The 7 Habits of Highly Effective People

Win/Win Performance Agreements

Creating Win/Win performance agreements requires vital paradigm shifts. The focus is on

results, not methods. Most of us tend to supervise methods. We use the gofer delegation

discussed in Habit 3, the methods management I used with Sandra when I asked her to take

pictures of our son as he was water skiing. But Win/Win agreements focus on results, releasing

tremendous individual human potential and creating greater synergy, building PC in the process

instead of focusing exclusively on P.

With Win/Win accountability, people evaluate themselves. The traditional evaluation games

people play are awkward and emotionally exhausting. In Win/Win, people evaluate themselves,

using the criteria that they themselves helped to create up front. And if you set it up correctly,

people can do that. With a Win/Win delegation agreement, even a seven-year-old boy can tell for

himself how well he’s keeping the yard “green and clean.”

My best experiences in teaching university classes have come when I have created a Win/Win

shared understanding of the goal up front. “This is what we’re trying to accomplish. Here are the

basic requirements for an A, B, or C grade. My goal is to help every one of you get an A. Now

you take what we’ve talked about and analyze it and come up with your own understanding of

what you want to accomplish that is unique to you. Then let’s get together and agree on the grade

you want and what you plan to do to get it.”

Management philosopher and consultant Peter Drucker recommends the use of a “manager’s

letter” to capture the essence of performance agreements between managers and their employees.

Following a deep and thorough discussion of expectations, guidelines and resources to make sure

they are in harmony with organizational goals, the employee writes a letter to the manager that

summarizes the discussion and indicates when the next performance plan or review discussion

will take place.

Developing such a Win/Win performance agreement is the central activity of management.

With an agreement in place, employees can manage themselves within the framework of that

agreement. The manager then can serve like a pace car in a race. He can get things going and

then get out of the way. His job from then on is to remove the oil spills.

When a boss becomes the first assistant to each of his subordinates, he can greatly increase his

span of control. Entire levels of administration and overhead can be eliminated. Instead of

supervising six or eight, such a manager can supervise twenty, thirty, fifty, or more.

In Win/Win performance agreements, consequences become the natural or logical result of

performance rather than a reward or punishment arbitrarily handed out by the person in charge.

There are basically four kinds of consequences (rewards and penalties) that management or

parents can control—financial, psychic, opportunity, and responsibility. Financial consequences

include such things as income, stock options, allowances, or penalties. Psychic or psychological

consequences include recognition, approval, respect, credibility, or the loss of them. Unless

people are in a survival mode, psychic compensation is often more motivating than financial

compensation. Opportunity includes training, development, perks, and other benefits.

Responsibility has to do with scope and authority, either of which can be enlarged or diminished.

Win/Win agreements specify consequences in one or more of those areas and the people

involved know it up front. So you don’t play games. Everything is clear from the beginning.

In addition to these logical, personal consequences, it is also important to clearly identify

what the natural organizational consequences are. For example, what will happen if I’m late to

work, if I refuse to cooperate with others, if I don’t develop good Win/Win performance

agreements with my subordinates, if I don’t hold them accountable for desired results, or if I

don’t promote their professional growth and career development?

***

When my daughter turned 16, we set up a Win/Win agreement regarding use of the family car.

We agreed that she would obey the laws of the land and that she would keep the car clean and

properly maintained. We agreed that she would use the car only for responsible purposes and

would serve as a cab driver for her mother and me within reason. And we also agreed that she

would do all her other jobs cheerfully without being reminded. These were our wins.

We also agreed that I would provide some resources—the car, gas, and insurance. And we

agreed that she would meet weekly with me, usually on Sunday afternoon, to evaluate how she

was doing based on our agreement. The consequences were clear. As long as she kept her part of

the agreement, she could use the car. If she didn’t keep it, she would lose the privilege until she

decided to.

This Win/Win agreement set up clear expectations from the beginning on both our parts. It

was a win for her—she got to use the car—and it was certainly a win for Sandra and me. Now

she could handle her own transportation needs and even some of ours. We didn’t have to worry

about maintaining the car or keeping it clean. And we had a built-in accountability, which meant

I didn’t have to hover over her or manage her methods. Her integrity, her conscience, her power

of discernment and our high Emotional Bank Account managed her infinitely better. We didn’t

have to get emotionally strung out, trying to supervise her every move and coming up with

punishments or rewards on the spot if she didn’t do things the way we thought she should. We

had a Win/Win agreement, and it liberated us all.

***

Win/Win agreements are tremendously liberating. But as the product of isolated techniques, they

won’t hold up. Even if you set them up in the beginning, there is no way to maintain them

without personal integrity and a relationship of trust.

A true Win/Win agreement is the product of the paradigm, the character, and the relationships

out of which it grows. In that context, it defines and directs the interdependent interaction for

which it was created.

Systems

Win/Win can only survive in an organization when the systems support it. If you talk

Win/Win but reward Win/Lose, you’ve got a losing program on your hands.

You basically get what you reward. If you want to achieve the goals and reflect the values in

your mission statement, then you need to align the reward system with these goals and values. If

it isn’t aligned systematically, you won’t be walking your talk. You’ll be in the situation of the

manager I mentioned earlier who talked cooperation but practiced competition by creating a

“Race to Bermuda” contest.

***

I worked for several years with a very large real estate organization in the Middle West. My first

experience with this organization was at a large sales rally where over 800 sales associates

gathered for the annual reward program. It was a psych-up cheerleading session, complete with

high school bands and a great deal of frenzied screaming.

Out of the 800 people there, around forty received awards for top performance, such as “Most

Sales,” “Greatest Volume,” “Highest Earned Commissions,” and “Most Listings.” There was a

lot of hoopla—excitement, cheering, applause—around the presentation of these awards. There

was no doubt that those forty people had won; but there was also the underlying awareness that

760 people had lost.

We immediately began educational and organizational development work to align the systems

and structures of the organization toward the Win/Win paradigm. We involved people at a grass

roots level to develop the kinds of systems that would motivate them. We also encouraged them

to cooperate and synergize with each other so that as many as possible could achieve the desired

results of their individually tailored performance agreements.

At the next rally one year later, there were over 1,000 sales associates present, and about 800

of them received awards. There were a few individual winners based on comparisons, but the

program primarily focused on people achieving self-selected performance objectives and on

groups achieving team objectives. There was no need to bring in the high school bands to

artificially contrive the fanfare, the cheerleading, and the psych up. There was tremendous

natural interest and excitement because people could share in each other’s happiness, and teams

of sales associates could experience rewards together, including a vacation trip for the entire

office.

The remarkable thing was that almost all of the 800 who received the awards that year had

produced as much per person in terms of volume and profit as the previous year’s forty. The

spirit of Win/Win had significantly increased the number of golden eggs and had fed the goose

as well, releasing enormous human energy and talent. The resulting synergy was astounding to

almost everyone involved.

***

Competition has its place in the marketplace or against last year’s performance—perhaps even

against another office or individual where there is no particular interdependence, no need to

cooperate. But cooperation in the workplace is as important to free enterprise as competition in

the marketplace. The spirit of Win/Win cannot survive in an environment of competition and

contests.

For Win/Win to work, the systems have to support it. The training system, the planning

system, the communication system, the budgeting system, the information system, the

compensation system—all have to be based on the principle of Win/Win.

***

I did some consulting for another company that wanted training for their people in human

relations. The underlying assumption was that the problem was the people.

The president said, “Go into any store you want and see how they treat you. They’re just order

takers. They don’t understand how to get close to the customers. They don’t know the product,

and they don’t have the knowledge and the skill in the sales process necessary to create a

marriage between the product and the need.”

So I went to the various stores. And he was right. But that still didn’t answer the question in

my mind: What caused the attitude?

“Look, we’re on top of the problem,” the president said. “We have department heads out there

setting a great example. We’ve told them their job is two-thirds selling and one-third

management, and they’re outselling everybody. We just want you to provide some training for

the salespeople.”

Those words raised a red flag. “Let’s get some more data,” I said.

He didn’t like that. He “knew” what the problem was, and he wanted to get on with training.

But I persisted, and within two days we uncovered the real problem. Because of the job

definition and the compensation system, the managers were “creaming.” They’d stand behind the

cash register and cream all the business during the slow times. Half the time in retail is slow and

the other half is frantic. So the managers would give all the dirty jobs—inventory control, stock

work, and cleaning—to the salespeople. And they would stand behind the registers and cream.

That’s why the department heads were tops in sales.

So we changed one system—the compensation system—and the problem was corrected

overnight. We set up a system whereby the managers only made money when their salespeople

made money. We overlapped the needs and goals of the managers with the needs and goals of

the salespeople. And the need for human relations training suddenly disappeared. The key was

developing a true Win/Win reward system.

***

In another instance, I worked with a manager in a company that required formal performance

evaluations. He was frustrated over the evaluation rating he had given a particular manager. “He

deserved a three,” he said, “but I had to give him a one” (which meant superior, promotable).

“What did you give him a one for?” I asked.

“He gets the numbers,” was his reply.

“So why do you think he deserves a three?”

“It’s the way he gets them. He neglects people; he runs over them. He’s a troublemaker.”

“It sounds like he’s totally focused on P—on production. And that’s what he’s being rewarded

for. But what would happen if you talked with him about the problem, if you helped him

understand the importance of PC?”

He said he had done so, with no effect.

“Then what if you set up a Win/Win contract with him where you both agreed that two-thirds

of his compensation would come from P—from the numbers—and the other one-third would

come from PC—how other people perceive him, what kind of leader, people builder, team

builder he is?”

“Now that would get his attention,” he replied.

***

So often the problem is in the system, not in the people. If you put good people in bad systems,

you get bad results. You have to water the flowers you want to grow.

As people really learn to think Win/Win, they can set up the systems to create and reinforce it.

They can transform unnecessarily competitive situations to cooperative ones and can powerfully

impact their effectiveness by building both P and PC.

In business, executives can align their systems to create teams of highly productive people

working together to compete against external standards of performance. In education, teachers

can set up grading systems based on an individual’s performance in the context of agreed upon

criteria and can encourage students to cooperate in productive ways to help each other learn and

achieve. In families, parents can shift the focus from competition with each other to cooperation.

In activities such as bowling, for example, they can keep a family score and try to beat a previous

one. They can set up home responsibilities with Win/Win agreements that eliminate constant

nagging and enable parents to do the things only they can do.

A friend once shared with me a cartoon he’d seen of two children talking to each other. “If

mommy doesn’t get us up soon,” one was saying, “we’re going to be late for school.” These

words brought forcibly to his attention the nature of the problems created when families are not

organized on a responsible Win/Win basis.

Win/Win puts the responsibility on the individual for accomplishing specified results within

clear guidelines and available resources. It makes a person accountable to perform and evaluate

the results and provides consequences as a natural result of performance. And Win/Win systems

create the environment which supports and reinforces the Win/Win performance agreements.

Processes

There’s no way to achieve Win/Win ends with Win/Lose or Lose/Win means. You can’t say,

“You’re going to think Win/Win, whether you like it or not.” So the question becomes how to

arrive at a Win/Win solution.

Roger Fisher and William Ury, two Harvard law professors, have done some outstanding

work in what they call the “principled” approach versus the “positional” approach to bargaining

in their tremendously useful and insightful book, Getting to Yes. Although the words Win/Win

are not used, the spirit and underlying philosophy of the book are in harmony with the Win/Win

approach.

They suggest that the essence of principled negotiation is to separate the person from the

problem, to focus on interests and not on positions, to invent options for mutual gain, and to

insist on objective criteria—some external standard or principle that both parties can buy into.

In my own work with various people and organizations seeking Win/Win solutions, I suggest

that they become involved in the following four-step process:

First, see the problem from the other point of view. Really seek to understand and to give expression to the needs and

concerns of the other party as well as or better than they can themselves.

Second, identify the key issues and concerns (not positions) involved.

Third, determine what results would constitute a fully acceptable solution.

And fourth, identify possible new options to achieve those results.

Habits 5 and 6 deal directly with two of the elements of this process, and we will go into those

in depth in the next two chapters.

But at this juncture, let me point out the highly interrelated nature of the process of Win/Win

with the essence of Win/Win itself. You can only achieve Win/Win solutions with Win/Win

processes—the end and the means are the same.

Win/Win is not a personality technique. It’s a total paradigm of human interaction. It comes

from a character of integrity, maturity, and the Abundance Mentality. It grows out of high-trust

relationships. It is embodied in agreements that effectively clarify and manage expectations as

well as accomplishment. It thrives in supportive systems. And it is achieved through the process

we are now prepared to more fully examine in Habits 5 and 6.