FairSetup is a short-cycle live-360 performance management system that uses short-cycle performance evaluations to calculate employee impact with the goal of rigorously quantifying the relationship between performance, outcomes, and compensation.

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The Problem

If the company consists of three equal partners, everyone is engaged.  But what if there are not three employees, but ten?  A hundred?  A thousand?  Ten thousand?  How do you manage people in a manner that keeps everyone engaged?  It’s a hard problem.

Traditionally, companies have used a number of ways to try to engage and manage employees.  A typical solution is long-cycle performance appraisals.  However, long-cycle appraisals are notorious for the problems they have, which include:

  • long-cycle appraisals take a lot of effort
  • people remember only the last 2 weeks when performing an assessment
  • peers do not give each other feedback
  • feedback doesn’t drive behavior
  • managers are reluctant to give tough feedback
  • it takes a long time to identify bad hires
  • a high-stress high-stakes discussion that doesn’t actually drive behavior
  • lack of transparency in how performance connects to compensation

More pains are discussed here.

So while it is important to have long-cycle appraisals to review strategic growth of both the business and talent, they are insufficient when used alone.

The Solution

Recognizing the problem, the industry has been moving towards supplementing its long-cycle appraisals with short-cycle  performance management.  This allows for a low-risk peer-based environment with regular feedback.

Every company has a natural rhythm.  Most have teams that update each other every week or so.  FairSetup is used at these meetings to keep track of how everyone meets expectations.  The system is then able to calculate impact of every participant, which can then be tied to compensation and long-cycle management decisions.

The Meeting

The process by which performance is collected should be quick, easy, and natural.  In them, everyone answers two questions:

  1. What have you done and did you meet expectations?
  2. What are you planning on doing?

The FairSetup system supports and encourages this conversation.  Moreover, it shifts team dynamics towards mutual accountability and makes explicit the idea and measure of “expectations”.

For example, Bob is reporting on what he did in a meeting:

Step 1: Bob reports:

  “I implemented a new feature.  I performed at expectation.”

Step 2: Peers, upon hearing Bob’s report, can provide real-time feedback:

“Bob didn’t finish the collateral I needed.  He performed slightly below expectation.”

“Bob stayed up late fixing the servers.  He performed above expectation.”

Step 3: Manager records the assessment:

“Slightly below – you really should have finished the collateral.  Please fix this.”

“Thanks for the hard work.  I am noting that you are above expectation.”

In the end, because this measure is recorded every week in an open manner that engages peers, FairSetup drives engagement, autonomy, accountability, and responsibility.

The regular assessment data is then used by FairSetup to calculate impact.

The Impact

Impact is the foundation of every organization.  When anyone starts at a company, their impact is zero.  Over time it accumulates to some maximum potential.  The potential is recognized by one’s level in the organization.  The speed with which impact grows is impacted by how expectations are set and how they are met.  After an individual changes his or her relationship with the company, impact might not go to zero right away, but might dissipate to an appropriate level over time.

Application

FairSetup is a flexible tool that can be deployed in a number of ways ranging from establishing a profit-sharing model to simply keeping track of expectations to support long-cycle appraisals.

Some possible applications include:

Support Management: Introduce keeping track of how expectations are met in weekly cycles.  Use the data collected to drive long-cycle appraisals.

Leverage Psychology: Set a bonus pool to be $1,000 if the company reaches milestone A.  Set a bonus pool to be $10,000 if the company reaches milestone B. Distribute the bonus using the relative impact of every employee.

Profit-Sharing Partnership: Set a bonus pool that is X% of EBITDA for a business unit, while allowing dissipation to be five years. This will achieve a feeling of honest profit-sharing thereby driving partnership-like engagement.

Conclusion

FairSetup is a natural way to run your team.  Whether used on its own or in tandem with long-cycle appraisal systems, it creates a healthy and productive environment where employees are completely aligned with each other, with management, and with their company.