We've all heard the horror stories: the performance review that ends in sudden firing; the boss who says, "Here's your annual review. Sign here"; the supervisor who keeps canceling the appointment because of "important" meetings; and the latest twist, the performance review by e-mail.
Most midsize to large corporations employ some form of performance management system to help them decide who gets promotions, raises, bonuses or disciplinary actions. If reviews are considered such a good tool to track and reward performance, why do bosses procrastinate scheduling them, and why do employees equate them with a trip to the dentist?
"Managers often see having to schedule performance reviews as a time bandit -- something that takes them away from their normal job and puts them in more of an HR function. They may be uncomfortable with the legalities of what they can and cannot say, or [they may] fear confrontation," said Margot King, CEO of OnSite Resource Solutions, an Atlanta-based recruiting, talent development and project governance company.
Merle Strangway, management trainer and owner of The Learning Edge in Athens, understands the time crunch. When he teaches management courses, he has to give the executives hourly BlackBerry breaks to respond to office business.
"Most managers get 100 to 200 e-mails a day and oversee an enormous scope of projects," he said. "It takes an hour to do a good review, and there's no immediate payoff in performance management. It's not where managers are rewarded."
Yet Strangway speaks for many experts when he says that "the performance review is essential and, if done right, one of the best tools a company has for keeping and developing talent."
He points to a 2005 American Management Association survey that asked employees why they leave companies. The top seven reasons: the job or workplace was not as expected; a mismatch of job and person; too little coaching or feedback; too few growth opportunities; employee felt devalued or unrecognized; stress from overwork and work/life imbalance; and loss of confidence and trust in leaders.
"At least five out of seven of those reasons could be addressed by effective performance reviews and coaching," Strangway said, "but many managers aren't trained for performance management. They can't see the long-term perspective or don't see that their main responsibility is to develop their team. The essential thing a manager does is get work done through his people."
That's done best by identifying someone's strengths and helping him or her overcome deficiencies, which should be the purpose of reviews and ongoing coaching.
Because the traditional form of performance appraisal -- an immediate supervisor tells an employee how he or she is doing and grants compensation accordingly -- leaves room for bias, miscommunication and misunderstandings, alternative systems have been designed to make the process more complete and fair.
Companies today may use some form of peer review system, which lets co-workers play a role in designing the criteria for different jobs and the training needed; self-reviews, which allow workers to assess their own strengths and weaknesses before hearing their supervisor's assessment; and upward assessments (often conducted by outside consultants), in which workers get to rate their manager's performance and suggest improvements.
One of the most comprehensive tools (often used for top executives) is the 360-degree feedback method, in which information is gathered and compiled from someone's manager, peers, direct reports, and even customers and clients.
"There are a lot of tools now that make it fairly easy to rank performance so that the reviewer doesn't have to come up with written opinions. Companies often design their own templates or buy one and adapt it for their needs," King said. "Because the role of the sales department is different than accounting, each unit must measure its people on different criteria and competencies."
What makes for effective performance reviews?
Regardless of the review method chosen, "the essential ingredient in the process is communication. Ideally, there should have been an open dialogue between supervisor and employee all along, so that there are no surprises during an annual review," said Gary Wheeler, president and CEO of Human Resource Business Partner Consultant.
PERFORMANCE REVIEW ADVICE For reviewers
For reviewees
Sources: Merle Strangway and Margot King |
That dialogue should begin by setting a clear set of expectations for each new hire, giving him or her a "blueprint for success" and having touch points along the way to review progress, King said.
"The expectations have to be clearly articulated and realistic," said Brian Cork, founder and managing partner of brian cork Human Capital, an Alpharetta-based recruiting, coaching and human resource consulting firm. "If you're asking a guy to sell a certain number of widgets to meet or exceed quota, you need to know that the company can deliver enough widgets for him to do his job."
Too often, the questions asked and competencies ranked on performance reviews are too generalized, Cork added. He encourages clients to keep performance-based criteria clear and directly tied to company goals. The less subjective, the better.
"The best leaders are the ones who can articulate what the company does, its goals for the immediate future and the plan for getting there. Then you can say to someone: 'Here's how your job fits in. Here's what I need you to do, and, if you do it, then the result is this,' " Cork said.
The reward may take the form of a company-wide bonus based on a percentage of salary if the company makes better-than-projected profits.
"If a manager can say, 'Hey, team, if we can beat these numbers, you earn a 3 percent bonus,' then you get synergy and everyone finding a way to help each other," Cork said. "The more you can tie jobs to company goals, the better everyone does.
"When I coach decision-makers and human resource professionals, I encourage them to keep performance criteria simple. Have the CEO come up with the three most important objectives for a quarter, his direct reports come up with the five things they need to do to make those objectives happen, and managers come up with seven tasks that will make the five things doable."
Communication is the first step in effective performance management, but "follow-through is the most important part of the process," Cork said. "Good leadership is about enabling people to follow through on expectations."
Strangway advocates a coaching approach, in which managers address situations as they arise, instead of waiting for quarterly, semiannual or annual reviews. A manager should help an employee analyze what went wrong and what needs to be done, devise a plan for how the employee can fix it and check back later to see if the plan worked.
If a performance review is a tool used to identify strengths and deficiencies in someone's work, that data should be used to help people improve their skills with additional training or switch to jobs that fit their skills, Cork said. "Making use of the data from a performance review makes the entire process worthwhile," he said.
"In today's climate of talent shortage, performance reviews are also a great tool for succession planning," King said. "It's a place to identify people who may be groomed in the future for additional skills or leadership roles. The companies that win the war to keep good talent will be the ones who reinvest in that talent."