Four Pillars of Successful Performance Reviews
Infamous management expert Peter Drucker said, “what gets measured, gets managed.” For the most part, leaders agree on the importance of performance reviews and high performing individuals crave feedback. So why does it feel so difficult to create an effective performance review process? And how should reviews be designed to ensure they are effective?
Many managers fear performance reviews because they haven’t been taught how to deliver feedback effectively. Others feel the process is cumbersome or just another “box to check” because their feedback doesn’t lead to meaningful outcomes. Employees feel the same way when their efforts aren’t rewarded with growth opportunities or compensation increases. At their worst, reviews can create apathy, anxiety, and excuses for poor performance. At their best, reviews can invigorate and empower employees and managers alike. In order to function at their best, performance reviews need to be consistent, objective, contextual, and impactful.
Consistent - Two of the biggest questions surrounding performance reviews have always been: How often should we do them? and Who needs to complete them? Consistency in cadence is one of the keys to a successful process and reviews must be used across all levels of an organization. Inconsistent performance review practices create space for struggling employees to flounder and frustrate high performers who crave recognition. Effective reviews are standardized and documented across the organization. When the organization has a culture of feedback, formal reviews only need to take place one or twice per year. And by the time they occur, there aren’t any surprises because performance has already been discussed on a regular basis. It’s important to remember that reviews will never take the place of more frequent feedback. Reviews are cyclical and standardized. Feedback is frequent and customized.
An effective performance review should be a conversation between manager and employee. There are two components to a successful review - the self assessment and the manager assessment - which must be completed independently of each other. Ask the same questions and then compare the forms to identify any discrepancies. The completed evaluation form sets the stage for the conversation between employee and manager. This conversation (and the evaluation form) needs to happen between every employee and their manager without exception. Feedback shows that the organization values the employee and every employee deserves an honest reflection on their successes and challenges.
Objective - One of the most important success factors of performance reviews is objectivity. Employees need to feel their performance is measured objectively or the integrity of the process will be compromised. Structure and transparency in the process are key to eliminating subjective reviews. The employee should be completely clear about the key performance indicators used to assess their performance. In fact, they should have buy-in in setting those KPIs to ensure they are within their control and to create a sense of ownership. Good reviews assess a mix of concrete results/ KPIs and observable behaviors, but many organizations struggle to measure soft skills effectively. Begin by defining the behaviors and traits you expect of all employees. Your organizational values are a great place to start. Then identify which skills are particularly important for the specific job the employee holds and abilities they need to develop in the future. These become a standard set of expectations you can leverage across individuals with the same position. Once you have established the successful behaviors, you can apply the same rating scale or assessment tool that you use for the goals and KPIs. When you can objectively measure behaviors as well as concrete results, you remove the mystery and anxiety for employees and empower managers to give honest, direct feedback.
Contextual - As with all things, context is king. Effective reviews need to be set in the appropriate context. Employees should understand why their performance matters in the context of their team and the organization reaching its goals. This ensures alignment with the mission, enhances accountability, and improves morale. An effective review should look backward at past performance and forward to future goals and challenges. When looking backward, take into account any extenuating circumstances (major business or economic factors) that may have impacted someone’s performance. Don’t make excuses for poor performance, but recognize there are some circumstances that are out of our control. When looking forward, make sure to consider the employee’s professional development. What is their path to advancement? What new opportunities are available to them? Employees also need to set S.M.A.R.T goals for the next review period and make sure these goals are set in the context of the organization’s strategic plan. They need to leave the review with clarity on their future with the organization, the path to get there, and be filled with a sense of purpose.
Impactful - Long gone are the days of three percent increases across the board and forced bell curve rankings. Employees need to believe their efforts will be recognized and that there are consequences for poor performance. When structured effectively, performance reviews provide the perfect opportunity to do this. Whether annualized for the entire organization or tied to a specific hire date, the performance review cycle should coincide with compensation and promotion cycles. Make sure the structure allows for merit increases as well as market adjustments (for inflation) and make sure your employees understand the difference. If an employee is underperforming, they should not be eligible for an increase that might be interpreted as performance based. Performance improvement plans (PIPs) are also a useful tool, as long as they are used for growth and not punishment. Use data and KPIs to support employees through the corrective action process. Use the review to communicate promotions or next steps on the path to promotion, so employees understand their work has value. While the purpose of the review is not to reward or punish employees, compensation and advancement are useful tools to reward high performing employees.
When conducted consistently, objectively, and with the right context and impact, reviews are an effective tool to drive morale and encourage employee development. Effective reviews are an important step in building a culture of feedback and accountability. But don’t forget that annual reviews are just one of the many ways for managers to deliver feedback to their employees. Stay tuned for “The Fundamentals of Feedback” in our August newsletter.