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A great team is partly about hiring the right people. But it’s also about how you develop the people working for you currently.
Performance reviews are a key part of developing a great team. Done right, performance reviews can inspire your people to achieve greater heights, get them focused on business goals, and bring out the creativity in them. Performance reviews can be one of your most powerful business growth tools.
If you currently offer your staff formal performance reviews, give yourself a gold star.
But what if you’re one of those business owners not doing performance reviews today? Here’s some good news: performance reviews are really not that hard to implement. Below I’ve outlined a practical process for doing performance reviews like a pro:
Step 1: Self-Assessments
I strongly suggest as the first step in the performance review process that you ask your employees to conduct a self-assessment. This simply means that before sitting down for the official performance review session, the employee fills out the performance review form assessing his or her own performance. Ask for the completed form to be sent to you at least one day in advance of the appointed discussion time.
That way, you can use the self-review as a launching point for the performance discussion.
The self-assessment changes the dynamic of the performance review. It makes it more of a two-way discussion – and less like a boss sitting there as judge and jury about to pass sentence.
The self-assessment can be as much of a revelation for you, as it is for employees. It’s amazing what you can learn:
- You see your employees’ performance through their eyes. You may come to recognize that they performed better under more challenging conditions than you appreciated.
- The self-assessment gets them to open up. Employees are motivated by more than just how much they get paid. Challenging work assignments and recognition can mean as much or more than money. Part of your job as manager is to figure out what motivates them.
- In my experience, employees are painfully aware of where they dropped the ball during the year. They may volunteer areas where they know they need improvement.
- If there’s a disconnect between where you feel the employee should be focusing their attention, and what they think their job is all about, the self-assessment brings that to the surface, too. Then you can discuss it and get in sync.
Step 2: It’s About the Discussion, Not the Form
Focus more on the performance discussion (feedback, coaching and goal setting) and less on the form itself. For that reason, I favor using short, simple review forms.
I spent a time in my career as head of Human Resources. I’ve seen good and bad performance appraisal programs. One had a review form that took several hours for the manager to fill out (no kidding!). Another required a complex 360-degree feedback process involving peers and subordinates all completing review forms.
For most small businesses that’s overkill. If you make a process too complex and time-consuming, managers tend to procrastinate. Reviews don’t get done timely. A simple form and straight-forward process gets the job done in a small firm. For simple forms, try this Microsoft Word template; or this form; or this one from WorkZ. Also, Success Factors has an online performance review system geared for small businesses.
Approach the performance discussion with honesty, empathy and calmness. Focus 50% on the past, and 50% on the future. What I mean is, spend half the time reviewing past performance, what was done well, and what could have been done better. Some managers like to use a ratio of 3 – 5 positive reinforcing comments, to one constructive criticism. That’s up to you – just don’t make it all negative (unless there is a serious performance problem). You want your employee feeling fired up after the review, not beaten into the ground.
Then spend the other half of your time discussing the coming year, career aspirations, strengths to build on, and new responsibilities they would welcome taking on. Together set a few goals for the employee. Align the employee’s goals with the business’s goals. Example: if one of your business goals is to increase sales of a particular product, then set a goal around that product for the employee (assuming it falls within their job description).
This forward-looking part is where the power of performance reviews comes in. As one performance management expert notes, “… the payoff in performance appraisals comes not from focusing on weaknesses, but from building on strengths.”
Step 3: Finalizing the Form and Communicating a Pay Increase
At the end of the performance review discussion, tell the employee:
(1) how much of a pay increase you will be granting, and
(2) when it goes into effect.
If you granted a promotion, communicate that also.
There are different schools of thought about pay increases and when to communicate them. I think pay increases should be directly tied to performance. Therefore, it’s natural to discuss a pay increase at the end of the performance review.
Bring up pay at the very end, or even a day or two later. Don’t bring it up earlier, or you will derail the coaching discussion.
After a performance discussion I feel it’s important that employees have a completed formal review form from me. Ask them to sign it. The original signed form goes into their employment file. (Also, should you ever have a need to demonstrate that you gave advance warning of performance issues, this signed form can be crucial.)
The Subpar Performer
Hopefully you are not in a situation where the completed annual review shows unsatisfactory performance. You shouldn’t wait for an annual review to tackle subpar performance. That should be addressed much sooner.
But if you must deal with subpar performance in an annual review, instead of a pay increase, the written review should include a list of remedial actions for the employee to take. Make the points as specific as possible. You’ll want to schedule another discussion no more than 90 days out to evaluate remedial progress.