Companies like Accenture, Microsoft, and General Electric are ditching annual performance reviews for more frequent feedback sessions, but for many others the practice is a way to end the year with a keen plan for the future.
The key to doing it successfully is not confusing performance evaluation with performance management, says Christine M. Riordan, president of Adelphi University and leadership development expert.
“Typically, organizations ask that performance be formally evaluated once a year,” she says. “A performance evaluation form commonly assesses the accomplishments, strengths, weaknesses, and development needs of an employee.”
Performance management, on the other hand, is a continuous process of assessing and developing the performance of an individual to align with the strategic goals of an organization, Riordan continues. “It is a constant process of discussion on progress towards goals and how the employee is performing,” she says.
A year-end review, then, should be different than periodic check-ins. Sit down with your employees, and make the most of the meeting by avoiding these five common mistakes:
One of the most common mistakes is evaluating personal traits, such as leadership, motivation, conscientiousness, and attitude, according to the American Management Association (AMA).
The problem with traits is that they are internal and subjective— almost impossible to evaluate on a fair basis, according to the AMA.
Instead, year-end reviews should focus on behaviors and results. Behaviors are actions that you can observe directly, such as completing tasks. Results are also observable, such as achieving a sales quota or increasing revenue by a certain percentage.
Performance evaluation can be uncomfortable for most people -– both for those giving it and those receiving it, says Riordan. “Because of the discomfort, when there is a performance problem, managers will often avoid difficult conversations or be too vague in the evaluation,” she says. “Because managers often don’t want people to feel bad, they may rate everyone the same or just use the more favorable ratings on the scale.”
Giving everyone the same score or only favorable scores can become a norm and create problems for the organization in terms of differentiating among employees for raises or dealing with performance problems particularly when an employee has been rated average or higher, says Riordan. Avoid this mistake by being firm on your ratings, understanding that the foundation of your company depends on it.
The secret to effective year-end reviews is laying the groundwork throughout the year, says Elissa Tucker, principal human capital management research lead at American Productivity and Quality Center (APQC), a nonprofit human resources research organization.
This includes clearly defining performance goals, measures, and rating criteria; scheduling frequent check-in meetings to update performance goals, discuss progress, and address challenges; collecting feedback and performance examples on an ongoing basis; and having informal conversations with employees daily or as often as possible to recognize small accomplishments and open the door for low-stakes questions and coaching.
APQC’s 2016 People Challenges at Work Poll found that the top-two challenges people have with their managers are:
- Does not share enough information
- Does not provide enough direction
“These findings show that managers would benefit from making communication a New Year’s resolution,” says Tucker. “The end-of-year performance review is the perfect time for managers to get a jump start. Then, they can follow through by having regular – weekly, monthly, or quarterly – meetings with each employee.”
The annual review should not be a shock, adds Bonnie Hagemann, CEO of Executive Development Associates, a talent management and research firm. “It should be a documentation of an ongoing conversation that has been happening between the manager and the employee all year. If the time ever comes that a manager needs to fire an employee, the employee should not be surprised because he or she had many opportunities and support to get the situation turned around.”
When providing feedback, it is helpful for a manager to think and act like a coach, says MaryAnne Hyland, professor of human resource management at the Robert B. Willumstad School of Business in Long Island, N.Y.
“The ultimate goal of the performance review is to improve employee performance, and managers are more likely to get the results they are hoping for by focusing on how to improve, rather than being punitive,” she says. “While many employees do not like constructive feedback, giving specific recommendations on how they could improve their performance is likely to be better received than more general comments about needing to improve.”
Focus on the behavior, not the person, adds Hyland adds. “For example, it is better to say, ‘The accuracy of the line items on your budget proposals needs improvement,’ rather than, ‘You are bad at budget proposals,’” she says.
If employee have performed poorly, good managers investigate. People don’t perform poorly without a reason, according to the AMA. There are always causes, and it’s a manager’s job to make finding those reasons part of the review process.
The performance review process should be transparent and well documented. A study done at the London School of Economics and Political Science published in the Spring 2016 issue of Academy of Management Discoveries found a good degree of consistency in the weight individual judges assigned to different factors from one appraisal to another. When asked to rank factors by importance, however, answers often varied, with most mangers having difficulty explaining their approach to others.
“Although participants adopted a consistent judgment policy across different performance-appraisal situations, they showed little insight into their own judgment policy,” write study coauthors Hayley German of the London School of Economics and Political Science, Marion Fortin of the University of Toulouse and Daniel Read of Warwick Business School. “The fact that experienced administrators differ sharply in how they evaluate the fairness of the same appraisal suggests why this can be a potential minefield for employers. On the basis of our findings, it comes as no great surprise that annual performance appraisals have been losing favor.”