Transforming the annual review - Human Resources - performance appraisals

Performance reviews are difficult. The reviewer spends hours trying to condense a year's worth of work into words, only to have the employee focus completely on the money. Meanwhile, instead of working to meet goals, the employee has spent hours worrying about a possible negative report and a small salary increase.

It's no wonder that this management task is often behind schedule. And that the review process often demotivates an employee's performance.

OUT WITH THE OLD

Consider the hallmarks of a traditional performance review:

* Manager writes entire review and typically reviews employee performance on a numeric scale;

* Goals, both performance and developmental, are set at end of review session;

* Review sessions are the main communication on performance and focus on shortcomings; and

* Assumes employees need to be managed and motivated to excel.

ENTER A NEW SYSTEM

A performance management system departs from the traditional review by creating the means for employees and managers to work together all year long to create success.

Under a performance management system you assume that your employees need to be led--not managed. Your employees want to do a great job and just need your guidance and permission, so your role as their manager transforms to that of a coach.

Given the assumption that your employees want to be successful, you've established that the responsibility and motivation for performance lies with the employee. You become accountable for appropriate communication of goals and feedback.

FOCUSING ON GOALS

Before you can communicate about goals, you must set them. A performance management system is designed so that goals are aligned with your organization's strategy and annual objectives.

If your organization defines leadership as taking initiative, being accountable for outcomes and aligning individual goals to the organization, then this becomes the basis for your expectations of your employees' leadership contributions.

If you have an organization-wide document with standards defined, you don't need to write these out as individual goals for each employee. However, you do need to make sure that each employee is fully aware of the organization's strategy and objectives. And if employee performance falls outside the norm, you need to document these exceptions along with specific standards for "how," (also called competencies), in a separate document.

THE METRICS

There is always concern that you and your employees will define success differently. Under a performance management system, the middle of a bell curve is meeting expectations, with occasional flashes of brilliance. So, the middle, instead of being a "C" is an "A." The ends of the curve are your at-risk populations-under- performing or under--challenged.

IT'S ALL ABOUT FEEDBACK

Nothing should be a surprise when the review rolls around. So, by defining success as meeting expectations with occasional flashes of brilliance, your job as a manager becomes easier as long as communication happens along the way.

Rather than waiting until you sit down across from each other at the annual review, managers and employees must communicate about goals and outcomes in an authentic manner--all year long.

For example, if your employee needs to finish a report earlier each month, you must tell the employee the first time it's late rather than waiting to bring it up as a weakness on a review. Authentic communication allows you to work closer to the truth and expectations. If your employee is not working toward expectations, your authentic communication creates a short road out the door.

In addition to your ongoing feedback and communication, your employees should update you quarterly on their goals. The level of formality for this update can range from a 30-minute meeting to a conversation over breakfast, with notes for the file from the employee.

IT IS, PARTLY, ABOUT THE MONEY

Now that you know the standards for meeting expectations and give behavioral feedback on performance on a regular, informal basis, then what about the annual review? Is it still necessary? Yes.

Because you've really addressed all of the feedback issues prior to the annual review, this pay-for-performance discussion becomes less time consuming and less stressful for both you and your employees. It's easily broken down into the following five steps.

Initial Information gathering: Prior to the meeting, your employee gathers goals and goal attainment information. Then, you sit down, have a conversation and ask: What were your goals? How did you do? Where were you successful? What barriers did you encounter? How did you overcome them? What changed during the review period?

As a manager, your role here is to listen and take notes. If your employee's recollection of standards, memories of events or analysis of data differ from yours, now is the time to discuss it.

Documenting the conversation: Formerly known as writing the review, after your discussion, write everything down. With time and practice, you may even get your employees to do this.

Determine compensation: Match the performance to your compensation structure and recommend the appropriate raise.

Approval: Work within your organization to get the raise and overall document reviewed and approved. If you have at-risk employees, you also must have a plan ready for dealing with the risk when you go into your approval meetings.

Compensation discussion: Review the document and raise with your employee. Since you already have had the performance discussion, they will be focused on the outcome--the money. Use this meeting to work together and set new goals for the new year.

CONSIDER THE BENEFITS

To recap, a performance management system:

* Aligns individual performance with the organization's strategic objectives, so when employees reach their goals, so does the organization;

* Gives employees a larger context for their jobs, allowing them to see the contribution their work makes to the whole;

* Encourages better decision making and time management since your employees know this larger context;

* Helps attract people with entrepreneurial focus, and lose those who need to be told what to do;

* Creates an annual review that reflects on your employees' successes and accomplishments, and sets goals for the future;

* Improves your ability to give feedback while your employees seek feedback because the focus is on individual achievement; and

* Builds success because each individual is more successful.

Implementing a performance management system will not happen overnight, and most likely will require some change in your organization's culture. But, it can be done, and the rewards far outweigh the struggle to get there.

Mary Richardson, M.A., is a senior consultant at Herrerias & Associates specializing in human resources and organization development. She recently presented a workshop on Performance Management to CalCPA 's San Francisco Chapter. You can reach Richardson at mary@herrerias.com.

COPYRIGHT 2002 California Society of Certified Public Accountants
COPYRIGHT 2002 Gale Group