If you think performance reviews are a waste of time, you're not alone.
They are time consuming, heavy on the paperwork and sometimes even downright awkward. For employees and managers alike, they add up to a human resources formality with little value.
But that need not be the case, says Sandra Reder, president of human resource consulting firm Vertical Bridge Corporate Consulting in Vancouver. If executed properly, performance reviews can serve as "a road map to get your business where it needs to go," she says.
This is particularly true for small businesses, she says, which typically don't have top-heavy leadership teams to rigorously manage staff. "Trying to develop consistency in how you run your business is contingent on the people who work with you," she says. "And [performance reviews]are a way to set expectations."
Here's how to ensure that performance reviews achieve tangible results - for both employees and employer:
The first is to think of reviews as a two-way conversation. "You want to set that expectation before the review," says Ms. Reder. "The employee needs to know that this is not me talking at you. This is an opportunity for us to discuss your role, both what's working for you and what's not working for you."
Valerie Corbin, president of the human resources firm Full Circle Consulting in Toronto, suggests taking it a step further by involving employees in determining the structure of the review.
"You need to take into account the staff itself and the kind of business you have when you develop your review process," she says. "Ask your employees how they want to be evaluated.
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"You should even ask them who they want to evaluate them," she adds, referring to the growing popularity of the 360-degree review, in which various people review the same employee, such as a manager, a peer and a customer, and the upward appraisal, in which an employee reviews a manager.
A two-way conversation should include employee feedback on both their manager and the company itself, a process that can uncover valuable insights that might otherwise go unnoticed. "Employees are the eyes and ears of your organization," says Ms. Corbin. "Who better than them to tell you what's going on?"
Opening yourself and your business up to feedback, of course, means opening yourself up to criticism, says Ms. Reder. "You have to go in there knowing that you may not hear everything you want to hear as an employer," she says.
But the upside of an open, meaningful conversation far outweighs any downside. "If you have a two-way conversation, it gives the employee the chance to say, 'I'm not doing it the way you want but this is why and this is how you can help me do better.'"
In fact, says Ms. Reder, the primary purpose of a review should be to help employees perform better, not simply to highlight shortcomings and leave it at that. This starts with reviewing previous goals, including any shortcomings, but then moves on to constructive feedback on how to make improvements, including solutions such as more training or support.
But making false promises of training and support is a quick way to turn employees against the exercise. "Not following through is the kiss of death of the performance evaluation," says Ms. Corbin.
"It undermines the entire process," adds Ms. Reder.
Another common mistake employers make is waiting for an annual review to address performance issues. "If someone isn't doing well why wait until once a year to tell them that?" says Ms. Reder. She recommends more frequent reviews - monthly or quarterly - even if they're informal.
And when it comes to telling an employee they aren't doing well, clarity - and tact - goes a long way. "You don't want to say, 'You suck at customer service.' You want to give solid examples and suggest ways for improvement," she says.
Consistency is also a must, adds Ms. Reder. Showing favouritism during reviews by letting one staff member off the hook for poor performance but admonishing another employee for the same action results in inequity in the process. And employees talk, says Ms. Reder. "They know what's going on."
Not doing reviews on time for the entire staff can also tarnish the process in the eyes of employees. It creates a sense that the reviews aren't a priority for the manager, so why should they be for the staff, says Ms. Corbin.
Like many HR experts, she also recommends a simple review process that isn't bogged down with confusing language and too many steps. "Managers sometimes forget that in the end this is really just about talking to your employees," she says.
John DeHart, co-founder of Vancouver-based senior care company Nurse Next Door, favours a more rigorous and structured review process.
Mr. DeHart and his partner, Ken Sim, use a scorecard system for their weekly reviews. "It is a lot of work," he says of their approach. "But we follow it because of how effective it is."
What started as a small business with only a handful of staff in 2001 has grown into a nationwide company, with 40 franchises.
"When we started, we didn't have a formal system [for reviews]" he says. "But we grew really quickly and things got out of hand. The lack of systems came back to haunt us. Performance management fell to the very end of our list of things to do."
Unhappy with the general culture in their workplace, the partners turned to the highly structured scorecards, which Mr. DeHart says both managers and employees like.
"We sort of think employees manage themselves, but they actually don't want to," he says. "They want your active participation and we've found the formality really works for us."
Ms. Reder agrees that employees are usually thirsty for feedback. She has observed that those new to the work force want it most.
"One thing that's very consistent when we look at generation Y is that they are constantly looking for feedback," she says. "They want training and development, and performance reviews facilitate that. Employers need to understand this is a need, not a want."
Some employers stay away from formal reviews because they fear an exorbitant cost. "But the cost is really intellectual capital," says Ms. Corbin. "It's the cost of the thought process and the listening."
Employers can choose to purchase inexpensive software that sets them up with a semi-formal system, which they can customize, or they can go as far as hiring a consultant to develop and help them execute the entire thing, which can cost into the thousands of dollars, says Ms. Reder.
Mr. DeHart maintains that the time, effort and cost are worth it. "It's a high cost in terms of time, therefore a high cost in money," he says. "But I don't look at it that way. Our turnover is incredibly low. If you put the money in now, it will save you more money in the future."