Six Steps to Building a Better Performance-Review Process

14 October, 2008

Not many employees relish being criticized. But performance reviews.evaluating both the positive and negative aspects of an employee's performance.serve many purposes, and are an integral part of every company's HR plan.

Why Conduct Performance Reviews?

The best reason to conduct performance reviews is that they improve communication. Performance reviews enable employees to receive feedback on how well they have been doing their jobs, and to set goals for the next year. At many companies, they also provide a way for employees to assess their managers.

Retention is another related benefit.

"One of the biggest reasons people leave organizations is because of the lack of communication," says Ian Alexander, a vice president of sales and marketing at KnowledgePoint, which sponsors a website, PerformanceReview.com, that helps managers write better reviews faster. "People quit their managers instead of quitting their jobs."

Improved employee performance is another benefit of performance-review programs. A well-designed performance-review program keeps people focused on performance and continuous improvement.

How to Build a Better Performance-Review Program There are six steps your company can take to maximize the benefits it gets from its performance-review program:


Customize the review for each department and job so employees are evaluated by factors that are most relevant to their positions. The more specific the criteria used to evaluate people in specific jobs, the more effective the review will be. Evaluate about five to seven competencies, which might include:

Job knowledge
Leadership
Management ability
Teamwork
Communication
Ethics
Judgment
Problem-solving ability

Consider linking performance to raises or bonuses. Although some companies have been decoupling performance reviews and compensation, linking the two can provide an incentive for employees to improve performance.

Be consistent in format, approach, and ratings throughout the company. For example, if a rating of "five" indicates exemplary performance, a rating of "five" should have the same meaning in every other department in the company.and if it's difficult to earn a "five" in the sales department, it should be equally as difficult to earn a "five" in the IT department.

Be honest. Honest evaluations that note good work as well as poor performance may help deter litigation. A disgruntled employee fired for repeated poor performance may have little ammunition against a company's careful documentation of shoddy work in a wrongful termination case.

Consider 360-degree reviews. Performance reviews can be conducted not only by managers but also by subordinates and peers.
Bryan Robinson, a producer for ABCnews.com, believes in the merit of evaluating supervisors as well as subordinates. "I would favor evaluating bosses or supervisors at least once a year because they need to be evaluated, too. Just like there are a lot of bad employees, there are a lot of bad supervisors," he says.

Before doing this, though, you should determine the costs and benefits of this type of program. While 360-degree reviews can lead to better communication, and a better understanding of which relationships are working in your company and which ones aren't, they can also be very time-consuming and costly.


Emphasize that nothing expressed in a performance review should come as a surprise to anyone involved. In other words, aim to use the performance review as a tool to improve everyday communication between coworkers and between managers and subordinates. As Alexander says, "Performance evaluations are a good vehicle to open lines of communication, but if you're not speaking on a daily basis, the evaluation at the end of the year is not doing anyone any good." - Linda Kim Linda Kim is a writer living in San Francisco.





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