Performance reviews – who needs ‘em? You do, and so do your staff. Without some sort of structured process for assessing performance how are you meant to know how your employees are REALLY doing? Likewise, your staff will become frustrated if they don’t have a platform that allows them to blow off some steam and discuss how THEY feel things are going (remember the whole ‘two-way communication’ thing?). You may even lose those ultra-talented staff that you worked so hard to find and, once they’re gone, it’s highly unlikely that they will ever return. In fact, they will probably set about telling anyone who’ll listen about the terrible company they’ve just left and their reasons for doing so. Not the best advert for your business when you’re trying to attract and retain the best talent available.
A well designed appraisal process can provide endless benefits for a business. A white paper by The Mind Gym claims that good performance management can bring about a 40% rise in employee engagement, a 15% boost in productivity, an 18% boost in customer loyalty and a 25% drop in staff turnover (check out their white paper here).
You already have a great performance management system in place though, right? No? Then this chapter is for you. In fact, it was written specifically for you. Read it (all of it) and thank us later.
I’m in… but how do I do it?
“It is an immutable law in business that words are words, explanations are explanations, promises are promises but only performance is reality.” – Harold S Geenan
Now that you’ve decided to implement performance management for your business it’s important to remember that simply having something in place does not make it effective.
Just as owning a book on space doesn’t make you a rocket scientist, having an appraisal system in place does not mean that you’re doing it right. Everybody should be clear on the role that they play in the appraisal process and how to ensure they get the best out of it. Appraising managers should be educated on the importance of reviews, how they make their lives easier and how to carry them out. Employees should be made aware of the benefits of appraisal, the reasons why they are being evaluated and the format and frequency of review.
Performance reviews should be used as a vessel for addressing underperformance, putting systems in place for improvement where required and recognising high performance. However, be conscious that, by nature, many staff will view their appraisal purely as a window for snagging a pay rise. Don’t fall foul of this by making it a reality.
There are many different tried and tested methods for carrying out a performance review but which one will work for your business? Let’s take a look at a few of the most common.
MBO (management by objectives) – First promoted in the 1950’s by management theorist Peter Drucker, this is one of the oldest performance management systems around, yet still one of the most popular. The process involves discussing the requirements of the employee’s role with them and setting clear and measurable targets. Remember to be realistic when setting goals, making them difficult but not impossible to reach. It is also important that there is a timescale attached to each target so the employee’s progress can be reviewed on an on-going basis.
Grading scale – The grading or rating scale method involves the implementation of a scoring system against which employee’s performance is measured. Generally speaking, staff will be graded on various areas of their work (typical categories include attendance, punctuality, communication and teamwork) and will either ‘fall short of requirements’, ‘meet requirements’ or ‘exceed requirements’. Whilst this may seem like an effective and simple process to adopt, be wary that it must be carefully designed if the process is to be a fair one. As with all of these examples, you should consider how your staff will respond to a marking system that is similar in nature to the way schools assess their pupils!
360 degree feedback – This method has grown in popularity in recent years and is fairly common in businesses today. The process requires the appraising manager to collect feedback from various areas of the business to allow them to build a more rounded assessment of an employee’s performance. They may speak with their managers, colleagues and subordinates during the process.
When conducting a review using the 360 degree feedback method, be sure to take into account any personal conflicts or negative feeling between those you’re interviewing and the employee under review to avoid unjustified results. It’d be a travesty to give Mike a bad review just because Linda doesn’t like his face.
We love ladders. Climbing up them, climbing down them, avoiding walking under them. They are a simple means of getting where you’re going and everybody knows how to use one. That is why we love performance ladders, and we’re not the only ones. Microsoft use them, as does Joel Spolsky (one of our heroes) of Fog Creek software (check them out here).
The concept of a performance ladder is simple. There are various levels or ‘rungs’, normally numbered. An employee’s position on the ladder is dictated by whichever contributing factors you choose (Fog Creek use experience, scope and skill) and each ‘rung’ of the ladder determines the base salary of those employees on it. Salary and positioning are reviewed on a regular basis as an employee’s value to the business increases through hard work and experience. Companies who employ this type of system rarely have additional appraisal procedures in place and tend to give feedback (positive or negative) on an ad-hoc basis.
Something that we really like about this method is that it promotes transparency. Everyone knows which level they are at, the salary they can expect to receive and what they need to do should they be daring enough to want to climb the ladder.
Examples of appraisal forms