Numerous articles have been written about the importance of having the right people in an organization. The group of employees that make up a business—the team—is one of the few remaining sources of sustainable competitive advantage. As it has become more and more difficult to find good people, it is imperative for business owners and managers to be constantly focused on developing and improving their skills, processes, practices, and experience in two critical areas:

  1. Finding, recruiting, hiring, developing, and retaining those people who are the best fit for their organization—what we call “A” players.
  2. Assessing the performance of their existing employees, not only in a transactional sense, but with the perspective of how they fit with the culture, how their behavior reinforces the core values espoused, and how they are true team players.

Because resources are plentiful that provide guidance on how to effectively attract, interview, assess, hire, and compensate high-performing employees, it is the second point on which we will focus. Don’t misunderstand, I totally agree that these capabilities are critical to success in today’s world. But so is the ability to take a hard look at the people already on board and make room for higher performing (in an overall sense) team members, where appropriate. I used the term “transactional” above, as it relates to performance. Let me explain what I mean. There are three key elements in managing employee performance:

  1. Clearly define responsibilities and expectations for the position, including how performance will be measured.
  2. Track performance, including measurable metrics focused typically on productivity, quality, customer satisfaction, and timeliness—regardless of the area of the business or position.
  3. Provide fact-based feedback to the employee, including results versus expectations for the metrics outlined in element one, and develop, with the individual, plans to address areas where improvement is needed.

In most cases, the metrics and expectations used to define performance are transactional. That is, they focus on the most easily measured aspects of the employee’s job. Here are some examples:


Job Title Metrics/Measurables
Project Manager Revenue value of jobs completed; job gross profit %
Bookkeeper Timelines and accuracty of entries; monthly account closing on time
Estimator Timeliness of estimate; profit margin on jobs
Sales Representative Revenue generated; number of sales calls or meetings


These metrics reflect the objective, measurable results, or activities associated with the respective positions. They are typical of the models used by contractors to measure the performance of their employees and are often tied to bonus or commission structures that drive a portion of the employee’s compensation. While the metrics are appropriate for the specific titles shown, they represent only a portion, one side if you will, of what should be expected in the performance of these jobs. This is what I refer to as the transactional side.

The performance of employees who are transactional in nature is driven solely by what will benefit them personally. If their goal is to make more money, they will focus almost exclusively on the metrics that drive compensation, the numbers that will increase their bonus or commission.

Let’s examine the other aspects of employee performance that contribute not just to the financial or operational success of the business, but to the overall health of the organization. This includes the culture, morale, and commitment level of employees and the ability of the total team to support sustained, profitable growth.


Employee Development

Every manager’s and supervisor’s goal is to help the people they manage or supervise to be successful. Training and development of employees under their responsibility contributes to improved productivity, higher employee morale, and retention. When employees see the organization placing a priority on helping prepare them for greater levels of responsibility and higher-paying positions, they are more engaged, morale is higher, and they tend to be more committed. Taking the time to help employees learn proper procedures and new skills builds their confidence and often their desire to make a career with your company, not just hold a job that is a stepping-stone to their personal goals.

Additionally, building the bench strength to replace managers and other key employees who leave the organization is an important element in succession planning.


Team Players

The most experienced employees are typically those who are sources of information and guidance for other employees. A transactional employee’s singular focus on getting their job done and earning the greatest possible bonus means they have little inclination to spend time helping others. New employees look to those more senior for cues on how to behave, including what is acceptable and what may be overlooked. Setting a good example by focusing on what is in the best interests of the overall organization is what being a team player is about.



One of leadership’s main responsibilities is to develop and maintain the culture of the organization. When employees are retained whose style and behavior is inconsistent with the espoused core values and cultural traits, others will view the inconsistency as weakness on the owner’s or leader’s part.


Leader Support

High-performing employees who are committed to doing a good job and wish to grow and develop with the organization expect several things:

  • Mentorship and a focus on developing their skills and abilities.
  • The opportunity to advance to increasingly more responsible and more highly compensated positions.
  • To be working with other “A” players, rather than being surrounded by or needing to pull extra weight for employees who don’t measure up. They expect that leadership will identify and work to improve or remove low performers.

Transactional employees who focus only on what serves their personal interests and who do little to contribute to the overall health of the organization through their efforts in the four areas outlined above may appear to be key players in the success of the business. In reality, they are often the root cause of high turnover and an organization’s inability to retain high-level talent.

In my years of working with small businesses, I have observed many instances where transactional employees have been part of the organization for a long time. They may have been with the owner when the business was started and played an integral role in helping the business start and ramp up. They may have a familial or personal tie to the owner that goes back many years. They often have specific skills or unique experience that causes the owner to view them as indispensable. I’ve often heard comments like, “Joe is only one who knows how to ______” or “Sue has dealt with jobs like this before, so whenever we run into this, we rely on her.”

It is not uncommon for leaders or owners, when confronted with the behaviors these employees exhibit that conflict with the core values and cultural norms of the organization, to respond with phrases like, “That’s just Joe being Joe” or “Sue is a unique individual, but we would be lost without her.” Rather than face reality and have a difficult discussion with these employees about their performance, behavior, and lack of support for the team, leadership side-steps the issue, making excuses for the behavior and allowing the “indispensable” employees to poison the culture of the organization.

In virtually every case I have witnessed, here is what was occurring below the surface:

  • The transactional employees were viewed by others as untouchable, although they routinely demonstrated behaviors that were not tolerated from other employees.
  • Owners and leaders were viewed as weak and indecisive because they refused to deal with situations of which they were acutely aware. Their credibility was limited.
  • High-performing or high-potential employees would either leave the organization or dial back their level of performance to only that which was sufficient for them to be retained. They wouldn’t make the extra efforts required to offset the disruption and ineffectiveness that was often caused by the transactional employees.

I am not suggesting that dealing with these situations is easy or that having the necessary conversations with these often long-serving employees (and friends) is comfortable. It’s not. It’s painful. All owners or managers can think about is, “How am I going to replace the skills, abilities, and experience that so-and-so has?” “How are we going to make up for the revenue we’ll lose when _____?” “How can I tell a long-time friend that their behavior has turned their presence in the organization from an asset to a liability?”

Whether with the help of trusted counsel or on their own, when the owner or leader is ready to face the reality of what is happening within the organization, they realize that the unseen effects are likely more negative than the skills and abilities they were convinced they couldn’t live without.

When action is taken, either in working with the employee to change the behaviors that are poisoning the culture or removing the person from the organization, the following typically happen within a relatively short period of time:

  1. Some employees communicate to the owner that they are glad the issue was addressed and changes made. This communication may include comments on the order of, “What took you so long?”
  2. Employees who had previously been holding back or who had been evaluated as average performers suddenly blossom and become more highly engaged, productive, and valuable.
  3. Others will volunteer to pick up whatever slack exists in cases where the transactional employee is no longer with the organization.
  4. The owner feels a huge sense of relief! The burden that was felt (if only subconsciously) in dealing with the behavior and the knowledge that they had the responsibility to take action is finally lifted.

When owners or leaders fail to make the difficult but critical decision to retain only those employees who perform at a high level AND are a good fit with the cultural values, mission, and vision of the organization, they not only risk losing existing “A” players, but they also miss opportunities to upgrade the organization by replacing those who may be performing transactionally yet are holding the business back in many other ways. Effective leaders recognize these negative effects and move on from the Joes and Sues of the world, making room for those who are both a good fit with the organization and who perform at a high level.