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How to Make Performance Reviews Work for Your Company

Performance reviews are a fact of life in human resources. Every company does them, and nearly everyone involved dreads them. All too often it seems to the participants that it is a waste of time at best—management has to take time out of “work” to compile a year’s worth of observations and go over them with employees, while employees have to take time out of their day to go in and be confronted with everything they’ve done wrong for the past year, making excuses for whatever sub-par performance they may be ambushed with during the meeting. Sound familiar?

Performance reviews don’t have to be painful, contentious, nor an obstacle to be overcome each year. They can actually be positive and productive, a process that your department may benefit from even if nobody particularly looks forward to it. Below is a blueprint for making performance reviews work to improve your company.

Why Are Performance Reviews Important?

Before understanding how to conduct good performance reviews, it is important to understand why they are important. See below for reasons why.

  • Employees are often more engaged in their jobs and, therefore, perform better when they understand what is expected, how to achieve performance goals, and how their performance is tied to the success of the business. Oftentimes, employees lose sight of their importance in the company, feeling adrift in the corporate structure. Performance reviews can go a long way to re-centering employees and reiterating their value in the overall business scheme.
  • Clear expectations and performance standards, along with achievable goals, will help increase retention and improve morale. Setting goals and establishing expectations help employees realize that they are working towards something, not just punching a timecard.
  • Performance reviews provide a framework in which employers can apply uniform performance standards. Uniformity in standards are of obvious value, but how to establish and maintain them isn’t always obvious. Performance reviews give you a “time out” where you can set them and answer any and all questions about them.
  • Conducting performance reviews allows employers to align the employees' goals with the organization’s business objectives. Employees may have different goals or different understandings of where they should be going in relation to the overall business plan. Performance reviews give managers a chance to discuss and perhaps correct goals that don’t contribute to the business plan.
  • Performance reviews serve as a medium in which employees can receive and give honest feedback. It’s not uncommon for managers and employees to get too busy during the course of normal business to engage in frank feedback. Performance reviews are (or should be) a time to engage in exactly that.
  • Reviews allow employees to see that their employer and supervisor care about their development. It has been shown time and again that employees who believe that the business is interested in their personal and professional development perform better and have a greater loyalty to their employers. Performance reviews are a perfect opportunity to build and reinforce that sense of empathy.

The Goal of a Good Performance Review Process

For most employees, performance reviews are among the most stressful conversations they’ll have at work the entire year. It’s stressful for most managers too, as it is rarely comfortable to feel like you’re standing in judgment of another, especially someone with whom you work.

“What a performance appraisal requires is for one person to stand in judgment of another. Deep down, it’s uncomfortable,” says Dick Grote, author of How to Be Good at Performance Appraisals: Simple, Effective, Done Right. However, this should not be the case. Evaluating an employee’s job performance should consist of more than an annual chat, according to James Baron, the William S. Beinecke Professor of Management at Yale School of Management. Performance management is a process, he says. “Presumably you’re giving a tremendous amount of real-time feedback, and your employees are people you know well. Hopefully your relationship can survive candid feedback.”

So what’s the goal of a good performance review process? “The ideal outcome for a performance appraisal is for managers and employees to have meaningful, reflective conversations together,” said Julie Rieken, the Chief Executive Officer at Trakstar, an evaluation software company. “It's a chance to document the year's accomplishments, journal about accomplishments, understand expectations and celebrate progress.” In other words, it should be a positive experience, not an experience that fosters dread.

Effective Performance Reviews

It’s also important to remember that the performance review process is not simply a once-per-year activity.

“Employee reviews are a process that should happen all year long,” says Paul Falcone, author of 2600 Phrases for Effective Performance Reviews. “How much do you value me as an employee if out of the 2,080 hours I work, and—Lord knows it's more than that—you only give me one review? It's just not enough.”

The following are some dos and don’ts for conducting performance reviews.

Do Set Expectations Early

If your performance review process begins the moment you sit down in the conference room opposite an employee, you’re way behind the curve. Establishing expectations at the beginning of the year is the only way to have meaningful conversations about performance at the end of the year. Hold a performance planning meeting early in order to come up with appropriate performance goals with your employees. Establishing such goals early on ensures that you will have credibility in holding employees to them as the year progresses. With new hires, go over expectations shortly after they sign the employment agreement or the independent contractor agreement.

Do Lay the Groundwork

In the days leading up to the performance review, ask your employees to write down a couple of accomplishments they’re proud of. This helps to refresh memories, and it helps to set the tone of the meeting as positive, not negative. Managers should go over their own notes as well to refresh their memories. Distribute the completed evaluation forms a few hours prior to the meeting—this allows employees to have their first visceral reactions (whether positive or negative) in the relative privacy of their own desk or cubicle, ideally allowing them to leave emotional reactions there instead of bringing them in to the performance review meeting. “When people read someone’s assessment of them, they are going to have all sorts of churning emotions,” says Dick Grote. “Let them have that on their own time, and give them a chance to think about it.”

Do Set a Tone

The received wisdom in the past has been to evaluate using the “compliment sandwich”—compliment, criticism, compliment. However, that sends too mixed a signal to most employees. Make star players aware of their great performance, as it will motivate them to continue in that vein. By the same token, sugarcoating bad news does nothing but a disservice to the low performers. “People are resilient,” says Grote. “As time goes on, that person is not going to get a promotion and not going to get a raise…You’re not doing this person any favors by [avoiding their deficiencies].”

Do Establish Clear, Measurable, Agreed-Upon Objectives

This is a basic, sound management principle. Unclear objectives can never be met, so be absolutely clear regarding what kind of outcome you are seeking. Use objectives that can be easily quantified, like number of closings in a quarter. It’s hard to argue when there is a number involved.

Do List Specific Ways for Employees to Improve

Just like specificity is important in evaluating an employee, it is important in imparting how the employee may improve upon his or her performance. Give specific advice and targeted praise.

Giving vague, general feedback, like “be more proactive” is meaningless. Tell the employee to take the initiative in X situation with Y client instead. Pointless platitudes have run rampant over the corporate world in the past several decades. Don’t use them—they convey nothing more than the fact that you have nothing productive to say.

Platitudes also show the employee that you really haven’t thought much (or don’t really care) about his or her performance and situation. If you give specific feedback about particular instances, you leave no question that you cared enough to do your homework on that employee and his or her performance. That alone will pay dividends of trust and loyalty from your employees.

Do Constructively Coach

After going over the good and the bad, ask the employee for his or her feedback, specifically what his or her feelings may be regarding the information discussed. “In most cases you’re dealing with mature adults and you’ll elicit their honest concerns,” says Grote. A “stop, start, continue” system of feedback is most effective. What is the employee doing now that is not working? What are they doing that is highly effective? What actions should they adopt to be more so? By focusing on behaviors and not dispositions, the personal aspect is removed from the conversation.

Do Compliment for Positive Outcomes

Related to the above, more specificity is better. It is easier for the manager to defend decisions based upon specific instances than general, vague impressions. It also makes it possible for the employee to relate to a compliment or concern when it is tied to a specific action or activity. Specificity is paramount, but vague observations are of little use to either the manager or the employee.

Do Use Objective, Job-Related Data

Just like when establishing criteria for the goals management sets at the beginning of the year, using specific, quantifiable data is the key to relevant, relatable ratings. Files closed, jobs completed, customers served, widgets sold, agreements signed—all of these criteria are easily quantified and hard to argue, so use them as much as possible.

Do Focus on Outcomes over Which the Employee Has Control

This seems obvious, but it isn’t always. There’s not a lot in life more frustrating than being judged on things that are out of our control, so don’t do it in your performance reviews.

It’s not your employee’s fault that there was a massive downturn in the market for widgets last quarter. It’s not your employee’s fault that a key member of his or her team resigned midway through the project. So be sure to not base his or her performance metrics on it.

Nothing will frustrate and alienate an employee and lose management’s credibility faster than blaming people for things over which they had little or no control.

Do Collect Thorough Documentation

We’re all very busy throughout the year, and memories tend to fade or get bumped out of our minds as a result. Therefore, rather than trusting performance to memory, document positives and negatives as they happen throughout the year. In the same way that quantifiable results are much harder to argue, so are events that are well and properly documented.

Do Hold Your Ground

The most important part of performance reviews to employees (and often the most divisive) is ranking and salary. If at all possible, remove those from the performance review meeting. If not possible, do not leave that as the last item of the meeting. Address it right out of the gate and get it over with.

Many companies use a scale of five or ten to rank employees on their overall job performance. Be sure to make employees aware that this ranking is not the same as a grade one would get in school. In other words, scoring a five on a scale of ten is not like getting a grade of C on an A through F grading scale—getting a five out of ten means the employee is meeting the goals. To use a golf analogy, the employee is shooting par, and that’s not a bad thing.

Do Conduct a Formal Mid-Year Evaluation

A year is a long time. People change, events occur, memories cloud—so why hold performance reviews so far apart? Mid-year evaluations force managers to compile the needed information as they go. It also makes the year-end review a little less painless on the part of the employee, since he or she should have some idea of what’s coming based on the mid-year evaluation.

Do Schedule Frequent Meetings with Meaningful Feedback

In addition to the formal yearly performance reviews and the mid-year evaluations, it is also important to have less formal meetings in the interim. It helps to keep the dialog open between manager and employee.

More meetings are probably necessary for new employees and/or those who are lagging in performance, but be sure to avoid meeting too much, as the meetings themselves can be a negative impact upon performance if they are conducted too often.

Don't Have Limited Focus

Performance reviews should encompass the entirety of an employee’s work for the specified time period. Concentrating solely on one area, whether it is the positives, the negatives, the highlights, or recent work, doesn’t help the reviewing management or the reviewed employee.

This may not address positive or negative situations that should be recognized or corrected, respectively. Everything is fair game at a performance review.

Don't Be Biased

It seems obvious, but it needs to be stated that a heavily biased review is worse than useless. A completely unbiased review is impossible, as humans are inherently biased and will pick favorites subconsciously, regardless of all efforts to the contrary.

However, it is possible (and extremely important) to avoid even moderately biased reviews. A biased review will do nothing but alienate the employee being reviewed. Further, once word gets around, morale is at risk.

As so much of an employee’s fortune and future at a company is tied to his or her performance review, the impression of bias has the potential to quickly scuttle even a well-run department. If a manager is even perceived to be too biased for or against an employee to give a relatively impartial review, it is a good idea to consider having another member of management conduct (or at least supervise) the review.

Don't Be Too Strict/Lenient

Management always walks a tightrope between being too strict with employees and being too lenient with them. Performance reviews are an especially important place to ensure that the balance is maintained.

Performance reviews are already stressful enough, so there is no need to nitpick or sharp shoot employees over the past year of their employment. It can quickly become incredibly uncomfortable to be confronted with all the things one has done wrong—most people eventually react in a defensive manner, which changes their attention from accepting of criticism to finding holes in the evidence to exploit.

On the other hand, being too lenient in performance reviews is not productive, either. Although management may be on friendly terms with employees (and hopefully they are), it is important that management be prepared to address issues or violations of company policy as they arise on a daily basis. This rule holds true for performance reviews. Even though the atmosphere in a performance review may be light and happy, it is important to keep the review professional and to discuss issues that merit discussion, even if it’s uncomfortable.