Ignoring the conventional approach for evaluating employee performance.

If you have ever been a front-line employee or worked for someone else as a manager, you have probably had some experience with The Employee Performance Evaluation.

Done right, it can be a real benefit to both management and employees, helping to identify workers’ talents and shortcomings. Employees gain perspective on their role in terms of the company’s larger objectives, are given growth objectives of their own and receive feedback on their progress.

And – let’s cut to the chase – those who make headway expect to be rewarded, with pay increases and perhaps greater responsibility.

A program of such evaluations can and should be a tool which integrates company success and employee initiative, helping both parties reach their objectives.
Sadly, performance evaluations more often become a deliberate effort to retain employees for as long as possible while paying them the bare minimum and meeting the company’s objectives with room to spare.

Only upon attaining management status do many employees realize this, let alone how long they themselves were victims of the nasty little game. Their “light bulb” moment often comes after they leave a company that practiced the deceit against them, though other employees figure it out sooner.

Consider the experience of Jack.

In his new job, Jack is rewarded for his years on the front lines at other companies with the chance to manage a small department.

As the first of his new charges’ employment anniversaries nears, Jack studies the blank evaluation forms. They are not all that different from those he had filled out himself in prior jobs. He calls the employee, Jill, into his office and explains the process to her.

“You fill out this one –”
“Yeah, I know the drill,” Jill says sarcastically, taking the papers and turning to leave.“...And I’ll fill these out.”

Jack looks up just as the door closes, with Jill back out in the shop.
“Then we’ll compare notes!” he shouts, to be sure she could hear him.

She nods, flashes the “okay” sign through the window of Jack’s office door, shakes her head and trudges back to her bench.
(Right about now, you may be thinking that Jill is one of those employees who has already figured things out. You would be correct.)
A few days later, Jack’s phone rings. It’s his boss, Pete.

“Jack, I’d like to talk about Jill’s review,” he says. “Can you come to my office?”
Jack had filled out and forwarded his portion of Jill’s evaluation forms to Pete, who wanted to look them over before the two met for Jill’s evaluation.
“Jack,” Pete said, “I know this is your first time doing an evaluation as a manager, so I wanted to give you a little guidance.”

“Okay,” Jack says.
“On a scale of one to five, five being the highest rating, I see you’ve given Jill all fours and fives.”
“Yes, I think she’s a great worker.”
“She is, isn’t she?” Pete agrees. “The problem is, if she’s this good, we have no reason for keeping her in your department.” After a pause for dramatic affect, Pete says, “Do you really want to lose Jill?”
“Well, I’d rather not, but she’s earned it,” Jack replies.
“Well, the problem is [another pause], we have no place to put her right now.”

“Really?” Jacks asks, surprised. “Because based on what I’ve seen, she could handle pretty much anything.”
“I know, I know,” Pete says, throwing in a chagrined look for good measure. “But unfortunately, no.”
“Well,” Jack says, “I think she’d be okay with staying in the department. But she certainly deserves a nice pay increase.”
“That’s the other problem,” Pete says. “The money is just not there right now.”

The light bulb went off.
“You want me to lower her ratings don’t you?”
“I wouldn’t say that, Jack,” Pete admonishes him.
“Let’s call it, ‘giving Jill something to work toward.’ You can certainly give her the standard increase, a little more, even. But beyond that – ”
“I get it,” Jack says, getting up to leave.
“I get it,” he repeats under his breath, trudging back to his office.

Finding good employees has never been an easy task – not now, not in our parents’ day nor in their parents’.

The problem persists across generations because, contrary to popular belief, an employee’s value lies far more in the individual’s determination than in her skill set. For people with the drive and work ethic required to succeed, the lack of a particular skill is no big deal. It’s a challenge to be overcome, a new talent to master. Good people will do it every time.

But no individual can overcome a management structure that restricts their progress or purposely diminishes their achievements in the name of frugality – or, to use the more fitting term, cheapness.

If you are doing regular performance evaluations, you have put in place a mechanism that can help you distinguish between the inspired and the disinterested. But if you are using them to keep people down (or your own salary rising at their expense), you should be ashamed of yourself — and not the least bit surprised that you spend most of your time looking for good help.

Giving good people the smallest pay increase you think you can get away with is a great recipe for high employee turnover.

Instead, why not develop the raw talent that is already on your payroll? It won’t happen with just an annual performance review, but instituting that process – and exploiting it for all it’s worth, instead of the people working for you – is a good place to start.

Anthony Noel has written for the magazine since 1994. Send e-mail to anthonynoel@suddenlink.net. If your question is for “Ask Tony,” please put “Ask Tony” in the subject line. Even if your question is not used in the magazine, Tony will do his best to respond personally via e-mail. Because CWB reaches the desks of company owners and managers, we gladly preserve questioners’ anonymity upon request.

Collecting from Customers

This month’s question comes from several CWB readers who expressed the same concern in a recent poll: “How do I collect from non-paying customers?”

Like so much about running a business, collecting money – be it from residential or commercial customers – is about two things: Good decision-making and good documentation.

Problems with collecting final payouts usually stem from poor decisions about which jobs to take and which to pass up.

In the case of commercial projects in particular, it’s easy to underestimate the cost of taking the job.

“Wait a minute,” you say, “what cost? They’re supposed to be paying me!”

True enough. But what many small shop owners don’t know until they are knee-deep in the situation is that it always costs more to do commercial work than the price of your materials plus your profit margin.

The big boys expect liberal payment terms – sometimes up to 120 days – in writing. In reality, many will stretch you out a lot longer. There are usually provisions for progress payments, meaning that, as certain elements of the job are done, you get a percentage of your total price. But even these can be delayed, and assuming you have signed their contract – you are their subcontractor, after all – there may not be a darned thing you can do about it.

Waiting for money gets expensive very quickly, and if yours is a relatively small shop taking on a big job, you may need to devote all your resources to that job. How are you going to pay your bills while the general contractor dallies for weeks or months over writing you a check?

Commercial work is therefore not for the faint of heart, and definitely not for any shop that needs money NOW. When you are certain you have the resources (read: cash in the bank, other work pending, and top talent in the office and shop) to go after that first really big, high-profile job, wait six months. Then ask yourself if you’re still ready. Do this for at least a year; two is better. If you feel truly ready at each six-month interval, you might actually be.

Nonetheless, when you take ANY commercial job, fight the notion that you are obligated to agree to the terms in the GC’s contract. Contracts are meant to be negotiated, and if you think you can’t handle the terms, rest assured: You can’t. If the GC won’t negotiate, shake his hand, thank him very much and walk away – even if the job is small.

This approach worked very well for me, eventually landing regular work with a GC whose projects included high-profile stuff in the local offices of multinational companies. After years of refusing to sign my contract by flatly saying, “I’m not the bank,” he finally broke down and did so on a job he didn’t feel he could trust to any other shop. Soon I was doing all his highly specialized work – and getting paid on my terms.

So, stick to your guns. High-end custom work is expensive, and GCs know it. Do it only for the ones who are willing to work with you.

On the residential side, collection is a lot less complex and far more immediate. The trade-off is that you are dealing with the most fickle customers in the world: Joan and John Q. Public. Make them happy and (as I’ve often said), they’ll refer you to a friend or two. Make them unhappy, and they’ll tell everyone they meet.

Again, it all starts with deciding whether to take the job. If Joan and/or John seem flaky or indecisive when you first visit to size up the job, that’s a big red flag. Remember, you’re in business to make money. If you sense that working for these people is going to be more trouble than it’s worth, listen to your instincts.

But more often than not, people call custom woodworkers when they have a clear idea of what they want and when they are ready – and able – to spend money in order to get it. And this is where many shops make a crucial mistake. They begin working without a contract.

Whether you’re dealing directly with the homeowner or through their architect or designer, residential work is your opportunity to call the tune. YOU name the price, the down payment amount, the progress payment schedule and when the final payment is due. Not availing yourself of this opportunity is a huge mistake, and from that mistake payment disputes arise.

So review your drawings and your contract carefully with your customer and get them to sign off on everything. At the first indication that they are not upholding their end of the bargain (in other words, if they withhold payment), call them on it. If their wallet remains closed, stop working on their job until they pay up.

And if the job is already done and they haven’t made their last payment, I’ve got one question for you: Why did you leave their house without a check on the day you finished?

(Editor’s note: For a contract template that is adaptable to almost any job, go to www.iswonline.com/Media/tonycontractexample.pdf)

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