Nowadays if you take a Gen Y out for lunch, you'll be criticized if you pick something off the menu that doesn't fit her/her environment viewpoint. Chicken? Those were raised in a cage smaller that your plate. Steak? Man, you should watch your cholesterol. Salad? This salad doesn't come from a sustainable farm. How about a glass of water, no, wait, you'll tell me bottled water is so bad since it consumes plastic and as a by-product I make my country more oil-dependant, is that it? Dude, you're getting good, I like ya.
Also, taking employees to strip clubs is not CGI policy anymore.
Personal philosophy aside, the annual employee review is the opportunity for a manager to discuss with a consultant that has been out there in the field for a year. It's face time where you review all the mishaps, make sure the employee doesn't plan to quit anytime soon and set unrealistic objectives for the next 12 months.
Of course, you expect the employee to vent some of his frustrations with the company, the client, the crappy PC he uses, his amazingly stupid cubicle neighbour, the world in general and whatever comes to his mind. You - as a manager - must patiently listen to all this nonsense, nod a few times, and give the impression that you share his feelings. This is called empathy. You don't fucking care of course but the employee must not know.
The hard part comes when the employees expects something for his good work during the past year. You know my position on this. People in general expects way too much, so you as a manager need to lower that to the minimum. If you give the employee a 2% raise (which is the standard), he of course will try to bargain something. Don't let him. Tell him that the company had to work double hard this year to meet its sales objectives, and even though the business unit increased its revenues by 20% with the same number of employees there's no money left for raises above 2%. Try to act sincere. Tell him that you got the same kind of raise, and do your best to look clueless but not stupid.
If the employee still tries to bargain something even though you clearly said there was no room for anything else, tell him you'll talk to the VP about this. This closes the argument, and then a week later you send the employee a boilerplate e-mail saying that his request was declined (you don't need to ask the VP since you already know the answer, don't you?).
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