How to Manage Employees: 3 Tips for Business Owners

This article is an excerpt from the Shortform book guide to "Winning" by Jack Welch and Suzy Welch. Shortform has the world's best summaries and analyses of books you should be reading.

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Do you want your employees to thrive? How can you effectively manage employees?

After hiring the right people for your team, you must set them up for success and manage them effectively. Winning by Jack Welch has great tips for being a great manager who guides and encourages your team.

Read more to learn how to manage employees so they can help the company succeed.

How to Be an Effective Manager

Welch provides several tips for learning how to manage employees:

1. Establish a strong human resources department: Welch argues that HR is crucial to the success of any company and yet is often overlooked or disregarded. HR, when implemented correctly, should be a transparent organization that addresses employees’ concerns, fosters compromise between departments, and helps people develop. Businesses are filled with people, and there will always be interpersonal conflict—office politics, hurt feelings, and disagreements. A strong HR department that has true power helps alleviate conflict and ensure that the company is as healthy and strong as it can be.

(Shortform note: Ben Horowitz, in The Hard Thing About Hard Things, agrees with Welch on the importance of a strong HR department, framing it as a company’s quality assurance: HR may not be able to create a positive company culture on its own, but it can tell when things are bad: when a company’s culture is toxic, for instance. Horowitz outlines five specific areas in which an HR team is especially helpful: Hiring (is the interview process effective?), compensation (is employee pay fair and competitive?), training (does the training process get employees up to speed efficiently?), management (is the performance review/feedback system fair and effective?), and motivation (do employees work hard consistently?).

2. Create a strong system for evaluating performance: According to Welch, most companies don’t have a good method for evaluating employees. Though every company’s will differ, Welch says that an evaluation system should be direct (clearly stating what the employee did well and where they can improve), data-driven (using quantitative data to measure performance), and should occur at least once a year (though more frequent evaluations may be helpful).

CFRs: An Alternative to Annual Reviews

While Welch argues that performance reviews should occur at least once a year, annual performance reviews are no longer the standard, with many companies now favoring more frequent manager check-ins or self-evaluations.

In Measure What Matters, for example, John Doerr provides an alternative to annual performance reviews: CFRs (Conversations, Feedback, Recognition). CFRs emphasize continuous improvement and addressing issues promptly rather than waiting for a yearly review. CFRs involve weekly or monthly conversations between managers and employees, constant feedback between managers and employees, and recognition of accomplishments from both peers and managers. Echoing Welch’s advice, CFRs are direct (they aim to give clear feedback on how to improve) and data-driven (they focus on accomplishments and results).

3. Delineate clear roles and responsibilities, with as few hierarchy layers as possible: Welch points out that many companies, especially bigger ones, suffer from a lack of clarity regarding each employee’s role within the company. To avoid this, design a detailed organizational chart that clearly shows the work each employee is responsible for and who they report to. This will promote transparent communication and ensure that everyone knows what they should be doing on a daily basis.

(Shortform note: In The Five Dysfunctions of a Team, Patrick Lencioni argues that clearly outlining each person’s responsibilities also helps solve one of his five dysfunctions: lack of accountability. He argues that in addition to each person’s responsibility, you should publicly post the goals and standards of the organization. This will make crystal clear what the team needs to accomplish as well as what each individual needs to do to accomplish it. It also shifts accountability and discipline from the managers to the entire team, as each team member will be encouraged to pull their weight and hold others accountable when they aren’t contributing to the team’s goals or adhering to the organization’s standards.)

Welch recommends having as few layers of hierarchy in your company as possible because they cost the company time and money. He claims that some companies keep adding levels within their ranks as they grow; others add layers so they can more easily promote top performers. But a company with too many hierarchy layers becomes difficult to manage and for employees to navigate. It also tends to add unnecessary costs and complicate even the most basic business decisions, requiring employees and managers to run every decision up the chain of command. Instead of having several rungs of managers within one department, it’s better to have one manager who oversees the department and reports directly to the CEO.

(Shortform note: The authors of No Rules Rules point out other key benefits of a company structure with fewer hierarchies: It empowers employees and fosters innovation. Many companies, they argue, require all big decisions to go through the higher-ups in a company, and these higher-ups may have a fixed mindset and limited perspective that can limit innovative ideas. A company with fewer hierarchies, however, lets its employees make decisions based on what they think is best for the company rather than what they think their bosses will approve of, so these decisions won’t be limited by the perspectives of a few senior executives.)

How to Manage Employees: 3 Tips for Business Owners