How To Make Annual Performance Reviews Work

The practice of giving Annual Performance Reviews is getting a lot of bad press in recent years. As more companies go the extra mile to make their employees happy by providing perks such as unlimited vacation leave, free gym classes, spa access, free vending machines with healthy options onsite and even stock options, the concept of eliminating this much-dreaded yearned exercise is being seen as another approach to improve personnel management.

However, not everyone believes that cancelling performance ratings is the answer. In fact, one of the world’s biggest companies, Facebook, held a survey that found 87% of their employees wanting to retain performance evaluations.

Annual Performance Reviews are not completely hopeless. There are clear-cut ways to make these effective and relatively painless for both managers and employees alike.

Set clear, measurable goals

Goal setting for each employee is very important whether or not a performance review is being given at the end of the year. The employee has to understand the complete scope of his job role and if there are any additional expectations in terms of his performance.

Goals are different from tasks

Managers should understand that goals are not the same as tasks. A goal is something an employee needs to achieve to contribute to the company’s productivity, while tasks are the daily actions he does to achieve this goal. It is crucial for managers to know the difference so that they are assigning goals and not tasks to their employees. Handing over tasks can lead to micromanaging and wasting valuable company resources. Below is an example of a goal versus a task.

Goal: A sales executive needs to exceed his sales targets by 20%.

Task: A sales executive performs 10 cold calls every day to exceed his target.

Assign an achievable number of goals

Human resource expert Susan Heathfield recommends that an employee’s goals must be limited to four to six key goals that focus on the most important requirements the company has for that employee. Assigning too many goals can distract the employee from prioritising what he is most effective at.  

Explain how the goals will be measured and provide a timeline

It has to be clear to an employee how his performance will be measured and when he is expected to complete his goals.  Will it be through sales figures, client feedback, or solely from his direct supervisor’s assessment?

It is recommended to share the format of the evaluation form so that the employee will have a strong understanding how he needs to work towards a successful assessment. This is a good way to avoid arguments from employees saying that they do not have an idea they are being measured in a particular method.

Perform reviews throughout the year

It’s no question that constant communication between employees and managers creates a healthier work environment, however, the reality is that schedules can be very demanding and a lot of managers cannot really afford regular weekly or monthly feedback sessions. This is why annual reviews are often preferred with the notion that one round of feedback a year is better than no feedback at all.

However, research has found that even annual reviews can cost companies a lot of time and money. So how can these reviews be more efficient?

Set up quarterly reviews as part of the yearend review

One major issue why yearend reviews can be so time consuming  is that managers, and even employees, struggle to remember what happened months back which often leads to a “he-said, she said” scenario.

An efficient compromise would be to set-up quarterly reviews that will cover the goals during that three-month period. This will not be as demanding as monthly reviews but can still guarantee that projects are still fresh, with both employees and managers still remembering relevant details. This will also sidestep the shock factor usually experienced at annual reviews.

The yearend meeting will then act as a summation of the quarterly evaluations and will be easier to manage.

Maintain regular written reports of projects and achievements

Not having a written record of how projects turned out is a contributing factor that makes annual reviews very tedious.  Progress or post-project reports are useful tools that can be reliable references when trying to recall an employee’s performance.

It is not necessary for the manager to create these himself, instead, he should assign this task to individual employees. Each employee can be requested to submit a progress and achievement report at the end of every month. The manager can then include his comments immediately and file these for the quarterly review.

If this is not doable in the short-term, a simple email of either recognition or critique after the end of a project or task can be helpful to ensure that both parties are on the same page.

Use customised evaluation methods

Another factor that will surely fail an annual performance review is using a “one size fits all” method in assessing employees. Unless the manager has thousands of employees doing the exact same task, then this way of evaluation will not help the company nor the employee.

Craft an evaluation form relevant to each employee’s goals

Performance rating forms that score employees from 1 to 5 stars on teamwork, punctuality, or creativity are more suited to pre-school students. This may seem like a fair means to compare employees but for a manager to say that Employee A’s honesty is 4 stars compared to Employee B who can only have 3 stars is something that does not really make a lot of business sense.

Instead of using downloadable templates just for the sake of completing performance reviews, managers should use the goals set at the beginning of the year to measure an employee’s success. Answer relevant questions such as:

  • Did he achieve his goal?
  • What are the actions he took to achieve these goals?
  • What are the reasons that made his goal easy or hard to achieve?

Request employees to submit self-evaluation forms

Another practical way to arrive at a comprehensive employee assessment is by asking the employee to do self-assessment. The manager can request the employee to submit a self-evaluation report based on his goals prior to the meeting.  

This will help the manager determine the employee’s point of view on his performance and it will be easier to provide feedback during the personal discussion.

Make the meeting count

A 2015 TriNet survey has found that 59% of working millennials felt that their managers are frequently not prepared in giving out performance reviews. Having this kind of impression can impact negatively on employee morale and performance, which can even lead to unnecessary resignations. How can this be avoided?

Review pertinent documents, progress reports and emails before the meeting

Before a one-on-one meeting, a manager must take time to review available records pertaining to the employee. Having the employee’s monthly progress reports and evaluation forms handy at this stage will make this process more straightforward because it can help the manager in noting down his feedback and comments.  

It is also recommended for the manager to already anticipate questions that may be raised by the employee and to note down specific situations that caused the evaluation results. Whether positive or negative, concrete examples are always more credible than vague responses.  

Start the meeting by highlighting the positives

Setting a positive note to the meeting by emphasizing an employee’s achievements is more preferable. This way, the employee will feel that the manager recognises his contributions to the company and is not just focusing on his faults. Starting with the negative aspects will only create a defensive atmosphere.

Encourage a dialogue

The manager must make sure that the meeting is not a one-sided monologue. Both parties must share their thoughts honestly but respectfully. The manager must already presume that there is a chance the discussion can become heated so he needs to steer the conversation into a constructive rather than a critical path.

Offer recommendations for improvement and discuss opportunities

Ending the meeting with a negative critique can leave the employee demotivated and less productive in the long-term.

The manager should always highlight employee opportunities rather than weaknesses in ending the performance review meeting. A great idea is to discuss employee and career development programs that will help not only the employee but also the company as a whole. This way, the meeting can end with the employee feeling excited for what’s ahead rather than dwelling on past shortcomings.

Recap not Review

The key to an effective annual performance review is for the process to not be regarded as a “review” but as a “recap” of what has already been set and discussed throughout the year by the manager and the employee.  This can be achieved through the recommended steps of clear goal setting, quarterly evaluations, and use of written data, which can make yearend evaluations a breeze.

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