4 Tips to an Effective Employee Review

Rating systems are ineffective and unproductive. Here are a few things to remember as you develop your employee evaluation system.
August 15, 2012

It wasn’t until a few years after launching his company that Craig Anderson realized he’d completely forgotten about the employee review process. 

As co-founder of IT firm NSR Business Solutions in Racine, Wisc., he learned that employees were looking for performance feedback and raises, so he turned to the Internet and downloaded templated forms, many based on employee review rating systems (one to 10). Anderson used the forms for years, but always with discouraging results. 

“We were just checking boxes, it was terrible,” he remembers. “Employees wanted to know why they got certain scores, how scores affected raises and we didn’t have answers for them.”

Last year he threw out the forms and developed a new process. Assessments are now based on four factors: tasks done well, tasks to be improved on, performance on set goals and planned goals for the future. And instead of administering annual reviews at various times throughout the year (based on an employee’s start date anniversary) everyone is subject to two reviews per year, one in January and one in August.

Anderson says his employees appreciate the simplified process. Another bonus: a newly created electronic employee performance file. Every time Anderson thinks of a performance issue (good or bad), he writes a quick e-mail to himself and deposits it in the file. Come review time, the file doubles as a memory refresher.

Here are a few things to consider as you develop your own employee review process. 

1. Schedule frequent discussions. Reviews can be stressful when employees don’t know what to expect and employers aren’t sure how to break news. Take the edge off by scheduling frequent performance chats with your employee.

“Some companies schedule monthly conversations, others schedule weekly conversations,” says Sharon Armstrong, founder of Sharon Armstrong and Associates, an HR consultancy based in Washington, D.C., and author of The Essential Performance Review Handbook. “Ongoing workplace conversations help improve supervisor rapport with employees.”

2. Focus on goals. The more transparent you are regarding company goals, the more engaged your employees. Try translating ideas into specific, actionable goals for each team member. Armstrong recommends following her acronym, for developing “S.M.A.R.T.E.R.” goals.

            S: Specific

            M: Measurable

            A: Attainable

            R: Relevant

            T: Time-based (“A goal without a date is a dream,” she notes.)

            E: Engaging (“Leverage an employee’s strengths,” she adds.)

            R: Make sure the goals reinforce the values of the business

3. Give concrete examples. An employee review takes preparation on the part of the small-business owner. Give yourself time to think of exact behavioral or performance-related issues you want to discuss. Being generic or broad can lead to dissatisfaction and confusion in the part of the employee, Anderson notes.

4. Don’t talk about raises. Small business owners should “de-link” the compensation conversation from the review process, says Armstrong. Instead, focus on performance and schedule the raise conversation for later.

“To have a substantive conversation, you need to get the money out of there,” she says. 

Anderson agrees with this line of thought, even though he has yet to implement it. He worries that there is an engrained expectation for employees to receive raises at review time, but says he’d like to separate the two conversations in the future.

“People equate dollars to what you think of them,” he says. “In a small business, incomes are sometimes based on how the company is doing. If someone did a great job and you are forced to give them a smaller percentage increase because of the economy, for example, they might think they didn’t do a good job when, really, they did.”