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The most effective performance reviews are forward-thinking. Are yours?
Most small business owners are entrepreneurs; their strength is in the doing. For people like these, managing others is often an afterthought. But to run a sustainable business, you have to develop a strong workforce. Employee performance reviews are an important step in achieving this.
"Performance reviews serve two purposes. First, it's a report card. It lets people know how they're doing," says Robert Drovdlic, director of The Global Consulting Partnership, in Wayne, Pa. "The second purpose - and the one that often gets ignored - is that it's a developmental plan for continued improvement."
Drovdlic says business owners often treat performance reviews as a formality: the employee gets a good grade and a raise, and everyone moves on. But in doing so, executives miss an opportunity to communicate their expectations, get feedback from the front lines, and help their employees become better at what they do. On a larger scale, the performance review is one element in creating a performance culture.
"Staff development should be a year-round practice," Drovdlic says. "Managers should always be creating learning moments, whether it's after a project wraps up or a big presentation is made. There should never be a surprise once the actual review arrives."
For the formal reviews, Drovdlic recommends scheduling the first one at 90 days, a second one at six months and then annually thereafter. When meeting with employees, start the conversation with what they're doing well, and be specific.
"Don't simply tell them they are doing a good job. What does that mean?" says Linda Finkle, CEO of Incedo Group, in Potomac, Md. "You cannot motivate people to do more of the same without being specific about what they are doing right."
Finkle also suggests asking employees what they think they do exceptionally well and where they need improvement. "They're likely to give you some insightful answers," she says, adding that it's equally important to sit back and listen during a review. Give your employees time to express their concerns, as well as any ideas they have for improvement - either in their jobs or for the company in general.
Also be specific when pointing out how an employee could do better.
"You need to give examples of behaviors you want to see that would indicate that they are improving," Finkle says. Instead of telling "Joe" that he needs to manage his time better, tell him why his time management is an issue - where is he dropping the ball? - and then give him the tools to improve.
David Lewis, president of OperationsInc, in Stamford, Conn., says there are a multitude of performance appraisal vendors that sell forms and processes to formalize the performance review. "You can find software starting at $300 and going up from there," he says, adding that some vendors provide hosted solutions that can run in the thousands.
However, Lewis says there are negatives to automating the process. "You may be spending more money than needed to accomplish the simplest of acts: telling your employees what you think of their performances," he says.
Outsourcing performance reviews to a human resources firm is another option, but Drovdlic doesn't recommend this approach.
"The business owner wants to be the one who is the catalyst and in control of developing his people," he says. "If you outsource anything, outsource a coach or consultant who can teach you how to be equally as skilled at managing people. The effectiveness is not in the templates or the tools; it's in the individual who can create a developmental culture and help her employees thrive."