Preparing for Annual Employee Reviews

It’s that time of year again, and Janelle Gomez isn’t happy.

"I dread January because of employee reviews," she said. "I love my employees, and I want to reward them with a pay raise, but I hate writing up all the employee reviews. Every year at least one employee gets upset because I forgot his or her big accomplishment. I’ve even had employees quit because they said I didn’t really appreciate them."

Janelle sighs. "I wish there was a way to get employees involved in the process. It’s my company. I want to call the shots, but I don’t want to hurt the feelings of my best employees."

Employee reviews don’t have to be painful. Try one of these efficient methods to review your staff while also promoting healthy two-way communication:

Use a Self-Evaluation Form
A few days prior to the evaluation, ask your employees to fill out a self-evaluation form. Many employers have discovered this takes the unpleasant surprises out of the review process and helps the employee focus on what has happened during the past year and what she or he hopes to accomplish in the coming year. Other benefits of using a self-evaluation form:

The employee will be better able to remember what happened in the past year than you will. Without a self-evaluation, you may forget a significant achievement the employee accomplished many months ago. You don’t want the employee to wonder why she is working so hard when you don’t remember the good work.
The self-evaluation gives you an early warning if the employee believes he deserves a higher rating than you do.
The self-evaluation lets the employee know you want the review to be a give-and-take session and not just a chance for you to talk.

A good self-evaluation form helps your employees to reconstruct the year. It’s even an opportunity to tap into your employees’ expertise in devising the questions for the form. Some examples of general questions to include in a self-evaluation are:

What work did you enjoy the most and why?
What skills and talents helped you achieve success?
What was the most difficult or challenging work you’ve done?
What results make you the most proud?
What existing or new skills would you like to develop in the coming year?
Are there any new projects or other assignments you’d like to do?

Prepare for the Review
Frequently, the perceived unpleasantness of an employee review can make an employer dash through it as quickly as possible. But, you’re not doing your company or your employee any favors by not preparing the review carefully. Take the time before each review to:

Review the employee’s job description. Make sure it accurately summarizes the employee’s responsibilities and what competencies are expected. This can help you determine where your employee is meeting or exceeding expectations and where she is falling short.
Review the performance measures you will use for your assessment. Objectives and goals should have been prepared at the beginning of the previous management period. Let your employee know how you’re assessing the achievement of these objectives, and set objectives and goals for the coming period.
Be sure you’re not going to blindside your employee. A review is not the time to spring surprises on someone. If you have negative feedback for the employee, this should have been communicated prior to the review. No one wants to feel ambushed in a review.
Ask your employees to prepare for the review. (See the self-evaluation criteria listed above.)
Find a quiet space and schedule adequate time for the review. Make sure you schedule the review well in advance. Never "spring" a review on an employee. A quiet place should be a place with no distractions: no phones, no e-mail, no open doors.
Prepare a draft of the performance review as a way to guide the discussion.
Think about what message you want your employee to take from the review. Superior-performing employees should walk away knowing what their opportunities for new responsibilities are and how to maintain their performance level. Satisfactorily-performing employees should be able to identify opportunities for their development and discuss with you how to maintain and improve their performance. With poorly-performing employees, you may want to develop a plan for performance correction and try to gain a solid commitment from them to improve.
Write an agenda for the meeting. Include talking points about how the employee has met expectations and opportunities for the employee’s self-assessment. Here is a suggested agenda:
- Greeting. Start with a warm greeting and some small talk.
- Summary. Summarize overall performance, including the rating you will give.
- Strengths. Compliment the employee on what he has done well.
- Weaknesses. Be specific. Instead of saying "you have a poor attitude," cite specific examples and what can be done to change the bad attitude.
- Feedback. Listen to what the employee has to say about your comments. Don’t argue, but let the employee know that the feedback has not changed your review.
- Salary. Recap the review, announce the new salary and the date on which the salary will be effective.
- Closing. Unless you’re dealing with a poor review, end the session on a positive note, and let the employee know how much the company values her.

Establish a Fair Rating System
Make sure your rating system is fair and easy for employees to understand. Have each rating translate into what the raise in salary will be. Some suggested ratings and salary increases are:

Unsatisfactory. Employee’s work is below the minimum level of performance. The employee must improve immediately to continue employment with your company. Suggested pay raise: 0 percent.
Below Average. Employee’s work meets most of the minimum performance requirements, but the employee must improve. Suggested pay raise: 0 to 1 percent.
Satisfactory. Employee’s work meets minimum performance requirements. If the employee is below average in one or more aspects, this is balanced by an above average or average performance overall. Suggested pay raise: 1 percent to 2 percent.
Good. Employee’s work meets all of your minimum performance requirements, and in some areas, the employee’s performance is superior. Suggested pay raise 3 percent to 4 percent.
Excellent. Employee’s work exceeds all of your minimum performance requirements. The employee’s performance in several areas of the job is exceptional. Suggested pay raise: 4 percent to 6 percent.
Exceptional. Employee exhibits superior work performance in every aspect of the job. In addition, the employee has accomplished one or two projects or goals beyond what was required. Suggested pay raise: 6 percent to 10 percent (and possible promotion).

Consider Alternative Performance Reviews
If your business or employees are unique, you may be able to explore some non-traditional performance reviews that may help you avoid some problems with traditional reviews and increase the level of communication between employees and managers for your company. These alternatives are not for every business but may be worth trying for at least one year. Some of the more commonly-used non-traditional performance reviews include:

Peer reviews. These are designed by an ad hoc committee of your employees who set the goals, benefits and objectives of the program; design a criteria-based performance evaluation; and conduct a pilot program. Peer reviews help the employees understand each other’s work and air grievances in a non-hostile manner. Peer reviews are not usually used to set salaries or disciplinary actions; but they may be used for that if the employees buy into the idea.
Self-reviews. Using the self-evaluation form described in this article, employees rate themselves on a variety of criteria and suggest improvements for their performance. The manager may be left out of the process, but a discussion with a manager should improve the relationship. Most people do not see their own deficiencies as others do, so self-reviews should be used with other methods.
Upward assessments. These allow the employees to review their supervisors. Upward assessments should be used only with supervisors who will receive evaluations from three or more direct reports. Someone other than the supervisor being reviewed compiles the individual reports into one comprehensive report.
360 degree feedback. This is sometimes called a 360 degree review. This is the most time-consuming and costly type of review because it includes everything: self-evaluations, peer reviews and upward assessments. This type of review can bring out every aspect of an employee’s life in the company. Many consultants believe 360 degree feedback has high employee credibility and may have the strongest impact on behavior and performance.

Janelle Gomez is about to give her last employee review, and she’s smiling.

"Finally, I know what to do at employee review time," she says. "I broke down and talked with another small business owner in my networking group. He told me what he did at his company. It was easy. All I had to do was let my employees evaluate themselves before I evaluated them. My employees liked having a part in the process. Even the employees who weren’t doing well came around this year. I might even come to like January."

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