ERE: 50 Top Problems with Performance Appraisal – the Most Dreaded HR Process

imageIt was fascinating for us to read about the Top 50 problems with Performance Appraisals on ERE.  It was even more amusing to identify how FairSetup addresses most of these problems.

The article written by Dr. John Sullivan starts out with a promising quote:

90% of performance appraisal processes are inadequate. –Salary.com survey

OK, something we already know.  He goes on to say:

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FairSetup Helps Grow Companies

Scenario: a consulting shop with 30 people.  The consulting shop charges by the hour.  Everyone is paid hourly or in salary.  Management wants to grow the company.  Employees like what they do and, at the end of the day, growth won’t benefit them because the company charges the same amount per hour per person irrespective of whether it is a 30 person company or a 300 person company.  How can you get the company to grow?

What we’ve recently realized with one of our clients is that FairSetup creates an opportunity for a team to participate in growth of the business.  For example,

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Snap-Shot: What is the FairSetup Suite?

We’ve come up with a new image to explain the components of the FairSetup suite, how they relate to operations, and what benefits differentiate us from everyone else.

The FairSetup Suite has three modules which connect performance evaluations to impact to bonuses to company performance. The benefits include:

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Rationale: Why does FairShare make sense?

FairShare is the most advanced form of deployment of the FairSetup model.  Before discussing FairShare, let’s focus on why people work.

While money is the central component of any business, money is generally not the primary motivator.  When do people work best?  When they feel that they are treated fairly – when they feel that, if they put in a lot of effort, they are adequately rewarded for their impact.  Until now, this sort of mindset was reserved for startups.  FairSetup is a new type of compensation: one where a motivated company culture is achieved for by creating a system that fairly rewards all participants for their impact.

What makes people feel like their are being treated fairly?  The ultimate form of fairness is a feeling of ownership.

What is ownership?  It is 1) the ability to make decisions and 2) ownership of future profits. Most, especially late-stage commodity-type, employees are not interested in making strategic-level decisions.  At the same time, they do want to profit from their impact on the company and are willing to take a risk to participate in the upside.

FairShare, the most advanced form of deployment of FairSetup, offers exactly that – if you are an employee who works hard and the company does well, you own some of that tasty future profit.  The goal of FairShare is to give employees a sense of ownership so that they work hard and profit when the company does well and share in company’s plight when it doesn’t.

FairShare is an easy-to-understand transparent profit-sharing model.  Hiring additional people to grow your team becomes easier – no need to dilute, dilution happens naturally as more people become members in the compensation pool.

What’s even better is that FairShare helps address the necessary transience of high quality employees.  For example: let’s say that you need a high quality programmer when building a large system.  After the system is built, their involvement is no longer necessary.  Under FairShare, the programmer will want to build the system as quickly as possible and then move on to other interesting projects, because most compensation comes from success of the system, not the act of building it.

All in all, FairShare brings entrepreneurship into organizations of any size.

Value Proposition and Pain Points

Update: (6/4/2012) this article has been re-written and published as a page:

It seems that FairSetup really addresses three primary pain points: capital, culture, and management.  We also have segmented our market into startups, growth, and established companies.

This is an improvement on our original value-proposition that we are making after presenting FairSetup to a pretty large number of people.  While we started with Nikita’s original pain point of stretching capital in a growth-stage company, we have learned that FairSetup has much broader applications.

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