How to Institute an Employee Review Process
Before you start marching employees into the corner office to conduct time-consuming and sometimes contentious employee performance reviews, you should conduct another review -- figuring out exactly what your goal is in establishing an employee review process for the business.
In many ways, performance reviews begin with the employer's mindset. Is your intent to do this annually or continuously? Do you view performance reviews as an obligation or a chance to spur employees to greater performance? Are performance reviews scheduled only after you have problems with an employee or someone asks for a raise, or are they penciled in on your calendar every month or every year?
"If you view this as merely an annual process, you'll put everything off until the last moment," says Will Helmlinger, a former human resources executive for Saber Software EDS, and HP who now owns a consulting business, Your Hire Authority, based in Portland, Oregon. "However, when you think of performance reviews as an integral part of your business, you think of reviews on a more regular basis. Verbal reviews should begin early shortly after the hire date and should continue frequently until you memorialize your thoughts into your written document."
The following guide details why you should institute an employee review process, how to develop a successful review process, and how to avoid pitfalls in conducting employee reviews.
Instituting an Employee Review Process: Benefits of an Employee Review Process
Not every employer and employee has to think of performance reviews with the same dread as an appointment with the dentist. It doesn't have to be confrontational. It doesn't have to be unpleasant. It doesn't have to be viewed as merely a way to avoid any potential litigation from dissatisfied or dismissed employees.
There are actually business benefits to be gained from instituting a program of evaluating employees on a regular basis. The performance review process is an opportunity for supervisors and staff members to take time out from the daily business grind to discuss longer-range issues and plans. This is beneficial for the business because it allows leaders to spell out their expectations from employees, establish goals, and hear feedback from the rank and file. This opens up communication between employees and managers. At the same time, managers can use performance reviews to help further business goals -- for example, by motivating employees to try to increase productivity or sales.
Traditionally, many companies have employed employee reviews to reinforce good work performance while, at the same time, seeking to better the work of under performers. The underlying basis also provides a foundation for documenting measures on which to base pay increases, promotions, or punitive actions -- such as documenting grounds for dismissal.
But, in order to realize benefits, it's important for employers to get in the right mindset and understand their goals for the employee review process. The most common use of the performance review process is to document past performance. However, an emerging trend is an employee development review. The employee development review looks to the future. These reviews typically include information about past performance but have a heavier emphasis on career development, specific job and personal goals, and areas of personal growth.
"Some HR administrators view the process as a way to make sure we have ourselves covered in the case of litigation," Helmlinger says. "My objective when I do a review is to state what a person has accomplished against a set of objectives and then make it a forward-looking process. What is it that we need to accomplish from a company standpoint? What are your own personal objectives? And incorporate a career-development component -- what do you want to do next?"
Business leaders also need to determine what type of review process to implement. There are different types of employee reviews, including the following:
- Top-down review. This performance review is conducted by someone above the employee in rank at the company -- this could mean a direct supervisor, manager of a business unit, executive, or all of the above. Putting a direct supervisor in charge is often the most effective way to assess an employee's performance and provide valuable feedback as to how they can improve. In larger organizations, these reviews are sometimes filled out by line supervisors and then conducted by human resources personnel. Either way, the review often culminates in a discussion regarding achievement of pre-determined goals.
- Peer review. In this case, employees are evaluated by co-workers. The benefit of this type of review is that peers at the same level as the employee understand the challenges better than someone judging performance from the top down. The risk is that rivalries can alter performance reviews, if jealous co-workers review each other more critically, particularly if they are in competition for promotion or pay raises.
- 360-degree review. Literally, in a 360-degree review, employees are evaluated from all angles -- above, below, and sideways. That means supervisors, peers, subordinates, and even sometimes customers put in their two cents about the employee. These types of reviews are often spear-headed by the human resources department and those giving input are usually allowed to remain anonymous. Critics of 360-degree reviews say that anonymity can pave the way for excessive -- and sometimes vindictive -- criticism and ultimately leave the employee who is the subject of the review feeling under attack.
- Self assessment. The employee self-assessment can be used in conjunction with any of the other review processes listed above. Some companies have found this very useful in that it can help cue managers as to areas in which an employee can improve and may benefit from training. It can also allow the employee to undertake some constructive criticism and be more willing to receive feedback from a manager. Employees, in fact, can sometimes be harder on themselves than their managers are. But the downside is that an employee's view of their performance sometimes might diverge greatly from a manager's view, which presents challenges in the review process.
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Instituting an Employee Review Process: Develop a Successful Employee Review Process
Once you decide to establish an employee review process there are several decisions you need to make along the way to make it a successful endeavor. You'll have to decide who will be subject to reviews. Helmlinger recommends that reviews be conducted at all levels within your organization. "This sends a clear message that performance reviews are important and favoritism doesn't exist in your company," he says.
Second, you need to decide whether to use a performance review format from an off-the-shelf software program, from a Web-based application provider, or a customized format solely for your organization. This decision may depend on the size of your business and your resources. Software packages and Web-hosted applications offer templates for various employee reviews and can help step you through the process. But if you have an office with only a handful of employees, you may just want to find a sample template and customize it for your business.
It's important to establish and communicate to both managers and employees the performance rating criteria and expectations at the outset of the performance year -- the rules of engagement, so to speak. "That's the most important thing you can do at the beginning of the performance cycle so that you are able to objectively measure an employee's performance," says Paul Rowson, managing director at World at Work, a global human resources association that focuses on compensation, benefits, work-life, and integrated total rewards. "You can't give people moving targets to aim for. You can't move the cheese."
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Instituting an Employee Review Process: How to Set Employee Objectives
Rowson recommends that you develop employee goals and objectives at the beginning of the performance cycle by using the SMART formula:
- Specific. Spell out specifically what you are expecting from the employee and what the employee is promising to do, such as, "I will improve customer response rates in the call center by 15 percent," Rowson says.
- Measurable. Talk about what metrics to use in establishing whether you have accomplished this goal. In the case of the call center, you could use call volume statistics every month compared to the previous year.
- Aligned. Make sure that these goals are aligned with the company's goals. "You want to make sure everyone in the organization is on the same flight plan and that they are aligned with corporate goals," Rowson says.
- Realistic. "I've seen employees that actually say their goal is to climb Mt. Everest, so to speak, but they don't have the equipment, don't have the budget," Rowson says. It's important that the goals represent something that realistically can be accomplished.
- Time bound. Set a time frame in which the employee is committed to reaching this goal.
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Instituting an Employee Review Process: How to Conduct Employee Reviews
Instead of only communicating with your employees once a year during an annual review, you should provide employees with regular feedback throughout the performance year so that they know where they stand. "There should be no surprises at the end of the year," Rowson says.
Reviews are commonly conducted approximately 60-90 days after hire, and at regular intervals thereafter. Companies normally schedule reviews around an employee's anniversary date, or conduct reviews for all employees during a designated time of the year. They can also be held more frequently, such as once a month, if it helps the business better achieve goals. Reviews typically summarize performance of tasks and duties and include areas of improvement or strength. Sometimes they will encompass goals for a future period.
Here are some tips from Helmlinger on making the review process a success.
1. Be prepared. Pull your notes and thoughts together as you review the actual performance review form. Set aside enough quiet time to reflect on each area that will be reviewed. "Take in to account the entire timeframe since the last review; never use just recent events," Helmlinger says. "Avoid including data points that catch an employee off-guard, especially dated instances." Preparation also means you will decide if you will have employees involved in drafting their own review or if you'll write the review without employee involvement. This is a critical decision since the path you take may set the tone on how you conduct the actual meeting. Employee buy-in is critical; choose your path carefully.
2. Conduct a performance review meeting. Once you have prepared for your meeting, you must set the tone for the meeting itself. Conducting an effective review with an employee requires you to do the following:
- Establish rapport. Most employees are going to be nervous and anxious. Remove both visible and mental barriers. Sit next to each other instead of across the desk from them. Let them know this is a mutual conversation, not an interrogation. Even consider meeting them over lunch or breakfast.
- Concentrate on the meeting and employee. Avoid interruptions. Your focus needs to be on them. Interruptions will be interpreted as a lack of interest on your part and will weaken your process.
- Take notes. Taking notes is another indication of your interest in the process. Performance reviews should be a two-way conversation. Notes will help you remember what changes need to be made to the final performance review form.
- Observe responses as well as behaviors. Both you and the employee may be nervous and anxious. Even though you may know the employee well, you still want to observe their responses and behaviors during the meeting. If their responses and body language shift during your meeting, go back and re-establish rapport. Body language can clearly demonstrate their level of buy-in.
- Allow time to ask questions. While you could hand them the review, have them read it, and sign it, it's better if you can allow time for them to ask questions. "Buy-in takes place when the environment is open and conversational," Helmlinger says. "Let them know that you welcome questions and want to ensure they understand what is being shared and why."
3. Follow up. Not all performance reviews are designed for a single session. You may have to re-draft the document because of the changes you've negotiated with the employee. Perhaps you have asked the employee to provide you with their evaluation without you sharing yours with them. Whatever the reason, a follow up is your ally for employee buy-in. Following up might also encompass future meetings with the employee to discuss any progress reports that may be required as part of your process. Following up demonstrates that you are committed to the employee's contributions and development.
4. Get employee feedback. Effective performance reviews involve employee feedback. Your document should always include a place for employee comments. Employees should be allowed to provide written feedback about their review. Give them the opportunity to agree or disagree with their evaluation, and let them do it in writing.
5. Set up a commitment for the next cycle. The results of the review should dictate the timeframe for the next review. If there are performance issues or specific goals that must be met, pick an appropriate intermediate time period in which to reconvene. It's a natural part of a follow up.
6. Discuss goals and career development. Employee buy-in to the performance review cycle can hinge on this step. "Most employees dread the thought of discussing historical information, yet get excited when you talk about their career development," Helmlinger says. Make this step a joint venture with your employee. Have them lay out their goals and objectives for the next three to nine months. Be sure their plans are in alignment with your organizational objectives. Then follow up with them. Without follow up, the process becomes a meaningless exercise that could negatively impact employee job satisfaction and turnover.
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Instituting an Employee Review Process: Pitfalls to Avoid in Conducting Employee Reviews
Too often, employee reviews get a bad rap because they're used for pettiness or as a vehicle for a manager's favoritism. Here are some of the tendencies to avoid when rating employees during a review process:
- The Halo Effect. This occurs when an employee excels in one area and the manager lets that trait or factor influence their ratings under every category in the review process. "This problem often occurs with employees who are especially friendly (or unfriendly) toward the supervisor or especially strong (or weak) in one skill," Rowson says. To avoid the halo effect, evaluate all your people on one performance factor before going to another factor. This way the evaluation is based on the factors more than an overall impression of one individual.
- Leniency or harshness errors. Sometimes the person doing the rating of an employee can show their own personal bias. "If you think everyone is great, then everyone deserves an Academy Award," Rowson says. "When raters see everything as 'good,' they are lenient raters. When they see everything as 'bad,' they are harsh raters." Look over your ratings to see if you display any of these tendencies and even consider using a "grading" distribution like they use in school -- with 10 percent of employees exemplary, 20 percent distinguished, 40 percent competent, 20 percent marginal, and 10 percent unacceptable.
- Central tendency. Another pitfall is to rate everyone somewhere near the middle. "'Central tendency' describes what happens when you tend to put ever yone in the middle of the road and rate all of your subordinates as 'competent,'" Rowson says. The problem with this tendency is it fails to discriminate between employees and offers little information for subsequent decisions. If you have this tendency, you will never differentiate performance between those who have done exceptional work and those who have had a poor performance. "It drives top performers nuts," Rowson says. "You'll lose your best people this way."
- First impression. Whether your first impression is positive or negative, this should not be the basis for performance evaluation. Some workers end up riding on that first impression for the rest of the year. To avoid this, go back to the job description and performance documentation. "This will take the emphasis away from gut level feelings and superficial impressions and focus your evaluation on facts and behavior," Rowson says.
- Personal bias. People tend to identify with others who are like them; this is true for managers and their employees who sometimes give a higher rating because the employee has qualities similar to him or her (or a lower rating because the employee has dissimilar qualities). Raters have to watch out for exhibiting this bias simply because they like certain employees better than others, Rowson says.
Any type of favoritism can undermine all the good will you seek to bring to your business when instituting an employee review process.
Dig Deeper: Taking the Sting Out of Workplace Evaluations
Instituting an Employee Review Process: Additional Resources
Implementing an Effective Performance Review System
The Society of Human Resources Management has some advice for instituting a successful review program.
Performance Review Software:
Authoria Performance helps organizations turn employee appraisal into a tool for building a stronger workforce that can deliver greater business results.
Halogen Software's eAppraisal offers a powerful, easy-to-use, and affordable Web-based solution for employee reviews.
Insala's iPerformance offers a timesaving collection of tools that integrates the complete evaluation process to include job profiling, competency management, assessment, reviews, and development plan creation.
World at Work
This global human resources association focuses on compensation, benefits, work-life, and integrated total rewards to help organizations attract, motivate, and retain a talented workforce.
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