by Rob Hellmann, certified GetFive Coach
Performance reviews are widely used, and yet often controversial. Do they work? What’s the best way to implement them? Don’t unfair grudges or favoritism, or other forms of bias, fatally compromise them? In this article, I’ll share with you a few thoughts on these and other questions.
See an important article about Employee Productivity on page 8 of this issue.
Part 1: How Performance Reviews Can Benefit Your Organization
Why should my organization bother with performance reviews?
Both research and experience show that organizations tend to succeed in what they measure. Performance reviews, when implemented correctly, go a long way toward measuring and improving employee performance (or allocating employee resources correctly). A systematic, well-executed process can also help to protect employers in the case of employee disputes.
But there’s a huge organizational benefit beyond that. Performance reviews can play a crucial role in communicating organizational goals, and engaging employees at all levels in the right tasks that will help the organization reach those goals. I’ve personally seen the tangible benefits in terms of both improved productivity and morale in an organization once a well-thought-out performance review process has been implemented.
What’s the best way to implement performance reviews?
Performance reviews should be applied both consistently and comprehensively. Everyone should be reviewed, from the CEO in public companies (responsible to the Board) on down to entry-level clerk. Reviews should be given regularly at assigned times for the entire organization; typically, this means a formal year-end process, with a mid-year check-in. This kind of consistent, comprehensive approach helps to ensure that organizational goal-alignment benefits happen, and that both the perception and reality of individual bias is reduced.
What should the performance review measure?
Performance reviews need to measure both the what and the how. The “what” is where the money is in terms of organizational alignment. Half of the performance review should focus on whether specific agreed-upon objectives were attained. Each employee’s performance-review objectives should roll up to her or his manager’s objectives, all the way up to the CEO, so that all employee objectives fit together laterally (like pieces of a puzzle) and vertically (like layers in a pyramid).
How an employee achieves an objective is very important for organizations where planning extends beyond the short term, and should account for 50% of the review. Holding employees accountable for how they get things done helps to ensure that individual goals aren’t being achieved at the expense of larger organizational goals. An organization’s “leadership competencies” (behaviors that an organization values) are often used as a guide to measuring this part of performance.
Case in point: I worked with an organization where a recently hired executive excelled at achieving short-term objectives. A year after being hired, business unit revenues were up and costs were down. It became apparent, however, that this person was, in the process, alienating colleagues, duplicating the effort of other departments, and causing a retention problem for productive employees! After a while, those initial, stellar results became quite tarnished. Unfortunately, the organization did not yet have a review process in place to deal with this situation, and things were allowed to fester far too long. Don’t make this mistake in your own review process!
Keep in mind that leadership competencies may need to differ based on the position’s level or type. As an example, for more junior employees leadership competencies might include:
- Demonstrates commitment and knowledge
- Drives improvement
Competencies for more senior employees might include:
- Drives innovation
- Develops effective strategies
Part 2: How to Implement Performance Reviews
When should the performance review process start?
Reviews are most effective when the process begins right after the prior year’s review. Starting 12 months prior means aligning with your employees throughout the year on how they are being measured. Not only is this fairer to the employee (i.e. no surprises), but you are more likely to get the performance results you want.
But how can we start 12 months prior when organizational priorities change frequently?
Yes, priorities change, but there’s a huge benefit to putting a stake in the ground wherever you are, so you can get some traction around measurement and organizational goal alignment. That said, there’s got to be room for reasonable movement of the goalposts. And when priorities inevitably do change, communication about how that impacts performance goals needs to happen.
In addition, have a six-month checkpoint, to help maintain organizational alignment and reduce the likelihood of unpleasant surprises. The review process in month-6 should mirror the final month-12 review process, with two important exceptions: (1) your employee’s performance is not scored, that is, the words are there but the numbers are not, and (2) the six-month review does not become part of the employee’s official performance record.
What kind of goals should be set?
Start with your own goals as a manager, and ensure that your employee’s goals directly support yours (as your goals should support your manager’s). You and your employee should agree on specific, measurable goals. “Improve the efficiency of marketing campaigns” is not specific enough— were they improved a little or a lot, and was the improvement above or below expectations? Much better is “Shorten marketing campaign processing time by 20%.”
In other words, three categories should be considered in goal formation and evaluation for the review, the first two agreed upon with the employee at the start of the year, and the last to be discussed in the review.
- Specific goal (“Shorten marketing campaign processing time…”)
- Criteria for success (“…by 20% or more”)
- Results/accomplishments (to be discussed in the review)
How do I rate performance?
Most organizations use a numerical scale to measure performance. Having a numerical scale helps both the employee and the organization understand the strengths and weaknesses of its most important asset, its employees. The scores ideally should fit together, so that your score as a manager is reflected in the score average of the people working for you.
A scale of 1 to 5 is common, where 1 is “exceptional,” 5 means an “exit strategy” for the employee, and 3 is “met expectations.” A smaller number of organizations use a 1-to-3 scale where 1 is the top 15% of performers, 2 is the middle 70%, and 3 is the bottom 15%. Having only three rankings helps focus attention on the outliers (those to promote and those to exit), at the expense of a more fine-tuned understanding of employee performance and potential. (Organizations using the smaller scale may supplement the performance review process with other processes for talent evaluation in order to keep track of the middle 70%.)
The ratings for individual goals and behaviors roll up to an overall employee score. In the “goals” section of the review, each goal should be rated, and weighted based on an organizational determination of how important that type of goal is. For example, goals might be weighted differently based on whether they are customer-focused or employee-focused. Similarly, each component of the “behaviors” portion of the review (how goals were achieved) should be rated as well.
How do I conduct the actual review?
First, ask the employee to write their own review, including the numerical scores, a couple of weeks before the actual review will occur. This way, you are encouraging the employee to engage in their development and performance achievement—so it’s not just the manager telling the employee. Also, the employee will remind you of achievements throughout the year in their self-appraisal, helping to combat the “what have you done for me lately” bias that can easily creep into annual reviews.
At the same time, ask the employee for three co-workers to be references. Get these names from your subordinates so you preemptively address concerns about negative bias. I’ve seen many situations where making the effort to get this feedback has paid off in a substantially revised (for better or for worse!) perception of performance.
Then, set up a separate time, at least an hour, to go over the review. Make sure you are in a room with a door and you are not disturbed—that is, communicate how seriously you take this, and respect your employee’s privacy!
What should I bring up in the review?
Go over each of the goals step-by-step. Always strive to give specific examples to illustrate your point of view. Don’t say, “You are annoying others in the department.” Instead, say, “I heard from participants in that meeting about how you interrupted several times to bring up off-topic subjects.” Specifics enable people to see the real issue, and reduce the likelihood that your observations will be perceived as unfairly biased. Make sure you use examples to both reinforce good performance and address sub-par issues.
Don’t bring up salary—that should be in a separate conversation. Having the two in one conversation could hurt delivery of the message on performance and goals.
Additional guidelines:
- The write-up should NOT be a laundry list of all the steps taken to achieve goals.
- Instead include: (1) what the goal was; (2) what were the specific parts of the goal that make up success criteria; and (3) what was accomplished. Keep it concise.
- Included criticisms should be actionable; list the specific thing the employee needs to do to improve.
- Talk (giving supporting examples), then listen.
- Be open to making changes, but don’t make them easily—it’s not a negotiation. If something is factually wrong or has been omitted, that should have an impact.
- Discuss next steps, areas that might be in a development plan.
- Have an optional employee response section where employees can comment if they feel it’s necessary.
- Get the employee to sign the review (or sign after any needed changes are made).
- Then you sign it.
Aren’t reviews too subjective or biased to be of any use?
There’s always the potential for bias in a review. Following the principles described in this article can go a long way to reduce that possibility. Other things can be done on an organization-wide basis, including (1) education on how to be alert to potential sources of bias in order to avert them, and (2) analysis of systemic problems within departments to identify problems, for example everyone getting top reviews or poor reviews. Managers should work closely with HR in conducting this type of education and analysis, as well as ensuring that performance reviews meet legal requirements.
A good performance review process can have a huge benefit for both individuals and the organization. I worked with a client who was having trouble with an employee on her staff. He was hired with high expectations, but was not meeting them. This particular client worked in a division that believed in a rigorous performance review process.
The review process forced all parties to focus on what the problem was. Where one organization might have said, “it’s just not working out,” and let the employee go, this leader was able to rely on the review process to take a far more productive approach.
In this case, the review process uncovered the employee’s weakness with data analysis, but strength in more creative areas. The result was the employee shifted to a different department within the same division, and became a star in the organization!
Summary: Do’s and Don’ts
Do:
- Make everyone accountable via the review process.
- Align on goals well before, and continue to align throughout the year.
- Have a mid-year checkpoint.
- Get employee input prior to your review, by having them write their own version.
- Use specific examples to support your review.
- Have actionable items in the review (continuing the good, improving on the not-so-good).
- Have uninterrupted privacy.
Don’t:
- Discuss salary.
- Make your review points too general, with no specific examples.
- Give too much detail—the review should not be too long.
- Make it personal. Focus on facts, observations of behavior or actions, and their implications.
- Have vague phrases with no supporting information. e.g., “Susan is a results-oriented problem solver.” Ok, now give examples.
Implement reviews in your department in an irregular, inconsistent manner.
