Use performance management to give your employees purpose, and watch what happens next

Imagine joining Netflix before anyone knew what it was.  You received a job description before starting.  On day 1 your boss gets you started on your key responsibilities. Whether your role is to sign movie licensing deals, develop their software or provide customer service,  as often happens for a large majority of people, your sense of engagement will likely start strong and then wane in the months following the honeymoon period.

But now imagine what would happen if before you even started, you knew the purpose for Netflix and how you fit in.  You knew they wanted to create the worlds most popular movie and TV streaming service.  They wanted to give people access to the shows they loved on-demand, a completely new idea.

The people you worked with continually talked about this picture of the future.  How much more engaging and motivating would it be?  You’d have a purpose beyond your end of week pay packet. As Hubspot’s culture code puts it: paychecks matter but purpose matters more.”

Individual performance (and subsequently overall business performance) dramatically improves when employees know why they are doing their job. It’s further enhanced when people know how their job impacts or contributes to the goals of the business overall.

The key benefits of a sense of purpose

Maintain a sense of purpose at all levels in your organisation – linking everyone’s job to the bigger picture – and your business will reap the rewards:

  • Significantly higher engagement – which lowers absenteeism and turnover and increases productivity
  • A faster business – with everyone pulling in the same direction you can achieve your goals more quickly
  • A more innovative business – having a clear direction promotes more creativity

Well-executed performance management clearly defines the link between an employee’s job and the objectives of the business – day in, day out. Here’s how:

1. Clearly articulate company goals to everyone

Sharing your company’s goals is the starting point for both purpose-driven employees and great performance management.

Creating a sense of purpose at an individual level starts with the leadership team asking “why do we do what we do?” – then clearly communicating the answer to the business. In his 2010 TED talk, Simon Sinek makes a terrifically powerful appeal to leaders (it’s worth watching):

“It’s those who start with “why” that have the ability to inspire those around them.”

Transparent company goals that are communicated clearly and often lay the foundations for a workforce driven by a shared purpose. They are also the bedrock for effective performance management.

At its core, great performance management ensures that employees are aligned with the business as it moves forward. It has the power to ensure the right people are in the right roles, doing the right tasks and developing their skills in line with business needs.

Of course, in order to do this job effectively, performance management relies on every employee understanding the fundamental goals of the business.

2. Align employee goals with business goals 

Give your employees purpose by clearly explaining exactly how their job affects the success of the business. A crucial step in the implementation of a great performance management system is giving goals this context.

The SMART approach is a best-practice method for setting goals (specific, measurable, attainable, relevant and time-bound). The ‘R for relevant’ is the key here – make sure all goals are clearly relevant to the business’s purpose.

For example, using the idea in our introduction, if you were setting a goal for a HR executive, an aligned and purposeful objective would be to “Contribute to successful commencement of services in Australia by establishing a leadership team by January 2015 with proven past successes building operations from the ground up” 

At Netflix, giving employees context is ingrained behaviour. The Netflix culture code captures this by saying: “High performance people will do better work if they understand the context.”

But it’s not just Netflix that says so – research backs up the statement strongly. If you’re interested to read more on this, I can suggest two papers from the Center of Advanced Human Resource Studies: ‘Seeing Clearly’ from this collection of white papers and ‘Employee line of sight to the organisation’s strategic objectives – what it is, how it can be enhanced and what it makes happen’.

3. Use performance management to maintain a sense of purpose when things change

Business objectives, and subsequently business strategies, can change in a heartbeat – especially in fast-moving, innovative organisations, or those facing fierce competition, regulatory upheaval and so on. Change can mean that job roles quickly become misaligned with the new direction of the business. To keep your employees on the right track and adding value despite shifting sands, ongoing feedback and coaching is crucial.

The effect of coaching on purpose and engagement hasn’t gone unnoticed at Wells Fargo. A top executive announced last year that he expects bank managers to spend two thirds of their time coaching their staff.

Ongoing feedback and coaching are key elements of best-practice performance management. Providing plenty of contact time between employees and their managers/mentors, regular feedback means new strategies can be quickly implemented on the ground.

Done well, every coaching and feedback session will leave your employees feeling that achieving their individual goals are directly connected to the success of the business.

In conclusion

A sense of purpose lies at the very heart of driving employee engagement and better business performance.

Great results happen when every employee is connected to purpose, every day. Best-practice performance management makes this straightforward.

With clear goals, feedback and coaching, your employees will have a direct and tangible connection to the success of your organisation.

Jon Windust

Jon Windust is the CEO at Cognology – Talent management software for the future of work. Over 250 Australian businesses use Cognology to power cutting-edge talent strategy. You can follow Jon on Twitter or LinkedIn.

Does talent management drive share price performance?

Why investors should care about talent management

Here at Cognology we love data that supports the importance of great people management. Today we’ve got some particularly interesting data from Glassdoor that all managers (and investors) should pay close attention to.
We’ve dug into Glassdoor data to understand the impact of employee happiness and satisfaction on share price performance.

If you’re not familiar with Glassdoor

Glassdoor is a website where employees and former employees anonymously review companies and their management. The data and reviews are then made publically available.
Here we’re using Commonwealth Bank as an example:

CBA Ratings and Trends chart

As you can see, it’s gives a quick feel for what it’s really like to work at the company on a number of measures.

But deeper than just employee happiness, Glassdoor is also a pretty good indicator of management capability. As we showed in our recent piece on Management Capability, Glassdoor ratings sit broadly in line with the Australian Institute of Management’s capability index.

What do these ratings say about Australia’s largest companies?

At an aggregate level, every company gets a rating out of five stars. We collected these Glassdoor ratings for the ASX100. You can see the results below:

Glassdoor ratings chart

Note that we’re only including companies with reviews on Glassdoor (which is why there’s 68 companies listed here instead of 100). Due to size or industry, some companies don’t have enough ratings to show data.

As you can see above, most companies tend to cluster somewhere between a rating of 3 and 4.

What’s particularly interesting here are the seven Australian companies that have scored ratings of 4 and above. As you can see from the chart, it’s quite rare to achieve a rating at this level. For comparison, some of the international companies with ratings above 4 include:

What has this got to do with share price performance?

One of the big questions about Glassdoor is always “does the rating really mean anything?”. Anonymous reviews sound awfully like they could be gamed by a company that wanted a quick ratings boost. Or just as easily destroyed by a particularly bitter ex-employee.

So, in aggregate, do these ratings actually tell us anything meaningful about the companies listed?

Perhaps the most impartial way to look at overall corporate performance is the share price. There’s a lot of nuances that share market misses – but there’s no disagreement that it’s a very clear public indicator of performance that all stakeholders care about.

So how does aggregate share price performance look when we chart against Glassdoor ratings:

Glassdoor ratings chart


It’s clear that the past 12 months has seen outperformance by those companies with a glassdoor rating of 4 or above. Just to highlight, these companies with employee reviews averaging above 4 are:

  • CSR
  • Fortescue Metals
  • Toll Holdings
  • Wesfarmers
  • Seek
  • Ramsay Health
  • Orora

Whilst it’s easy to make the argument that employee engagement and management capability is causing share price outperformance, let’s not get too carried away and start the “Glassdoor ratings >4 hedge fund” (although we did very briefly consider it before publishing this article).

To be very clear, I’ve always believed that there’s a relationship between great talent management and company value. But before we say this is definitive proof of the huge value of talent management, there’s more research required. Do companies that are achieving stronger share-price growth just have happier employees? It is possible that the causation works in the other direction?

In any case, it’s fascinating data that requires more attention and thought. It’s safe to say you should expect more questions from investor relations about your talent management strategy in the near future. 

Please note: Clearly, this isn’t investment advice. And for the sake of full disclosure, nobody involved in the publication of this article holds shares in any of the outperformers referenced.

We asked seven workplace experts for their number one tip in dealing with an underperforming employee

Tips from industry experts

How do you manage an underperforming employee? To get a quick take on best practice we consulted seven of Australia and New Zealand’s workplace experts.

Collected here are their seven different perspectives – a great resource that you’ll want to bookmark for next time you need to deal with underperformance on your team.

Colin D Ellis says you need honesty, empathy, and to be timely:

Colin is a project management expert who is all about leading teams. He’s all about pushing aside process and getting results. But when those problems come from within, Colin has some tips for managing your team.

Colin’s view: “My number one tip for managing an under performer is to be absolutely honest about what could be improved as early as is possible, but be empathetic at all times. As a leader you have a responsibility to create an environment of learning and growth not one of fear.

So listen hard to the issues they face then work with them to provide the support and knowledge to help them succeed. And don’t forget to look at yourself and ask what more you can do to support them achieve their goals.”

You can reach Colin here. Or you can have his project management experience all to yourself through his website.

Amanda Sterling says it’s as simple as active listening and trusting your instincts:

Amanda Sterling is an organizational development practitioner and one of the lead contributors to Her background is in L&D (with an increasing focus on communication and social media).

Amanda’s take on underperformance management:

“I think my tip is deceptive in its simplicity. It would be: have a conversation with your under performer, actively listen.

It’s something that I’ve had to do and not that well. Retrospect is a useful thing. If I had to do it again I’d like to think I’d take my own advice.

My second tip would be to trust your instincts. If you’ve really listened, I mean really listened, you should have a sense of what really needs to be done and that might be different from what your head is telling you. Again, I’ve learnt that one the hard way.”

Amanda loves to tweet, I’m sure she’d love to tweet you too. Otherwise you can keep up to date with all the latest New Zealand HR news through

Lynne Cazaly says writing the conversation down keeps the conversation clear and focused:

Lynne Cazaly is an author, speaker, mentor, and facilitator. Lynne uses her expertise in visual agility to educate clients in management processes and drive employee engagement.

Lynne’s perspective: “Have a conversation. And a visual one at that.That means you’ll need a note pad, marker and be switched on and listening and visually capturing what you talk about.

Ensure the conversation and communication is ‘three point’; that is, you and the team member talking are ‘two point’ communication. Bring in a third item, a flip chart, note pad or white board to handle what could be an awkward or challenging situation. It helps make the content and conversation clear, focused on objective information and helps avoid the tension or loss of face that can occur in conversations like this.”

Follow Lynne on Twitter here. Or go to her website to learn all about visual facilitation.

Karen Gately says take the direct approach with tough love:

Karen Gately used her knowledge in managerial methodology, combined with her background in teaching and karate, to develop new ideas in the HR and management space. She’s written two books on the subject, and practices her skills in her own boutique HR consultancy.

Karen’s take on underperformance: “The single most important aspect of a people manager’s approach to managing under performance is tough love — that is, being completely honest while delivering feedback with compassion and sensitivity.

An empowering and respectful process, tough love demands that you deliver fair and necessary feedback with conviction and kindness. While telling the truth can be an opportunity to help people understand and take ownership of their performance, if not delivered well it won’t work.

Brutal honesty on its own can be destructive or inspire defensiveness. Avoiding the truth, on the other hand, can be equally damaging as it holds people back from reaching their potential and ultimately succeeding.”

You can tweet Karen here, view her blog here, or reach her HR consultancy here.

Jon Windust: Feedback, feedback, feedback.

Jon Windust is the CEO at Cognology. He’s been building talent management software for over ten years, and deals with over 250 Australian clients.
Jon’s #1 tip: “The important thing in dealing with an underperformer is to always be forward looking and encouraging. This can be difficult, particularly if a person is having a negative impact on the team, but the process will fall apart if it doesn’t remain forward looking.
Once a person has been identified as an underperformer, the feedback gap needs to be reduced. If a person is going to change, they need more immediate and frequent feedback to adjust their course. This means weekly and even daily one on one sessions. They don’t need to be lengthy, but it’s important to reduce the feedback gap.

The process looks like this:

  • Meet one on one with the team member.
  • Provide very clear and specific feedback on the issue and its impact.
  • Ask about roadblocks and any other issues the person believes is affecting their performance.
  • Encourage the person to come up with a solution.
  • If they cannot, provide a solution.
  • Set short term goals around the solution (ie. daily, weekly).
  • Provide development if needed.
  • Provide daily/weekly feedback on the goals.
  • Document the feedback, goals, development, and daily achievements.
  • Repeat until resolved or all reasonable avenues are exhausted.
  • Maintain focus on the issues and avoid making personal criticisms.”

You can follow Jon on Twitter here.

Scott Brown says underperformance starts right at recruitment:

Scott Brown is a hiring and recruitment expert with over 15 years of experience. Scott also does presentations on hiring best practice, internal systems, avoiding hiring mistakes, and how to plan for staffing increases.

Scott’s perspective: “Is there a problem with the employee’s engagement within the business, or misaligned skills and abilities? Engagement underpins performance, and engagement is always a result of hiring and induction.

With technical skills often receiving the greatest weighting during the hiring process, and more cultural fit (behaviours, attitudes or personality) ignored or glossed over, often it is this that directly relates to poor employee performance.

If an employee feels they are not a clear fit for the role, or they were not properly inducted into the structure, nature and processes within the role, almost instant disengagement can occur leading to clear performance issues.

Combine the hiring and onboarding failures and there is a real problem with the workplace environment. Statistics suggest that poor hiring and onboarding leads to failure rates of over 50% of new starters.

If poor performance is a perceived problem, and it can be traced back to the hiring or onboarding process– and yes it is the most common culprit – you will need to review these processes and requalify the employee’s skills AND behavioural fit.

From there, structure the role to properly accommodate the newly qualified traits, whilst concurrently, ensuring the culture of the team is properly engaged to allow the employee to regain confidence and role definition.”

You can follow Scott on Twitter here. Or check out his website for the latest in recruitment.

Helen Blunden says look at skills, knowledge, and abilities. Don’t make assumptions:

Helen Blunden is the founder of Activate Learning Solutions, where she works with businesses to solve their performance problems. Her background in learning makes Helen the ideal professional to ask about employee underperformance.

Helen’s #1 tip for managing underperformance: “My #1 tip for managing an underperformer has been based on Mager and Pipe’s model on analysing performance problems which explores whether the person has relevant skills, knowledge and abilities to do the job as well as exploring the environment in which their performance must be demonstrated.

We also take into account their roles, expectations of the job role, the resources they have available and the consequences for performing or even underperforming. When dealing with underperformance, we need to delve under the surface and seek out the real reasons and rectify those as opposed to making assumptions.”

Follow Helen for great learning tips. Go to her website to get her insight into education.

Thanks to all our thought leaders for participating. We’d love you to jump into the comments and add your own tips for managing underperformance on your team …

Who are Australia’s most valuable employees?

I love thinking about the future of work. And recently there’s been a lot of discussion that the future of work means bigger companies employing less people. It’s hard to draw any other conclusion when you look at deals like the Facebook acquisition of WhatsApp, a US$19 billion dollar acquisition with just 55 employees. I’ll save you pulling out the calculator – Facebook are paying an incredible $350m or so per employee!

I wanted to understand the Australian perspective on whether we’re seeing the start of a major disconnect between employees and firm value. To do this we’ve spent some time running the numbers on the ASX 100. And the results might surprise you!

The average Australian employee is worth just over $1m

I’m just looking at the ASX 100 here. But that’s a pretty good representative sample, given that these 100 largest companies in Australia employ between them about 1.4m people.
At an aggregate level, these 100 companies are worth just over 1.4 trillion dollars (yes, with a T!). So at an individual level, that means that the market values each Australian employee at just over $1m ($1,002,617 to be exact).

Chart of the market value of Australian employees

Roughly that means that a company worth $100m will on average have about 100 employees. A company worth $10b will have about 10,000 employees (and so on).

Before you go asking your boss for a pay rise, it’s worth considering that this average masks some big differences. So of course I put together a top 10. And my vox-pop around the office shows that pretty much no one can guess which large Australian company has the most valuable employees.

I’ll save the suspense. Australia’s most valuable employees work at Transurban – the tollway giant that operates some of Australia’s most important highways.

Australia’s most valuable employees (market cap per employee)

Chart of market capitalisation

A single employee at Transurban is worth nearly A$32 million dollars. The startling fact here is that depending on which day you look at the exchange rate, that’s more per employee than Facebook! (Their average employee value is a measly US$28 million). It’s also significantly more than Apple, Google, Amazon and Microsoft.

The rest of the Australian top 10 comprises APA Group (pipelines), Seek, Sydney Airport, Dexus (property), Duet (infrastructure), GPT (property), ASX (the stock exchange), Oil Search, Beach Petroleum and Woodside Petroleum.

Surprisingly, Seek is the only technology company to make the top 10. In Australia, it’s not technology, but tollways that win out in this list.

The big earners in the US work in the cloud. Here in Australia the big money is still in the ground.

On a sector-by-sector basis, it’s not surprising that the most valuable employees sit in property and infrastructure. Long term monopoly contracts and regulation mean that there’s simply less employees required to generate earnings. But what’s startling is just how significant the difference is between industries, with property and infrastructure employees worth nearly 3x more than the next most valuable sector.

Average market capitalization per employee (by sector):

Chart of average market capitalisation

The difference between Australia’s most valuable and least valuable employees is HUGE!

The great thing about the stock market is it doesn’t mess about with niceties. Between Australia’s most valuable employees (Transurban) and least valuable employees (Downer) there’s a difference of 367 times!

Chart of the difference between a Transurban and Downer employee

As well as this astoundingly large multiple, what’s interesting here is that the bottom 10 companies in this list are all subject to market and technological disruption. We’ve got a collection of steel makers (Bluescope and Arrium), retailers (JBHifi and Myer), logistics companies (Qantas and Toll) and engineering firms (ALS, Leighton, Worley and Downer).

The bottom 10

Chart of the bottom 10

What does this all mean?

There’s a large number of conclusions that you can draw out of this data. And I’m sure others will have insights to share in the comments. But let me start with a couple:

  • Given the dominance of infrastructure players in the top 10, do Australia’s most valuable companies rely on regulation, rather than innovation?
  • Where are the technology companies? There’s a lot of talk get’s thrown around in the press about how Australian investors just don’t understand and value technology. This research provides some hard evidence in support of this claim.
  • Many people have predicted that the future of work means larger companies employing fewer people. On the basis of this data I think we can say that the future of work will also be more and more unequal (with the gap between the most and least valuable continuing to increase).

I’m also looking forward to tracking these stats over time to see if the average Australian employee is getting more or less valuable. We’ll update this on a semi-regular basis to keep track.

There’s so many other insights to be had here, so make sure you stay tuned to the Cognology blog over coming weeks as we look in more depth at key industries and companies. But I’d also love to hear from you. What does this data tell you about the Australian workforce and the future of work?

About the data

These numbers are based on Google Finance data as at late September 2014. This was supplemented with WGEA data where necessary (some companies are quite tricky about hiding how many employees they have).