Many managers and employees agree that the traditional annual performance review is about as enjoyable as a root canal. It doesn’t have to be that way, though. Business leaders have begun asking smart questions about the age-old practice, like, “How is it helping our workers step up their game” and “How might we do things better?”
According to Gallup, just 14% of employees strongly agree that these yearly reviews – formally scheduled conversations about their performance, development and growth – help them do better work.
Reinventing Performance Reviews
In recent years, organizations have started to rethink how they conduct employee performance appraisals, which most agree are necessary tools for managing talent.
Since change is so rapid in the modern workplace, some leaders have decided that reviews conducted on a semi-annual or quarterly basis may be more effective than those done just once a year. At the same time – and separate from these formal reviews – there has been a trend toward more informal and more frequent, year-round “check-in” sessions with employees to regularly align their personal development with the company’s goals.
While some managers have also scrapped the time-honored practice of including salary discussions in the formal review, many believe the format offers the perfect time for a healthy, productive conversation around the link between compensation and performance. Manager and employee alike should prepare in advance for these once-a-year discussions.
Employers, for example, should be prepared to explain if and why a raise is warranted or not. Whether a pay increase is a merit-based or a simple pay raise based on tenure or a cost-of-living adjustment, an annual salary comparison and review could make a difference between retaining top performers or eventually losing them to a competitive offer. As talent supply and employment conditions change, so do compensation demands.
An employee who believes they deserve a pay raise, or even a promotion, should determine the value or compensation for their job title, in their local job market, by conducting research with a trusted source of unbiased salary data. Employees “need to have a solid foundation for the request and realistic expectations,” says Diane Domeyer, executive director of The Creative Group. “Study salary trends for professionals in your geographic area and industry with similar job titles, qualifications and responsibilities,” to prepare for a performance review.
In crafting your organization’s approach to employee performance appraisals, here are four key points to consider:
1. Be transparent about the process. Regardless of the frequency you choose, inform your employees. Dick Grote, author of “How to Be Good at Performance Appraisals,” recommends talking with each direct report at the beginning of the year about their personal goals, as well as the company’s expectations. Erika Rasure, an assistant professor of business and financial services at Maryville University, told Business News Daily, “Don’t catch your people off-guard in a performance review. Be clear in writing and sending calendar invitations and setting expectations and the tone for the meeting.”
2. Collect data and feedback beforehand. Prior to the review, set time aside to evaluate the employee’s work in comparison to their job requirements and ask them to give you a list of their top accomplishments. Solicit feedback from co-workers and analyze data from any applicable employment agreements or employee engagement surveys. Give yourself enough time so that you can provide a copy of your appraisal to the employee to assess before your official meeting.
3. Encourage the employee’s progress with an honest assessment. During the actual one-on-one performance evaluation in a private setting, be straightforward with the employee. Speak positively about what they’ve done well. It’s also important not to gloss over areas that need improvement. Listen closely to the employee’s feedback and provide specific advice, just as a good team coach and motivator would. The give-and-take should explore what’s working, what’s not and what concrete steps can be taken to get things on track.
4. Decide the helpfulness of numerical ratings. After carefully considering topics like the employee’s performance, level of engagement and career development plans, managers are often pressed to rate them on a scale of 1 to 4 or 5. These numbers denote a range of grades, from “Exceeding Expectations” to “Far Below Expectations,” that can be used for the meeting’s compensation component. Some organizations have waived these school-like "grades” during the coronavirus pandemic, though, opting instead for a more flexible narrative assessment due to the challenging times.
Formal performance reviews represent a great opportunity to bolster your top performers and redirect those who may need additional guidance. At the end of the day, after all, you want your employee to leave the meeting excited and motivated about their prospects for growth with the organization.