Formal Performance Review Best Practices: Turning a Judging Act into a Coaching Process

The recent Great Places To Work Survey shows that great employers have the following in common.

• Management makes its expectations clear.
• Management provides training and development opportunities to employees.
• Management's actions match its words.
• Employees are given responsibility.

The perfect opportunity for a manager to communicate clear expectations, outline training and development opportunities, and establish goals and related responsibilities is in the performance review process. However, the standard once-a-year performance review is flawed because of the following.

• Managers typically don't like having to prepare the usually lengthy document and spend time to actually conduct the review.
• The review meetings make employees (and sometimes managers) nervous.
• Meeting once a year doesn't build consistent feedback and coaching into the process.
• The review meeting becomes a "data dump," especially for immature or inexperienced managers.
• The whole process tends to be a subjective "judging" act that doesn't clearly define success, expectations, and growth opportunities.

Essentially, two kinds of performance reviews exist: informal and formal reviews. A manager informally reviews someone's work when he or she talks about the person's performance in an unstructured, soon-after-the-fact meeting. While it may be scheduled, it is essentially a review concerning a specific task or how the person handled a particular incident. Formal reviews are scheduled (usually once a year) and are typically done by all managers during the same time period in the year. They are designed to review the person's performance for an entire year and are "official." Typically, a written report is produced and entered into the person's personnel file. This article will focus on best practices and recommendations for conducting and leading formal performance reviews.

Best Practices

While there's no "map" to conducting a perfect formal review, there are many nuggets of advice I can offer to those in management who may not be particularly comfortable with doing them. Some of these follow.

No Surprises

If the employee is surprised by something he or she is told in a formal review, then the manager has not been communicating enough during the year. Look for surprise on the employee's face. Ask whether he or she saw this coming, and if not, perhaps go over some indications that may have served as red flags to unacceptable performance.

Let the Employee Talk First

Because most people judge themselves more harshly than anyone else does, it is a good idea for the manager to ask the employee to give his or her assessment of the job the employee has done over the year. After hearing from the employee, the manager will have an idea of how the employee views his or her performance and only then does the manager have an accurate platform from which he or she can effectively coach and encourage the employee.

Write It Down, and Have the Information Peer-Reviewed

Before the meeting, write down what must be clearly communicated to the employee and the results/outcomes that are expected and desired. Also, have these expectations reviewed by a peer manager or by an HR representative. Many people only "hear" things that are in writing.

When It's Not a Great Review, Let Your Written Outline Sit

Write the poor review and sit on it for at least 2 days before reviewing it again. It's always a good idea to write it and then rewrite it after you have had a few days to sleep on it. While this is good counsel for anyone who is angry or disappointed, it is especially true for a formal performance review. In this setting, the manager is directly affecting the employee's job, career, and often his or her compensation, so the content of this meeting can have a significant impact on the person's sense of confidence and morale.

Do Not Postpone the Meeting

It is very common for managers to postpone formal performance reviews for one of two reasons: either they do not want to do them, or they believe that little loss is experienced if the meeting is postponed. But employees are usually anxious about their reviews and have told loved ones and friends about their upcoming review and therefore are either embarrassed or frustrated when their reviews are delayed.

Acknowledge Unacceptable Performance

Do not let unacceptable performance or behavior go unstated or unwritten. Another common mistake managers make is to not address unwanted behavior or poor performance in this setting. But, if not here, then where?

Take the Lead throughout the Entire Meeting

While you may have the employee talk first, always remember that it is your meeting. The manager sets the agenda and the tone. If the employee needs to complain, explain things, or set the record straight, these things are permissible within a meeting that you are running. You have specific things that you need to communicate and accomplish. While it is important for the employee to feel that he or she has been heard and honored in this meeting, make sure that you walk away from every formal performance review with a high degree of comfort that you accomplished your goals as well.

Do Away with Subjective Grading

Most companies have a review process that entails having the manager assign a subjective grade to various competencies or performance indicators. An example would be assigning a score of 1–5 (5 being the best) for a competency, such as communication. This subjective grading opens the door for disagreement between the manager and the employee and most often lends itself to demotivating the employee. Have you ever heard managers say, "I never give a score of a 5 because there is always room for improvement"? If so, then that manager has just demotivated the employee.

Three-Step Best Practice Performance Review Process

As a way to incorporate all of the aforementioned best practices, the following three-step process is recommended.

Step 1

Have each manager provide the following questions to each of the manager's direct reports and give them about a week or so to write down their answers. These questions should include employee self-evaluation questions, such as:

1. What does success in my position look like to me? (Each manager needs to determine what the success gap is based on the manager's definition of success for the employee.)
2. What are my expectations of my manager and of the company? (Unmet expectations are the source of contempt and lowered morale.)
3. What are the things I do well in this position? (This reveals what the employee views are his or her strengths.)
4. What are the things that keep me from doing my best in this position? (Development opportunities will be discovered.)
5. What does my manager do well? (This indicates how to best manage the employee.)
6. What gets in my manager's way? (This gives insight about the employee's unique motivators and the manager's development opportunities.)

Step 2

Have each manager answer the following questions about each of his or her direct reports. The content from the following four questions is what should be documented in the formal review form. The manager's perspective questions include:

1. What does success in the employee's position look like to me? (Include outcomes/target goals that are observable and measurable. An example of this may be something like "Achieving 100 percent of your sales quota" for a salesperson.)
2. What are my expectations of the employee? (These are the things the employee does on a daily, weekly, monthly, and quarterly basis to achieve the desired outcomes/target goals. This may be driven from the core competencies of each job title, such as communication, sales appointments, teamwork, community involvement, etc. The key here is to use action-oriented language stating what you actually see the employee doing. An example of this may be something like "I envision you going out on five sales appointments with prospects each week.")
3. What are the things I do well in this position? (Include the employee's strengths from the manager's perspective.)
4. What are the things that hamper me in this position? (Include growth and development opportunities—refrain from using the term "weaknesses.")

Step 3

A series of three brief meetings is recommended in the process of communicating the information and ultimately establishing the formal performance review document. After the employee has completed his or her self-evaluation, the manager should sit down with the employee and listen to the results of his or her self-evaluation. The manager is only listening in this meeting, and if the manager talks, it is only to confirm what the employee is trying to communicate—that is, to clarify.

The next meeting, which is recommended to occur about 1 week from the first meeting, is for the manager to communicate his or her answers to the manager's perspective questions to the employee.

The manager then takes the answers from both the employee's self-evaluation and the manager's perspective questions and merges them into one final performance document. Here's an example of a completed performance document.

Click here for an example of a completed performance review.

The next step is to schedule a third meeting with the employee to confirm and sign off on the performance outcomes and expectations for the upcoming year. It is recommended that the overall goals/outcomes or action items include some of those identified by the employee so the employee has ownership of his or her annual goals. This also eliminates the potential for the employees to state that they had no input regarding their annual goals.

Afterward, it is recommended that the manager and employee meet on a quarterly basis to revisit the desired outcomes and process goals to confirm that the employee is on track to achieve these annual goals. This constant communication eliminates "surprises" and provides an opportunity for the manager to coach the employee throughout the year on any process goals or expectations that aren't being met.

Metric for Salary Increases

Implementing the suggestion that there be no subjective scoring process on various performance indicators will likely throw a wrench into the process used by many companies to determine annual salary increases. It is recommended, rather than using a subjective score for various performance indicators, to instead use a percentage of overall outcomes/target goals achieved to drive salary increases. For example, if, based on the manager's definition of success for the employee, there are 10 outcomes/target goals, and the employee achieves 7 of those at the end of the year, then the employee receives a performance grade of 70 percent. You may wish to develop something similar to the following guide to develop salary increases.

Overall Outcomes Achieved/Salary Increase Percentage

85–100% = 3.00% salary increase

70–84% = 2.00% salary increase

55–69% = 1.00% salary increase

0–54% = 0% salary increase

Conclusion

In summary, the best practices and three-step process recommended in this article help change the annual performance review from a systemic judging act to an extrinsic and intrinsic coaching process and help managers clearly define success and communicate their expectations. Additionally, they outline training and development opportunities while reducing anxiety and defensiveness. The process allows the employee to take ownership in his or her annual goals, and it creates a performance document so the manager and employee are working from the same set of expectations.

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Mike Poskey is president of ZERORISK HR, Inc., a Dallas-based human resources risk management firm and exclusive provider of ZERORISK Hiring System. For more information, visit www.ZERORISKHR.com or email Mike at .