Annual Performance Reviews: How to get the Most Out of Your Employees

One of the times of the year some managers dread is annual performance review time. Unfortunately, we often do not provide frequent enough informal reviews to our employees and have to pop everything on them one time a year. Do you keep track of the accomplishments of your employees throughout the year? Do you correct "on the spot" or save it for a once-a-year bitch-fest? Do you keep track of your own accomplishments throughout the year?

 

More Frequent Performance Review

One way you can mitigate the Annual performance Review Blues is to provide more frequent performance reviews. When I managed a JC Penney store, I would often provide quarterly quick review sessions with my employees. This provided them an opportunity to see how I, and their upper management view their performance, accomplishments, and problems. Many times these were revealing and difficult sessions, but when annual performance review time came none of what I said was a surprise.

 

These frequent performance reviews can be written or just verbal, but I always kept written notes of them to ease the pain of writing a dozen reviews at the HR mandated performance period.

 

If the Performance Review is a Surprise, You're Not Doing Your Job.

If you walk into a performance meeting with your employee and the employee is shocked by what you are saying – you are not doing your job as a manager. The role of the manager is to ensure tasks get accomplished, while motivating and correcting employees to achieve those task. Employees should have a rough idea of how they are performing throughout the year so when the annual review time comes around they are not shocked from the outcome.

Here is a story told to me by a former manager, Todd, who was not performing very well. He was consistently doing less work than his counterparts, took a long time to accomplish short tasks, and had a tendency to not show up to work on time. My manager had many talks with Todd throughout the year and his performance was not improving. When it came time to perform his annual review, his self-review indicated he was the model employee. Todd gave himself "Excellent(s) and "Exceeds Expectations" on his self review and I wondered why he didn't see his performance problems as clearly as we did.

 

My Manager and I sat down to do his review and he disagreed with almost every point! My manager had performance data to back up the review – he (Todd) had performed a third less work than his counterparts, the time he took to close certain issues was twice his peers, and he didn't rate well on his customer surveys. Though throughout the review, he debated on each point and he believed he had performed an excellent job.

At the time I thought Todd had no clue and this was just another example of how poorly he performed. What I came to realize was that my manager did not do enough throughout the year as manager to correct Todd's issues, to provide the training Todd needed, and to provide enough timely feedback to help Todd improve. She had failed as a manager and needed to correct her own problems in order to improve Todd's performance.

My manager learned from this mistake, and fortunately, over the next year Todd was able to make significant improvements in his performance and become a good employee. Had she not realized her own shortcomings in dealing with Todd, he may have just been swept aside and we would have lost the years of knowledge and experience he brought to the team.

I know that this was not part of the original question, but most reviews boil down to the point of Money. So I will take a moment to deal with this issue now.

Dealing with Performance Base Raises

Corporations often provide a budgeted amount all salary increases must fit into. For example the target budget percentage for the team is 4%- this means that you can give across the board raises of 4% or give some individuals 5% and some 3% or give some nothing, as long as the average is less than or equal to 4%. Salary increases is an area were many managers make significant mistakes. Here is how I break down the different types of managers: the penny-pinching manager, the everyone-is-equal manager, or the old-hand-gets- the raise manager.

We will start with The Penny-Pinching Manager

The first type of manager makes the mistake of making sacrifice of the entire team to beat budget. If this manager is given a 4% budget for increases, they consistently come in well under, at say 2% being a miser with the money and not handing out raises many on the team may deserve. This miser will often have good performers on the team who leave for managers who are more willing to give a raise and end up with a team of poor performers who are pissed at annual raise time. When I was working for a national Retail Chain store (I will not say which one) we had a Penny-Pinching manager, and not three weeks after the annual reviews were given almost every supervisor had left including myself.

Everyone –is-Equal Manager

The second type of manager makes the mistake of not wanting to offend anybody, so he gives and an across-the-board raise to meet budget. This manager, if given a 3% budget for raises, gives everyone 3% regardless of performance. This manager could also shirk responsibility by giving very small difference in pay to different performers, for example, excellent performers get 3.2% while poor performers get 2.8%. this type of manager attracts non-confrontational employees who are happy receiving equal pay with their peers, but lack initiative and often leads to morale problems.

 

Old-Hand-Gets-the Raise Manager

The last type of manager gives pay increases based on the length of time you have been on the team. The longer you have been with him, the better the raise gets. Alternatively, this manager gives higher percentage increased to newer employees (5% of $21,000 a year is less than 5% of 75,000 a year) and provides smaller increases the longer you are on the team. The former encourages new blood to leave, while the latter encourages employees with experience to leave for greener pastures.

 

The Manager with Guts

The right way to handle salary increases is to provide pay increases commiserate with the employee's performance. If the employee performs excellently, give him/her and exceptional raise. If he/she performs poorly, give him/her no or little raise. Being this type of manager takes guts and is often too rare in Corporate America. Also, remember that performance reviews are a year long process. Managers should be communicating with employees in a direct, timely manner.

By being an effective manager and handling performance review time correctly, you can properly motivate and get the most out of your employees.