• resources

Harness the Power of

Employee Performance Agreements: 

A Guide for Leaders Who Want to Increase Productivity and Morale

When I was a leader in a high-performance team, the introduction of employee performance agreements was one of the most effective processes we used to improve team and business performance. 

Now, just so you are clear, the employee performance agreement program that I explain below, is different from a performance contract (which is generally a legal contract you agree to at the start of employment).  

Done right the performance agreement can be one of the most empowering, productivity increasing and morale boosting activities that you perform all year with your team members. 

Done wrong, it can end you up in all kinds of hot water.

You would have to have been living under a rock to not know that people's engagement levels have declined post COVID. Gallup suggest the top reasons for the decline are attributed to people not having:

  • clarity of expectations
  • connection to the mission or purpose of the company
  • opportunities to learn and grow
  • opportunities to do what they do best
  • feeling cared about at work

and all of these elements are taken care of when you skillfully implement the process I'm about to outline in this article. 

Become a Member

If you want to level up this information, all of the resources I've mentioned below are available in the members area of the Make A Dent Club. 

Get templates you can use, in-depth information in bite-sized lessons on how to implement the performance agreement process in to your team. Find out more here about how to join the club today for less than $1 per day.

>> Contribution over and above 'business as usual work'

Just so you are clear, the context in which we are using a Performance Agreement is that it is an agreement between the team member and their leader about how they are going to contribute to the business over and above their "business-as-usual" work during a particular time period.

It can be a mistake for the unwary to just focus on Contribution To Business Performance. 

What makes this performance agreement process different from most others is that we are including a social element in terms of Commitment to Team Performance, along with a personal growth element in terms of Commitment to Self-Improvement. 

Therefore, view employee performance agreements as a goal setting process on three levels.

That period of time is normally no less than a quarter and generally, no more than a year.

  • Contribution to Business Performance Improvement
  • Commitment to Team Improvement
  • Commitment to Self-Improvement
employee performance agreements - three levels

 Now I mentioned a moment ago, that the performance agreement should run for a particular time period. That period of time is normally no less than a quarter and generally, no more than a year.

The frequency of setting employee performance agreements depends

  • complexity of the work performed by the team
  • speed of change in the business
  • number of team members you have reporting to you
  • degree to which your company monitors and expects performance results to be delivered

>> Use the 4Bs  Framework as the backdrop for building the Employee Performance Agreements

And to really give the process a super-boost, use the 4Bs of High-Performance Leadership  framework  to help guide your thinking as you develop the employee performance agreements.

The 4Bs are Believing, Belonging, Behaving and Bottom-Line. If you aren't aware of the 4Bs framework then access our free training Tools To Improve Employee Performance to discover how this powerful framework will transform your team's performance.

In most companies employee performance agreements tend to be Bottom-Line focused. But done right you will also build the all-important Believing and Belonging. Along with reminding them of the behaviors that will make them heroes and those behaviors that will get them in hot water.

Rockstar leaders weave

Believing & Belonging

into most conversations

>> Benefits of Employee Performance Agreements

Now before we get into the meat of the training, let's take a quick look at the benefits of employee performance agreement.

And here's a hint, some of these you might be able to use to justify to your senior leadership team if they aren't on board as to why you might want to introduce performance agreements.

Performance Agreements have benefits for both the company and the team member.

For the company, it can

  • help increase productivity and effectiveness (Bottom-Line)
  • ensure that workloads are spread evenly across the team and all people are contributing (Behaving & Bottom-line)
  • ensure company goals are met (Bottom-Line)
  • help team members to see that what they do matters and their input and their efforts contribute to the success of the team (Believing)
  • Because we include commitment to team and self improvement performance agreements can be a great tool to build strong community within and increase commitment to the workplace (Believing, Belonging & Behaving)

For the team member, it can

  • provide motivation to perform well by helping them see how their input matters (Believing & Behaving)
  • offer the opportunity for team members to learn new skills and build new capabilities, which can open up new career opportunities and interests (Employee Bottom-Line
  • make work more enjoyable as people commit to building better behaviors within the team (Belonging)
  • enable them to use their strengths and work on projects that interest them (Believing, Behaving, Bottom-Line)

>> Use These Principles As You Develop The Performance Agreement Process

Here are some guiding principles that lay the foundation for a great employee performance agreement program. 

Principle 1 - With not To

This is a process that you are doing WITH your team member not TO them! 

Principle 2 - Holding Regular one-on-on meetings

You are committed to having regular one-on-one meetings with each of your team members.

Principle 3 - Know your people

You have a fairly good handle on your team members interests and strengths and 'regular every-day workload' (and if you don't you are willing to learn)

Principle 4 - Committed to excellence (team and individual)

Your desire is deep to lead your team beyond just turning up and doing their job. Instead, you and they are dedicated to performance excellence - at a business and a personal level.

Principle 5 - Use the 4Bs of High-Performance Leadership Framework

You are using the 4Bs of High-Performance Leadership Framework as a backdrop to how you lead your team (If you aren’t familiar with the framework, you can take our free training here to discover how to shift your people from hostages to rockstars!)

Principle 6 - Follows on from Goal Alignment

It is optimal if the performance agreement is a flow on from an Organizational Goal Alignment process. But even if the company you are working within does not use a process like this, you can still create Individual Performance Agreements with your team members.

Principle 7 - Not a tool for pay increases

Performance Agreements can lay the foundation for 'compensation based on level of contribution' but don't have to be the outcome of a Performance Agreement process. They are certainly not a tool to give people pay increases! So never set that expectation up. 

Performance agreements don't need to be complicated or lengthy. But they do take some planning.

Generally the most complex and time-consuming part to develop is the Contribution to Business Performance Improvement. So we will start with this first element of the employee performance agreement.

>> Contribution To Business Performance Improvement (CPBI)

The purpose of the Contribution to Business Performance Improvement (CBPI) section of the Performance Agreement is to ensure that everyone in the business is in some way helping the business to improve.

This takes your business from being a 'regular' competitor in the marketplace, to one of the Rockstars!

You'd be forgiven for thinking that CBPI is all about Behaving and Bottom-Line.

In fact CBPI can be a great tool for boosting morale.  Because if you hold the conversations in the right way, you'll help your team members to see how what they do matters. In other words you're building Believing.

Performance Agreement Should flow from Organizational Goal Alignment

If your company has used a Strategic Goal Alignment process, you will have worked with your team to develop a list of the initiatives which will be worked on during the next year which will support the business focus and priorities.

These initiatives should result in systemic improvements. Here are some examples from a fictitious company that we used in the goal alignment article

  • Develop and implement system to track conversion rates
  • Improve workflow process for …(xxx) procedure
  • Improve system to upsell existing clients
  • Open up three new markets

This is an example of a one-page output from a goal alignment process. See more here on goal alignment

If your company doesn't use a Goal Alignment process, (which is not ideal) then simply work with your team to create the initiatives that are your best guess at what needs to happen in this year to help the business move forward.

Be mindful that an initiative might be so big that it is divided into several projects and may have multiple goals coming out of it, with multiple people working on it.

For example, the initiative of "Open up three new markets" make have to be divided up into three different project teams, each with their own set of goals. 

Whereas the initiative of "Re-write and implement quality procedures for (xxx)" may only require one or two people to work on it. 

Marry up team members interests with initiatives/projects

You will need to work with the team to ascertain each individual's interest/passions in taking on the various projects or initiatives with a view to being able to assign people to the appropriate projects/initiatives when having the performance agreement discussions.  

It is best if people are able to choose which initiative they would like to be a part of delivering. When people feel control over their choices and are passionate about a particular subject, their input and commitment to success will be much higher.

As well, doing this group discussion before you have individual discussions, ensures that there is no double up of effort/overlap between team members when assigning projects/initiatives.

Small day-to-day improvements/fixes are business-as-usual work

Remember as we mentioned earlier, the goals/projects that the team member is working on are over and above normal "business as usual" work. The smaller day-to-day fixes should continue to be a part of people's every day work.

The project/goals/initiative should be something more 'meaty'. And most importantly enable the team member to grow and learn.

Ensure team members are not overloaded

Depending upon the complexity of the Initiative/project/goal, the individual's work load and career aspirations, they may have only one thing they are working on for an entire quarter or year. Or they might have 3-4 smaller ones. 

The Team Leader and Team Member discuss and agree to what is feasible, given their "business-as-usual" workload, their level of time and/or competence in their role. 

Remember this process is designed to improve productivity AND morale. If you overwhelm people with too much you'll do the reverse. You'll have people feeling resentful and/or overburdened. 

be warned:

do not overwhelm people with too many,

or too big projects.


Instead of boosting productivity and morale

you'll do the exact opposite

Ensure that for each goal/project that the team member is working on that there are clear deliverables and timelines that can be measured. 

Find a way to measure group work

If the team member needs to work on their initiative in a team or project group, then ensure that his/her contribution can be noted in someway. For example:

  • number of suggestions provided
  • meetings attended
  • number of responsibilities for action items taken and delivered as per group expectations

If there is a team/group working together on an initiative, do ensure that you are clear on who is Responsible for doing delivering what. So make use of the R-Chart process to help facilitate this. 

Be Flexible in Implementation

It must be understood that some projects/activities could change as the business needs change during the period.

>> Commitment to Team Improvement

The next two elements of the employee performance agreement is where the rubber hits the road.

Everything we've just outlined in the CBPI, is often a given in many organizations. But few set up agreements that get people focused on personal growth and impact of their behaviors.

This section of the agreement is inspired by both the second and  third elements of the 4Bs of High-Performance Leadership Framework which are Behaving and Belonging and should be driven, as much as possible, by the individual team member.

Improve Behaviors of the Team Member That Are Holding the Team Back

Ultimately what holds performance back in most teams is poor behaviors. 

When people don't like or trust each other performance always suffers.

So in Commitment to Team Improvement we are getting people thinking about what they are doing that is harming the team. 

This could be as a result of their own poor behaviors that are holding the team back.

Or, following discussions in team meetings, it might be a set of behaviors that the entire team is focused upon improving.

Ultimately, you want them commit to how they will be held accountable to improving any of their behaviors that impact on their personal and the team's success. 

Done well, you are looking to help the individual improve relationships and performance within their own and across teams. 

Your aim in this part of the performance agreement is to build the sense of Belonging. People have got their backs and their work colleagues want to see them succeed. And also be mindful that we all do things that cause problems in the team - nobody's meant to be perfect. From people who talk too much or gossip, to people who don't talk enough!

Make It Measurable

Just like in Contribution to Business, any goals you set in this section should be measurable. For example, "I'll be a better team member" is not a good statement to put in the agreement,  as there is no measure.  It should be something like 

"I will stop contributing to gossip in my team. This I will measure by keeping a running journal, (over the next 3 weeks)  of conversations I have throughout the day. I'll make note of whether they are more gossipy, than positive/moving forward/solutions focused conversations. 

After the logging of conversation trends, I'll work with (my Team Leader) to create strategies to help me re-direct conversations when they turn to gossip. And we'll continue to monitor my progress.

My aim at Peer Review is to score 4 or lower on the scale "Does this person contribute to negative gossip"

Members: login to review my point on Peer Reviews and the things that should be in play before you introduce a Peer Review system.

Summary of Commitment to Team Improvement

For any business to be successful, the people in it must find ways to work together collaboratively to achieve common goals and the success they desire as individuals and as a team.

When teams/individuals work well together the following results occur:

  • More creative/innovative ideas are offered to the marketplace
  • Work is completed more effectively and efficiently
  • Higher quality work is delivered of which individuals and teams can feel proud
  • Morale is higher and people enjoy coming to work more
  • People's sense of Belonging (the second B in the 4Bs of High-Performance) escalate which is great for individual and collective mental health
  • People learn and accomplish more
  • Less interference from management as the team becomes more self-managing

Skilfully implementing Commitment to Team Improvement into your performance agreement will help you achieve all of this. Next we are going to look at Commitment to Self-Improvement

>> Commitment to Self Improvement

People are the lifeblood of any successful business. This is why it is so important to foster a culture of self-improvement in the workplace.

This part of the performance agreement does a good job of building Believing and Bottom-Line (the first and last B of our 4Bs of high-performance).

When people feel that someone is invested in them succeeding, it strengthens their view that this is a great place to work (Believing). They become more motivated and engaged. Which leads to increased productivity and a better work environment.

For the company, a motivated and engaged team can take a business to another level (Bottom-line.)

As well, it builds the team member’s bottom-line, because self-improvement can open doors to new career opportunities and sometimes salary increases. When an individual's personal growth is stagnating, it is highly probable that their life is stagnating too.

Self-improvement helps create legacy

Most people will likely work somewhere between 90,000 and 160,000 hours at work in their lifetime. Therefore, their career is an important part of how they use their hours on this planet.

When an individual improves themselves both from a capability/skill standpoint along with working on their behaviours, this has a powerful impact on the legacy they leave as an individual and for the business they work within.

Discuss career aspirations

In this part of the agreement individual's look at their career hopes and aspirations. Your company may have a formal Career Progression Discussion system and this should inform this part of the Performance Agreement.

However, if your company does not, then during the Performance Agreement discussion the Team Leader should open to door to discussing with the team member their professional hopes and goals.

In the one-on-one meetings training there are 30+ questions you can use to help a team member to tease out their career aspirations.

Working with you, your team member will decide the skillsets/behaviours they want to enhance so that can achieve the job satisfaction they desire along with delivering the results the business requires.

There are many ways that team members can work on self-improvement at work.

Generally there should be something in this part of the agreement that directly improves their technical capability at delivering in their current role. For example a copywriter attending a course to improve their sales copy capability.

As well there should be something that is more broadly scoped. Maybe, as an example improve skillsets such as developing better communication skills, becoming more organized, improving their presentation capability, delegation, etc.

Or maybe, even gaining a new skillset that sets them up for future career moves.

As you work through the process with the team member it is good to look at which of their strengths are being under-utilized and that they'd like to use more of to support their own and the business' success.

Together with deciding which of their weaknesses they want to minimize the impact of, so these weaknesses don't cause them to derail.

A word of warning: This section of the agreement is not about the person off doing a bunch of courses. It is likely that your training budget couldn't support that!

Of course, there may be some training/courses involved, but these shouldn't be your highest priority.

Supporting team members to focus on and invest in their own self-improvement will always pay dividends - for both you and them.

>> Review and Follow-up

Once you've set the performance agreement up with your team member, then ensure that in your regular one-on-one meetings that you are reviewing progress against the team members performance agreement - in all three levels. 

Don't make the mistake of only talking to the Contribution to Business Improvement. For one-on-ones to be of value you should be talking to all three components (Commitment to Self-Improvement, Commitment to Team Improvement and Contribution Business Performance Improvement). 

Not only that, because their projects should flow-on from Department wide initiatives, there should be some form of report back at team meetings on how the individual and/or team who are working on that specific initiative are going.

The last thing you want is to get to the end of the period and there is an "Aw shucks!"

This is why your one-on-one meetings are so important. 

Agree a date when team member will present to their team the outcome of their performance agreement.

By creating and implementing employee performance agreements, you can ensure that your team is focused on meeting their goals and objectives. This will help you achieve the productivity and bottom-line results that you are looking for without feeling like you have to do it all yourself.

In the members area we start to unpack how to hold the performance agreement discussions with your team members. You might be surprised by the fact that you should start the discussion with the Self-Improvement component and I'll help you to understand why that is so crucial.

See below for all the other resources available to members of the Make A Dent club.

>> For Members

Members login and go to this page to access the following resources:

  • Discussion topics /outlines for holding the conversation/(s)
  • Trello board/Word/Pages templates that you can use to document and track progress of the Performance Agreements with each team member
  • A Powerpoint/Canva/Keynote presentation (with speaker notes) you can use to introduce Performance Agreements in to your company
  • A checklist of what to discuss with your team members as you are setting up the performance agreement with them
  • An example Performance Agreement
  • Along with all the other resources mentioned throughout the article

Become a Member

All of the resources I've mentioned above are available in the members area of the Make A Dent Club. Many of the resources come with templates you can use, in-depth information and even bite-sized lessons on how to implement in to your team. Find out more here about how to join the club today for less than $1 per day.

4bs of High Performance

When you get the 'what' we are here for right (Believing), you'll create the inspiration and the desire for the 'hows' (Belonging, Behaving and Bottom-Line).

Finding it hard to motivate your team?

Use the 4Bs Framework to get better performance from your people

This free course Tools To Improve Employee Performance gives you 4 proven and easy to use tips to get unmotivated people firing.

Got A Question?/Want ToComment


facebook botton
twitter botton
linkedin botton