Most managers dread performance reviews, and employees aren't crazy about them either, but neglecting to evaluate workers regularly can be as dangerous as ignoring your balance sheet -- it will come back to bite you. Anna Jenkins, vice-president and co-owner of Spa Fitness Centers, in Capitola, Calif., believes that formal, written employee reviews are critical communication tools. Spa Fitness's system, which applies to all 150 employees, includes the following:

· A 90-day review rates new employees as outstanding, satisfactory, or needing improvement in such areas as dependability, interpersonal skills, and time management, and evaluates how well they perform their particular jobs. Sales consultants are graded on their follow-up of sales leads and overall sales performance, for example. There's also room for managers' comments at the end of each section.

· Interim "counseling statements" point out behavior or work habits that need correction. "We always talk to employees before we put anything in writing," Jenkins explains. "If you avoid small things, they grow into large problems, and employees get a distorted view of what is expected of them."

· Informal reviews, conducted at each manager's discretion throughout the year, acknowledge jobs well done and also state specific goals for the coming months.

· Annual performance reviews use the same format as the quarterly reviews.

Each employee is expected to read and sign all documents and may add comments that will be appended to the personnel files. The reviews, says Jenkins, not only contribute to improved employee performance and a reduction in turnover but also help protect the company from wrongful-discharge complaints. "Documentation that's signed by the employee is a verification of his or her history with the company," she says.

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