Six Steps to Better Performance Appraisals

By Barry Brown

As compensation consultants, we are often called to look at performance management systems that are failing. Our initial investigation typically finds the majority of employees rated above average, forms that are too complex for anyone to understand, ratings that make little sense to the employees, and metrics that have little to do with the actual job performance.

The following steps to better performance appraisals cost little, if anything, to implement. The challenge will be whether or not this change will be an HR initiative or an executive initiative. HR projects are prone to die a long, slow death – because it’s an HR project and the backing of senior management doesn’t go much beyond lip service. An executive initiative on the other hand, usually gets the attention it needs and has a much better chance of success.

So … ask the executive team to “own” this project and have HR as the administrator of the new performance appraisal system. The following steps will help get the issues resolved and the process moving in the right direction.

Step One. Realize that Performance Appraisals are a process, not an event. Good performance management systems involve lots of good one-on-one communications. In short … it’s NOT the form or something we do once a year. Don’t spend so much time worrying about the form. Concentrate on the process. Brief one-on-one communications keep the employee aware of how they’re doing – and removes doubt about their performance rating when it’s time for the formal, written review. The key here is to actually do the quick appraisals, then track them by whatever means works best for the individual supervisor or manager. When it’s time to actually write the review, the evaluator can simply refer to their notes.

Step Two. Consider separating the discussion about performance and pay. If you only have one discussion period, the only thing the employee is listening for is how much the increase will be. If they’re OK with the amount, no problem. If they’re not OK with the amount, the evaluator will usually spend the rest of the time defending their rating or pay increase. Consider having an in-depth discussion on performance and tell the employee up front, “We’re not going to talk about money.” If money is not the subject of discussion, then it will have to be performance. And, with good notes at hand, the evaluator can cite specific reasons for ratings.

A few days (or a couple weeks) following the performance review, schedule another meeting to talk about money. How much of an increase, if any, will there be? What can the employee do to improve their next performance review? What can the employee do to maximize their value to the company, e.g., additional training, certifications, formal education, etc.? More importantly, where does the employee want to be in the next 2-3 years? It’s often surprising to hear that the employee wants to be in a different department doing a completely different kind of work!

Yes, having two discussions with an employee really is worthwhile. You’ll be amazed how much more effective both of these discussions will become.

Step Three. No surprises! If the employee is surprised, shame on the evaluator! Good communications throughout the performance appraisal period are critical. If there are surprises, then the evaluator has not done a good job communicating during the performance period! And, keep in mind that communicating means more than just saying something to someone. There has to be acknowledgement to the communication and ACTION in the desired direction. Otherwise, it’s just a one-way message.

A performance appraisal can be as short as ten seconds or several minutes. The idea is to provide continuous feedback (both for good work and not-so-good work) followed immediately by making a note of the discussion. List the employee name, date, time, the topic, etc. and keep notes in a written log, drop file, or computer file – whatever works best for the evaluator. Good notes are valuable when it comes to writing the performance evaluation and extremely valuable as evidence if things go badly and progress to a legal challenge.

Step Four. Realize that many criteria commonly found on performance appraisals should really be “pass-fail” rather than trying to use a multi-point rating scale. Attitude, attendance, teamwork, adaptability, customer service, cooperation, and similar criteria are behavioral factors and are good candidates for a simple pass-fail rating. Either the employee exhibits good teamwork most of the time or they don’t. Either they typically have a good attitude or they don’t. Either they get to work regularly or they don’t. Trying to distinguish between a “meets” and “exceeds” rating when it comes to behavioral factors is nearly impossible.

Don’t try to set up a four- or five-point evaluation scale on pass-fail items. In the first place, you won’t be able to do a credible job of defining the differences between the ratings. Ideally, all behavioral factors, if used at all, should be pass-fail. A good leader will be coaching the employee on the little things daily – including behavioral items. If you can reduce the number of behavioral factors and focus on specific, job-related factors, the performance appraisal process has a much better chance of success. Evaluators and employees alike will experience less stress and better results.

Step Five. Make sure your standards are current and reasonable. If a manager has rated an employee “exceeds” or “outstanding” on some particular criteria, ask the manager, “What could the employee have done less of or not as well and you would have still been happy with their performance?” If the manager says, “Gee, I’d be disappointed if they didn’t perform at that level all the time,” the manager has just described standard performance. (The fact that you may only have one or two employees in the work unit at this level simply means that the rest of the team is behind the curve and needs some help!)

If the standards have not changed in some time, consider updating them. When a majority of employees are receiving top ratings, it’s typically a good indication that performance standards are out-of-date. This is especially true when performance of the work unit or profitability of the company doesn’t reflect the overall performance ratings. Be sure to communicate the change to employees and prepare them for the change. Just because an employee has “always been rated a 5” or “outstanding” doesn’t mean they will always be the super performer. This is the toughest part of actually implementing new standards, but standards need to change or the organization will stagnate.

Step Six. Develop better, more meaningful criteria. When developing performance standards, focus on the answer to these two questions. First, “How do you know when the employee is doing a good job?” This same question can be asked of the senior executive or the janitor. Create a short bullet list of success factors that will be clear to both the employee and the evaluator.

Second question, “How can we measure it?” If you can’t measure a given factor, consider leaving it out or using a pass-fail rating. The measurement should be clear, objective, and specific to the factor. The fewer subjective issues the evaluator has to deal with, the better. Stick to clear, objective measures that the employee can see or the evaluator can share as often as needed.

Bonus Point. End nearly any discussion with an employee with the most powerful question a manager can ask, “What can I do to help you?” This question, when asked sincerely and acted upon timely, will result in a powerful transformation. This question removes excuses and clears the way for honest, straightforward communication. If asked regularly, the leader may be surprised at some of the responses. And, the employees may be surprised their manager is actually taking an interest!

Barry Brown, SPHR, CCP
President, Effective Resources, Inc.