How to Ace Your Annual Performance Review

As another year is coming to an end, most cubicle farms will soon be engaging in the annual ritual of employee performance evaluations. Since I no longer pursue a regular job, this will be my first year since leaving university without going through this customary review process.

“Wow, I’m so excited for my annual performance appraisal!”

Said no one ever

Help, I FIRED – who’s holding me accountable now? How to Ace Your Annual Performance Review …on a life towards or on FIRE?

Why do we review performances and hate it so much at the same time? People want to know where they stand. People want to get confirmation, they want to know what to do better and what to stop. People expect to be held responsible – in good as in bad ways. In a perfect world the system should be fair and give you what you deserve.

Depending on your job, the result of an annual review will impact your compensation, your corporate advancement in short providing you an affirmation of how your efforts are paying off. Providing feedback to employees mainly benefits companies as people are held accountable for achieving targets that have been pre-defined a year earlier and should keep the company on track on a larger scale. This got me thinking.

Boss: “Spends extra hours on the job”

Translation [employeese]: “Miserable home life”

Anyone having been in a corporate culture knows just too well that whatever is being measured and prioritized will somehow be achieved – sometimes with unexpected and unintended losses in other areas. Imagine a customer service center that implements a KPI to “remediate client queries within 5 minutes of picking a call” because last years’ customer feedback might have been something along the line it takes too much time. If this KPI where to be implemented, you could be assured, calls will be ended before reaching the 5 minutes threshold – irrespective of the outcome of the call. This is an example of how well intended but poorly designed KPIs could backfire.

Boss: “Approaches difficult problems with logic”

Translation [employeese]: “Finds someone else to do the job”

In an ideal world, performance reviews improve employee engagement, which in turn improves customer satisfaction, productivity and profitability. You don’t need to be Mr. Spock to come to the logical conclusion that managers who focus on employee strengths will therefore experience the highest levels of engagement and those who don’t share any feedback have the least engaged employees. Being ignored is harming employees’ engagement more than negative feedback.

“Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.”

Richard Branson

However, writing feedback on a blank form is difficult and may take a long time. Besides, it’s not easy to find the right words – what is meaningful or even what is legal!

Imagine your boss would write: “Since last year, this employee has reached rock bottom… and has started to dig.” or “It takes him 2 hours to watch 60 minutes” or stuff like “It’s hard to believe that he beat 1,000,000 other sperm to the egg.”

Employees expect a reality-check, they want to know how they did on the corporate scoreboard. On the other hand, most people believe performance reviews are a complete waste of time anyways. Despite all the measurable parts, in most companies there are very subjective and political forces at play in the background. And if you don’t prepare yourself well enough for these reviews, you’ll be like a turkey on Thanksgiving waiting for the axe to come.

Boss: “Unlimited Potential”

Translation [employeese]: “Will stick with us forever until either fired or retired”

Putting all these thoughts aside, one better prepares well for this meeting. Especially if there is no more boss around to judge. A managers’ role is usually to optimally engage all his (human and capital) resources for maximum impact.

Boss: “Enjoys job”

Translation [employeese]: “Needs more to do”

This is exactly the same for your own private life and personal finances. However, you are not a turkey, sheep or a resource of someone else: You are your own direct report now. You are in charge. Assume command! If you attempt to take charge of your personal finances, YOU got to define how to measure your progression and where you would like to finish up next year, 5 years from now, a decade later, in your life.

As much as we dislike annual reviews, humans – you and me – focus on what we measure. In order to improve and get more successful, we have to learn how to create our own KPIs that are impactful, useful and meaningful at the same time. Financially reverse imagineer your dream life and learn how to set the right KPIs that will guide you on the path of your life towards your dream life and beyond. So define and measure the parameters that are important for and to you and make the measuring stick.

KPIs [Key Performance Indicators] have to be SMART: Specific, Measurable, Achievable, Relevant, Time-bound

 

Financial Imagineer 2017 annual performance review

 

1. Getting your priorities right: Happiness tracker

My review for 2017: In 2017 I dared to quit my job, moved with family of four from Singapore to Switzerland to start our new life on FIRE and attended my first Fincon in Dallas in order to get my blog started. I give this a full mark for 2017.

Boss: “Happy”

Translation [employeese]: “Paid too much”

“Most of us have two lives. The life we live, and the unlived life within us.”

– Steven Pressfield

Note to self: Do something you love today!

 

2. Net worth tracker

This one is fairly simple. Add up all your assets, your accounts, your everything and deduct your liabilities from it. This is your net-worth. Do this exercise on a regular basis. I’ve been doing this with an excel sheet since 1995 [yes, since 22 years now…] on a monthly basis and can confirm it works. If you focus on increasing this number, you’ll find yourself more and more options in life. Believe in your inner Warren Buffett.

“The first $100,000 is a bitch, but you gotta do it.”

– Charlie Munger

In order to make this one more “achievable”, break your big target down. Set a target for this year, a target for two years from now and a five year target that can be somewhat more ambitious. Best is to start your own excel sheet and implement some functions in your excel to simulate different scenarios (e.g. salary developments, saving rates, budget-miss or overshoots, real-estate price and profitability developments) – play around with the calculator and optimize for maximizing your net worth. My current excel spreadsheet reaches 20 years into the future. Simply adjusting little details like school fees, monthly bills, housing expenses or passive income by activating assets will show net-worth and passive income impact over half a lifetime at a fingertip. Tracking net-worth and simulating different forward scenarios has been the single most crucial factor on my path to FIRE.

My review for 2017: Despite giving up my job, surrendering my monthly salary and purely relying on passive income since July while financing an intercontinental move with a family of four, my net-worth still increased 6 digits in 2017. Check.

Boss: “Of great value to the organization”

Translation [employeese]: “Turns in work on time”

 

3. Investment performance tracker

This KPI gets more complex the more assets you hold as different asset classes are not equally correlated to each other and have different risk/ return and liquidity features. How to measure emerging market real estate/ parking lots versus fixed income mutual funds, single equities, active asset allocation funds and overlying option strategies including the respective currency effects. This part can be rather fanciful but doesn’t have to be. Most people in the FIRE community opt for long Vanguard S&P ETF and keeping fees as low as possible which is beating more than 80% of global investors in the long run anyways. As a lifelong investor and early retired banker, investments are my true passion and I plan to revert in more detail about this topic in subsequent posts.

My review for 2017: As per November I’m very satisfied to have reached a performance in excess of 20% on my core investment portfolio of bankable assets which I consider a clear done for 2017.

Boss: “Competent”

Translation [employeese]: “Is still getting work done even if supervisor helps”

 

 

4. Passive income tracker

In early 2017 the big question for us was: “Will our passive income be sufficient to support the family”. As the first couple of months passed on, our key initiative was to review all assets and double-check whether or not they could be “activated”, e.g. if they could be used to produce passive income. The key decision in 2017 and main enabler was to boost our passive income by activating our condo in Singapore as a rental unit.

My review for 2017: In summer 2017 we activated and unlocked the potential of our Asian home while moving to a cheaper residence in Switzerland. This move increased our passive income, reduced some of our unnecessary expenses (mainly location related schooling fees for our two kids) and resulted in a 6 figure passive income delta (difference over 2016) per year. The passive income was now more than sufficient to let go the monthly salary. Mission accomplished.

Boss: “Uses resources well”

Translation [employeese]: “delegates everything”

 

 

5. Budget/ saving tracker

While at the beginning of 2017 our household budget was supported by salary AND passive income, we made a transition to an only passive income fed budget. As the end of 2017 comes closer, I’m very happy that we still manage to save parts of what we consider our passive income despite and especially having a nice life.

In Singapore, we could choose to indulge in cheap foods – hawker center streetfood dinner starting from $3 – as well as super expensive options such as a 2 star michelin dinner for $300 per person. We could basically “arbitrage” within the city state itself and choose which options to go for. Luckily Singapore offers a wide array of options.

Our new home in Switzerland is considered expensive. Nevertheless, our city is conveniently located only 10 minutes by car from either Germany OR France. We are living in the beautiful city of Basel, a tri-national urban area in the heart of Europe. Most certainly, you could find us comparing our grocery options in different supermarket chains in three nations nowadays. We can finish a cross border grocery shopping trip within an hour or could indulge in longer trips taking advantage of each locations specialties, restaurants, price levels and so forth. Having convenient access to tri-national grocery and service shopping in Basel is a paradise for a mustachian inspired arbitrageur.

My review for 2017: On target!

Boss: “Exceptionally well qualified”

Translation [employeese]: “Has committed no major blunders to date”

 

6. Bucket list tracker

In March 2017 we went to a two week family campervan trip to New Zealand, we covered both islands and saw the nice hot springs at Hanmer Springs, checked the Franz Josef and Fox glaciers at the West coast, visited Wanaka, saw Mt. Cook, did whale watching at Kaikoura, crossed with the Interislander to the North Island and went on the see the Waitomo glowworm caves, visited the Rotorua Maori village and Pohutu Geyser. It was marvellous and the kids are still telling stories of this trip.

In May my wife and I celebrated our 10 year wedding anniversary and left for a trip to Hong Kong, Tokyo and Kyoto mainly financed with travel miles. To kick-off this trip we indulged in flying Singapore Airlines Suites class together for a mere $50 and some travel-hacking funded award miles. On this trip we planned what to do in the years to come and once we returned home, we were ready to let go of my job.

My review for 2017: Very satisfied.

Boss: “Uses time effectively”

Translation [employeese]: “Clock watcher”

 

7. Check progress against five year plan

Together with my wife, we have planned our life in 5 intervals ever since we married in 2007. This year marked our 10 year anniversary and we have achieved all our big hairy ambitious goals for the past two 5 year plans. We have been able to safe sufficient, invested enough and well, got two kids on the way and ignited our new life on FIRE after our 10 year honeymoon trip in 2017.

My review for 2017: It was an exciting journey and thanks so much for my patient wife to hang along. If you’d like to have an extraordinary life, you’d have to give up your ordinary one. We have planned our next 5 years till 2022 and we are ready to roll.

Boss: “Deserves promotion”

Translation [employeese]: “Create new title to make him/her feel appreciated”

 

Conclusion:

Plan and track your progress towards your dreams. Break down your ambitions to achievable, measurable goals. Measure up. Be accountable. Be responsible. Have patience. Have grit. Keep going. Think big and go for it! You’ll get there.

First year end review without a job accomplished.

Have a rich day!

Yours, Financial Imagineer

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