case. And if we can measure that, I love that, I think on the achieving goals, side of things for the return on investment part, this is the whole nature of OKRs. And I think to be honest, and requires still a qualitative, smart person to look at the systemic results, and to be able to make very good judgments that may not be apparent in the actual data that's coming forward.

I think it'd be one where you need to roll it out gently and learn a lot along the way. And make sure it doesn't become command and control and cascading OKRs. At the end

of the day, these are commercial companies that need to deliver a payback. Well, they're just what a company's about. And that is the contract that you've signed for employment, which is you're being paid money to deliver a result. So being able to have that as part of the performance assessment fundamentally, intuitively is correct. The question is the how of how you actually do it. And if you look at sales and marketing, they're trying to do the same thing, which is create a pipeline of value, and convert that into actual customers. And both sales and marketing are doing the same thing. So being in a position where you can measure them collectively, and pull back where you're judging campaign a or MQL B, but you're just saying to the marketers, look, we're going to judge you on the net new pipeline you've created over the course of a quarter, and we're going to judge you on the number of deals that are being signed. That's it. I think if you can kind of pull back far enough, it feels like there may be a way to do what she's saying without getting lost in the granularity around finance with a key result that is very difficult to connect to the reality of the business. So the second thing she spoke about the line managers doing a very effective job of talking to their reports in terms of their career development and their skill set growth. And her sense of that was not part of her role, and that the line managers were kind of somewhat left to their own devices to figure it out to do good line management to make that happen. The

obvious caveat is that you have line managers who are good and are capable of doing that. But then after that you are letting them step back and decide whether or not their team are high performers and recognise the ones who aren't and recognise the ones who are and they are generally in the best position to tell. The second caveat is we're all massively biassed. And not just around protected characteristics bias but also in terms of things like we generally like people who are like us. So I know that I'm biassed towards people who are clear communicators and succinct. And I will tend to hire more people like that. And I will tend to support them more or see more potential. And that is an entire bias on my part, because somebody has a shared communication skill with me. And so I do worry that you might not be getting well balanced teams and you might not be getting out of the best out of everybody because of that relationship of the manager in the in the team member.

I think there is a systemic level of importance that should be put on ensuring that all line managers are levelled in the sense of competence for having discussions around performance management and around career progression. I think what you tend to see is huge variability and people's ability to do that well. And where you want them to company I think is a level set where at a bare minimum, they can understand how to take a performance management framework that's been provided to them understand how to have a conversation around the current level that they're at, you know what that means in terms of expectations, look at the next level, be able to talk about that in terms of targets for that individual, the kind of things they might think about to get them on the pathway to get to the next level and timeframes around that and then things they might want to flex in terms of their skills and just being able to have a proper conversation around that. Number one, and then number two, making sure the managers understand leadership is expect team members spend time on this on a regular basis. So why don't we go on a quick break and when we come back, we will talk to Jessica Swann.

So what we're going to talk about today is performance management. And yet I've never seen it done particularly well, is it actually like the emperor's new clothes. And it's just an impossibility. But it's worth trying anyhow,

I adopts a product management approach and what I do in people in operations, so what I try to do is take as much of the analogy of customer facing product building and apply it to people ops and operations in general, where it makes sense. And the way that I talk about performance is basically the idea of all your customers paying or your employees performance. And if put in that perspective, understanding the answer to this question is, I think probably the most important question that you can answer in HR, I do think there are ways to figure out if your team are genuinely performant. The last bit is, I think, probably know, the majority of the ways that we're doing that right now do not answer the question effectively, or even at all. So many of these things like kind of systemic within just how people operations team and HR teams have been built over the years. And then other parts of them are, I think they're kind of tool based, as well. And part of that is, again, because of the customer that these tools are selling to is HR teams.

A more fundamental question is, is performance management and having a poor performance management framework, the right way to answer the question, Are people in your teams performing? What

are people teams responsible for? I'm gonna say the most important thing and people team responsible for like the payback on your investment in people, which means that you have to understand how performant those people are that's like central to the function of people operation. So if managers aren't doing a good job of that, yeah, sure. It's kind of managers fault operationally, but like it's people teams fault systemically. Part of the problem, I think, is that people teams really like to kind of create these like culturally forward unique, bespoke things, or just copy what other companies are doing, which doesn't always work. And there are, I think, some very specific answers or questions you can ask within performance management or understanding performance assessment, maybe that do probably get to the answer to this question in a very effective way. The two that I see all like organisational network analysis, how deeply interconnected are your employees within the employee base? And who are they having this positive behavioural halo effect within? And there are plenty of great tools? Oh,

yeah. Okay, you're about to tell us how to measure that. Because I was like, Oh, this sounds great. But now what?

There are plenty of great tools that measure your organisational network analysis. Two of them are a tool called it was built by a team called encompass labs. And it's based on peer incentive analysis. And the other one is a company called performer car, which is doing a similar thing, but from my own kind of different angle. Well, what they're trying to assess is the behavioural impact that your employees have amongst other employees. So performance, for example, we'll ask the question, Who is the person you go to when you need technical help? Rather than how do you rate this employees technical capacity, and then what people will do is, you will bluntly, you will stack rank your employees based on certain competencies and grade them, and then it kind of creates this algorithmic view of who are the people that are strongest connected in terms of these competencies, that is a really effective way to measure one part of behavioural performance. And the second thing that's very effective is a drive a tree of goals that impact revenue, and not just asking, What are your goals? Did you achieve them, but also, were they the right goals, and were you the right person to be working on those goals. And I think the final kind of point of this is, you should be looking at all of these things as a system and where your team fit within the system. Whereas I think performance assessment has been built traditionally, as very much looking at the individual on an individual by individual basis, and assessing them against usually a wholly unnecessarily complicated rubric of like, competencies and levels and all these words, but it's just not a first of all, human brains aren't very good at doing that. research backs this up. And second of all, it doesn't actually give you a good insight into the essentially about this elephant problem in your company, right, like performance is an elephant problem is understanding the system as it integrates together. And I think this kind of individual by individual performance assessment is ultimately what really holds us back. I'll give her like a really nice practical example here, which is maybe easily understood by a lot of us which is, so if you're just looking at outputs, so like goal achievement, and not looking at the organisational network analysis, and who is like assisting each other on certain problems and certain goals. Your data team may not have a lot of particularly high impact goals. They may be refactoring something or creating a dashboard or something else, right. So if we're looking at them on a pure output basis or saying just OKR based performance, I think what you'd end up doing is you miss the forest for the trees a little bit there. But if you ask the question of like, who are your high performers are consistently going to the data team in order to help them achieve their goals, what you may end up seeing is actually, the data team is a deeply interconnected part of your business, where they are not necessarily driving or accountable for a lot of achievement within your business. But if you did not have them, the performance of others would be hindered, if that makes sense. So it's trying to understand where those relationships exist. So

that core question of impact on the organisation and delivering results for the organisation, not just the outputs, but the actual outcomes. What do you do? Like where do you even start with that?

I've got a couple of good friends of mine who work in academia focused on customer lifetime value algorithms and building like really complicated algorithms to define customer lifetime value over time. Pete Fader is one of the names. He's a professor at Wharton, and then Dan McCarthy, as well, who is a professor, I was at Emory. And they all have kind of the preeminent experts in the field of customer lifetime value. And I've been talking to them for the last couple of months about how do we build an employee lifetime value algorithm. It's like a drive a tree of goals. So rather than just saying sales is very close to the top line, right, so it's very easy to say there's a causal relationship there between 10 million net new revenue and Joe who works in the business development team who had a quarter of x, it does get more and more difficult. The farther away you get from OKRs of your top line, okay, as your revenue base, okay, ours. But if you're doing I think a good job of building goal driver tree, you should be able to see the kind of causal relationships between the work that's been delivered and those top line metrics in some way. Short answer to the question is, there's no perfect way to do this right now. But there are better ways to think about it than an individual by individual performance framework with a big back end of PDF documents.

Basically, the thing that I'm thinking about with not the social interconnectedness one, but the driver tree, that seems to justify whether or not a team should exist, and how much you should invest in that team. And if that team is working well, but it's not a performance measurement. And maybe it's performance of a team. But it's not an individual performance.

That's kind of where the O Na comes in. So the organisational network analysis is drawing out the individuals within those teams that are delivering the most kind of cross network value. And again, there's no perfect way to say like, who in the team is the person that is contributing the most value? Absolutely. But you will definitely get a better understanding of who in the team is most likely to be the person that is contributing both the most value based on the fact that their team is consistently achieving, they seem to be working on the right goals, and they seem to be deeply connected with others. And also, within that team, these two people are consistently mentioned by other people in other teams as being necessary to achieve their outcomes as well. I don't think you're ever gonna get to a perfect like, just like customer lifetime value, right, you're never gonna get to a perfect place to be like, Oh, this customer is absolutely going to be worth 917 pounds and 23 pence. But you'll have a pretty good understanding of which cohorts and customers within those cohorts have the higher propensity to be delivering you more value over time.

And so that seems to be able to be a great way of identifying your superstars. What happens after that, like if everybody always goes to Joe, but they're another nine people on the team beyond Joe, I suspect that you would need to have more than just Joe, how do you decide what you do with the other nine,

I do see a lot of stuff from founders and CEOs who kind of imply that there is a promised land in which every single person in your team is some kind of exceptional, independent superstar that's able to drive your company forward individually. The reality is, that just absolutely is not the case. Like I mentioned before, there is this elephant problem. If one person is a superstar that's deeply connected, that is able to drive problems forward, I think you do actually just need other people in your team that are able to fill the gaps of their skills in an effective way. And what you're really always looking for, I think, is the spike. And then where are the people in your team that aren't delivering the value aren't being mentioned by their colleagues who aren't delivering goals consistently. Or even worse, if you're building a kind of downwards goal mechanism, just aren't even given goals that connect back to top line performance in any way. And then ask the questions about like, all those roles necessary is that person the most effective hiring is also a risk, right? What you're basically doing if you take your middle performance as somebody that's like meeting expectations consistently quarter on quarter, they're like pretty well connected. They kind of mentioned occasionally within your organisational network analysis. They seem to deliver their goals reasonably consistently. And that team is doing fairly well terminating that individual say that their total available current value creation is a million dollars over the course of their employment and the moment they're contributing $750,000. Well, how much does hiring cost? What is the percentage of likelihood that you're going to hire someone better than that person? And then there's like a risk analysis of like, is this like a VP sales in which case there probably is a pretty big risk and it's not replacing this person with someone that's able to contribute more value? Or is this a customer success manager who actually is going back out to market and trying to replace this person and prioritising this is going to ultimately result in us? Maybe getting 5% incremental gains of performance over the course of three years. Is that really what you should be focusing as a company? Probably not diving

into this goal driver tree concept? What is that? How do you apply it? And when it comes to goals for individuals? Are you suggesting that from an OCR standpoint, they should be taken all the way down to the individual level? Because traditionally, or at least in some organisations, they stop at the team level?

I've had a couple of conversations with people about this over the course of the last couple of years really to think about like, well, how can you actually set effective goals that answer this question, but you start with the top line goals, so say, like 10 million net new revenue, who has a goal that feeds off this, like, who has a supporting goal that is a leading indicator, or makes this happen? Well, we've got 150%, net revenue expansion, the customer success team owns that who is accountable for this goal, who is consulted on this goal? Or who assist on this goal? Or whatever frame you would like to put in? And then are there any sub goals from that? So basically, every single time you're asking, like, Who is the person that's accountable for delivering this and who the other people that support on the delivery of this goal? And then you continue asking those questions until you get to a point where someone says, There are no sub goals beyond this, this is the kind of the dead end that we get to. And maybe that dead end is right new documentation for the customer support team, as it relates to cancellations. Are there any sub goals from this? Nope. But that's four rows down from that revenue expansion. And what you have then is individuals that are accountable for delivering that goal, and individuals that are contributing to the outcome of that goal. And then what you do at the end of the goal session, or the goal period, so maybe it's you know, three months, if it's quarterly or six months, whatever you're doing, you asked, not just did you achieve your goal? Yes, no, a binary or a percentage, whatever you want to do. You also ask, Was this the right goal for the company to be heading towards? And were you the right person to be working on this or accountable for this? So you're trying to get a like a forward looking and retrospective understanding of how effective your goal setting was, and who was involved in that? And you can also add another question was, was there anybody else unpredicted that helps you deliver this goal? So then you can add in? Actually, yes, we did speak to the person and bi.

It sounds great. In theory, the idea of rolling it out in reality sounds horrific, and slow and painful. And what tools do you use? And do you spend more time navel gazing than you do writing stuff?

I guess I kind of put the question on, like, do you feel like the current way for measuring performance is spent time nasal, get navel gazing and writing stuff? And people now just putting things in chat TBT based on a couple of points of feedback,

but it just seems very cumbersome. Does it have to be that cumbersome? And how long does it take? And what size organisations you're talking about? So

we did run like a little baby model on this? Like, how long would it take if you had a team of 5000 people, if everybody to deliver this and it took them a day each or something. And I think we got to the point where it took like just under two weeks that if everyone contributed to things within that timeframe, every quarter, you'd be able to set and complete all of your goals within like eight working days. Basically, in my team, we do basically a version of this. And we are very light version, like a Google sheet. And it takes us five working days. But I think we're very soft about it. We do every quarter.

Right? So the first five days of the quarter or the last five days of the quarter are planning. Exactly.

So our team is just submitting, there's literally today they're starting to finalise their drafts

and who's accountable for what. And then you use that plus the way to the right person or not questions at the end of the quarter, to then take a snapshot on effectiveness, team and individual effectiveness.

The combination of these two things to get to like an understanding of basically kind of answering an LTV type question is understanding who was connected within the team and working on things together behaviorally, and then who was working on things as it relates to like output, like delivering things?

How often you do these things is always a core question as well, because they all take time, regardless of what you end up doing.

I think there's a difference between giving an individual feed back on how they're doing the terms of their own personal growth trajectory and the work that they're working on day to day, and understanding performance as it relates to the system of your company. I think if you're managing a person, I don't know I think I'm quite intense about my opinions of this. But I want to have as little to do with the practicalities of management as possible with my team like I mean this in like a hopefully non kind of shrugging way. But I believe that my managers are fully capable adults that are able to deliver feedback effectively in real time to their team and have conversations with them and escalate if there's a problem. So I don't create really strong processes around how to do that. I say you I've got a systemic kind of position that I need to take here, which is understand how the individuals within the company are working as a whole, in terms of how your individual is working, as it relates to their expectations of themselves. That's your domain as a manager, and then I spend the majority of my time focused on systemically, how is our organisational design effectively helping us reach our goals? And where are their spikes within that? So very strong individuals are very weak individuals? And how can we basically improve the ROI of those roles? Where possible,

interesting, so you're not actually doing what I would think of as performance management, which is so much of the individual performance management, do you get this score that score? How's it tied to your bonus, yours is much more systemically? How do we structure an organisation and is it working, and then you leave it to every manager to decide themselves, whether or not the people in their team are performance.

It's not that I leave the managers to decide if the team performance like the numbers speak for themselves. We're in a kind of specific circumstance at Townsville, I should add here and that we are a professional services company. So we've just rolled out our first iteration of this way of working. And I've previously done this in my previous businesses, where we have members of our team who are pretty much every one is very revenue facing with an on delivery team, we have a very clear understanding of like their cost per head and their revenue per head and all those kinds of things. So in some ways, I'm kind of able to cheat a little bit untolerable, because it's so much easier than if you're in an r&d function. I do understand the tension there between r&d and professional services as it relates to performance. I think taking this kind of the idea of Performance Management back to first principles a little bit here, like, what do I think it's really trying to do is it's trying to work out, is each individual paying you back? Right? Is the ROI positive on each individual as it relates to the whole system? I think, if some other people and asked that question, maybe their version of what is it really trying to do would be to help support individuals to do the best they can or something like that. And I think manager feedback and helping someone grow and understand where they sit within the rest of the team is a conversation that is separate to my authority to some degree, although I'm happy to help advise them and support them through these conversations, if they're difficult, I step away from this idea of we should look at every individual on an individual by individual basis and say, How is Jane Austen comparing against this rubric? And rather, what are the different outputs that we expect from Jane Austen's as it relates to a peer? Is she meeting them? Yes, no, and then look at the whole in some kind of calibrated exercise. And then, you know, algorithmically apply compensation changes and those kinds of things. And of course, with some kind of human oversight, but then all the conversations and the support and guidance and all that kind of stuff. I guess we've been deferred to like performance management or performance assessment, maybe.

And yet, we just call it all performance management. Oh, wait, whereas actually, we mean performance assessment, for the most part. Yeah, exactly. Getting back to the outputs. If you're looking at it entirely systemically, do we have the right structure? Do we have the right, people? We're not talking about Jane Austen, we're just talking about this team? Does it produce? Does it give an ROI? That would be separate to pay in effect, possibly. But you've just said that it is part of pay because you're tying pay into outcomes. But what happens if people are good performers, but you've done this cascading of goals? Everything they've worked on is not valuable? And isn't the right things, when you ask that question at the end of every quarter, but yet you know that they're actually top performers. So is that part of the responsibilities? If you get something you think is bad, you should be able to say this isn't actually relevant? Because I think we've all ended up doing work that we realised in retrospect, wasn't the best use of didn't move things forward the way we thought a quarter before, which is part of your question. So is it if you consistently you're doing the wrong thing that's reflection on you not making the right decisions? I'm just thinking like somebody who's fairly Junior, who's being handed from their manager stuff? Or would that reflect on the manager not actually goal setting properly?

First of all, I do this quarterly. So it is a lot more live than maybe an annual review where everybody gets a 10% increase if their managers really nice to them in a phone. Companies are here to make money and be successful. And if your employees are consistently not able to deliver on goals that are valuable to a company and they're not connected with other people in the team and having some kind of positive impact, then like all they actually performance, like we are paying those individuals a salary. So as if the work is not being recognised in any way there is a contract there that we have in place. Do we have an obligation to increase that salary apply a bonus if an employee is not doing the things that we expect to drive more value within your company?

Well, I think the question is, how command and control is it? Where's the decision making coming for the goals? And I guess I'm just thinking about you can have bad leaders who end up with teams who have gone totally the wrong way, and that's a reflection of the leader, not the individuals, but in this system would that be caught? What

is surprising from these tools that measure organisational network analysis is that what you end up seeing is locations where you do have a weak manager and a strong team, where the manager is either reporting that their team aren't particularly effective, but all that actually other members of the business is saying, we come to this team regularly. Or you see the overlay of whom this team doesn't seem to be achieving the majority of their goals. But actually, as it relates to behavioural connections within the business, this team is deeply connected, they are being referred to as people going through to help solve problems, or that are deeply technical experts in their field. What's interesting about that, if you're looking at both of those two things together, you shouldn't just be looking at the goal. That's why the organisational network analysis component is so important. Maybe I'll give you a useful example from a company of encompass labs that I know the CEO of so the CEO run this organisational network analysis with peerform or encompass labs. And what was discovered within about 300 Something employees I think they have fully distributed team. They are an E commerce platform, right? So they ran this organisational network and network analysis. And what they found was there was actually three members of the team who have the highest performing as it relates to organ network analysis, right, there's still the goals, separate question that needs to be asked. But in terms of organisational network analysis, in terms of being deeply connected within the business, and referred to as being people that are strong in their technical aptitude or their connectivity within the team, three people came out on top, those three people were relatively junior members of the data team, and they were all managed by a manager who scored fairly low on organisational network analysis. So what was surfaced up to the C suite team was there are three members of our team who were very, very performant as it relates to being connected to the team experts in their field, knowledgeable, helpful, whatever other competencies are looking at. And they're being managed by someone that is effectively shadowing their our ability to see those individuals and maybe on the goals drive a tree, you would have found that that team wasn't particularly performing in terms of its goals and outputs, well, then what do you put together there when you're doing your calibration, it's not all those individuals are poor performers, it's oh, these individuals may actually have the potential to be a very strong performer. What we have here is a non Performance Manager. So we guess they're going to point here is like, Yes, I'm a big fan of like algorithmic surfacing of insights. But I think you still need a human being to kind of troll through those insights and say, What is this story here that I'm seeing, and sometimes the story is, this individual has a lot of potential, we should make an exception here and offer them, you know, an opportunity to work in a different team, or we should, you know, give them a bonus to retain them, because it seems that they're quite disengaged. Or maybe this manager is actually deeply ineffective. And if we would have relied on traditional performance assessment where the manager gave everyone downwards feedback, we would never have captured these three individuals that have the propensity to be very beneficial for our company as a whole.

How do you do a really good calibration exercise that is connected to pay because previously, one of my former companies, they did calibration exercises, once a quarter across all the engineers in the company, we had a lot of engineers, we had a lot of levels within engineering, and being able to compare apples to apples calibration wise really put us in a good position to understand how they fared to your point not as individuals but interconnectedness relative wise to the other individuals within that wider organisation said, and we use that pretty directly for the benchmark salary and where they needed to be pushed to. So what do you think of calibration exercises on mass like that,

if you are working with an individual by individual performance assessment process, basically, what a calibration is there to try and do is to do all that systemic stuff I'm talking about, it's there to say, Okay, we've now looked at all these individuals. And we've got all this data, qualitative data, largely. And now what we need to do is turn it into something more quantitative, like an output a number on a sell, or some things, we can turn that into pay. So everyone sits in a room and have these very long conversations. If you are doing the individual by individual traditional performance assessment method, I believe performance calibration is necessary and incredibly helpful. As you've mentioned, it can be very time consuming, very laborious, it's there to do the hard yards for basically what I think is a fairly ineffective way to actually assess performance and get the data you need for performance. In a world where you're, you are able to take what may feel like a little bit more of a hard nosed kind of analytical approach to understanding performance positions, that calibration discussion turns into, rather than let's go through and measure where everyone should be in these boxes. Instead, it's about let's tell the stories with the data that we're not seeing otherwise. So it turns into what we were just saying there, which is heart interesting. This individual is deeply connected, but they don't seem to achieve their goals. What do we think that means? What's kind of driving that? What other data do we have about this person? That helps us tell the story about what's going on here or this team is incredibly effective? Absolutely. smashes on one that goes every quarter, but no No one in the company seems to be connecting with them at all. They're complete rogues doing things independently is that actually reflected for performance in this company? What does that mean for us? So, I think calibration is what it is, depending on where you're at in terms of the sophistication of the data inputs

you have. It's interesting, because I was feeling like performance management and OKRs are interconnected, as I said at the beginning, and then they are, we're back to this again. So OKRs versus goal setting. As operators, we love a nice spreadsheet, we love everything to interconnect, we love cascading goals and goal setting and OKRs. And then it just hits reality. And you end up with a business that is inflexible, or over planned for where it should be or overly rigid and command and control. So how do you enable the right decisions to be made? How much of it is more around providing context rather than providing an absolutely measurable goal? And if you're going on that context, providing way, how do you measure that they've made the right decisions are they focused on the right things in a quarter,

we do a version of OKRs just a goal that you have that has a parent goal, and that parent goal drives up to our top line goals. And then someone accountable, and then people that are consulted are involved in those goals. I think this is actually where the kind of softer side of people and operations kind of needs to interconnect is I kind of tell my team that it's, it's better to have less goals with more impact, that's always the better option. Don't try to do the kind of traditional Google version or doing things where everybody has an O and then three chaos, and then an O and then three cars. And what I end up seeing behaviorally there is people get hung up on the rule of what they need to do, rather than what they're trying to achieve. Right. So if I just say, you know, I'm trying to achieve this 99% retention rate of consultants on any one project, what do you think you can do to help me achieve that my team says, Well, I think that I can do this by implementing this thing or changing this outcome, then I'm going to make you accountable for that, who else needs to help you in the team to make that happen this quarter for us. So trying to keep it much more simple, I think trying to have more impact, fewer goals, clear accountability, who is helping you like really, that's what I'm boiling the driver tree down into, I used to be very big on output only goals, like I almost would like write my team over the fire of like, do not bring me input metrics, I will turn you down, I will turn them away. I am much more comfortable with my team bringing me some input metrics every now and then now, especially for the softer parts of the work that we do. So recruitment, I expect output metrics, People Operations, organisational efficiency, okay, you can give me some input metrics. But I want to understand what are you trying to affect that as an output metric? Ultimately,

yes, I think also, sometimes you just laying down the foundation's, like, let's say you need to double the number of leads that you get in, and it's not going to be linear, because you're in a really bad situation to the point. So like, the first half of the year is actually structuring it. And you're not going to know your outputs to the second half. But you better figure out what you're doing in the first half to lay down the foundations. And yeah, I think you do have to be a bit flexible on those.

We live in this world now where we all believe that employees should be empowered, they should be autonomous, there should be guard rails, they should have agency, and the question that always rises with every CEO that I work with, is this question of accountability. Are people actually delivering results? This gets to this question of performance assessment. Can we assess performance to ensure that accountability is taking place satisfying this urgent need that we have to ensure that people are highly effective, there's a return on investment, and all this talk around empowerment and autonomy, this whole model that we've set up actually works? And the fact of the matter is, we don't have a system that works? I mean, I'm posing this to the two of you, what am I missing?

I don't think you're missing anything. I think the shift towards a more autonomous workforce, particularly more distributed workforce has made this question become more urgent. And I think the other thing that helps kind of in the macro effect is like, we're not in zero interest land anymore, baby. We don't have 0% interest rate law. And we have pressure from VCs to be profitable. We have rising costs of running a business, we have team that are getting very disappointed because they're not getting continual pay rises, because the market is not strong. So that is pushing us to be more focused on both performance and output than we were a couple of years ago. So I do think that there's this insight is really truthful in that it feels like this has become more urgent or feels like it's become more important to think about and I think it's because it kind of has become more of a strategic imperative for a lot of CEOs and founders and boards. I feel like it's

always been a strategic imperative, but it's just really hard and with command and control, it was a bit easier to just be able to measure things Next, and now with more empowerment, we have to figure out more effective ways of doing it. Before we go, if our listeners could only remember one thing and take it away from our conversation today, what would that one thing be? I

think, as a CEO, the best thing that I have done for my people operations team is to gear them towards the goal that they should be thinking about employee lifetime value and return on investment as it relates to the 65 odd percent of my p&l, which is headcount, and making them almost myopic, in what are you doing that helps answer the question of like, are we improving our employee lifetime value? If you are having conversations with your people operations team that feel disconnected from that goal or that question, I would be asking yourself a very serious question about are you actually enabling them to do the work that you really need them to do? I think that would be probably the one piece of advice.

So thank you, Jessica Swan for joining us on the operations room. And if you like what you hear, please leave us a comment or subscribe and we will see you next week.