Happy employees are more productive, deliver better customer service and offer a leadership pipeline that allows your business to scale. The employee performance review is one tool employers have to drive employee engagement and results. Unfortunately the employee performance review does not have a good reputation among employees or employers.
Things Are Changing
We are entering a new era when it comes to employees and the internet is driving that change. Much like what has happened to the customer / company relationship, employees are now sitting in the driver's seat.
Increasing amounts of information is available about the companies employees are considering in their job search. Employees are offering feedback and reviews about the companies they are working for on sites like Glassdoor (I suggest checking this website to see what reviews employees have left for your company). Even Google and Amazon are not immune to receiving open criticism from their employees.
To make things even more difficult for employee retention, the economy is heating up and unemployment is dropping. Freelance opportunities are on the rise giving employees even more options, increasing competition for employers.
Add the "millennial" dynamic into the mix making employees more demanding than ever, looking for employers who cast a vision for a greater purpose. Millennials are not are not just looking for a paycheck and must be managed differently (you know what I mean if you have millennial employees).
The Purpose of Employee Performance Reviews
For all these reasons, managing employee performance is increasingly important and the employee performance review is one of the main tools employers have to drive performance improvements.
When done correctly, reviews can enhance performance and employee loyalty. If done poorly (or not at all) employee performance reviews become something which drive employees to look for another place to work.
It's my hope to provide you with an employee performance review framework that eases the pain and allows you to make your review process a competitive advantage for your business.
I must warn you....
Employee performance reviews require that you are actively managing your employees. A performance review is not something you can throw together at the end of a year. If you do, you are asking for trouble. I am going to assume you want to build into your employees and see employee performance reviews as a critical part of growing a success company.
To begin, let's start with a little history
History of Employee Performance Reviews
1800's - The first industrial revolution begins as people move from farms to cities. The technological advancement also brought 12-hour work days, child labor, monotonous work and unsafe work conditions. Workers defended their interests by by developing labor unions and passing various child protection laws.
1900's - Frederick Taylor (1856-1915) developed theories of Scientific Management by focusing on the manufacturing industry. Taylor railed against the "awkward, inefficient, or ill-directed movements of men". Some of his concepts still in use today such as: analysis, efficiency, elimination of waste and standardization by defining best practices.
Taylor also promoted the idea of the performance contract, "Each employee should receive every day clear-cut instructions"
1920's - 1940's - The Human Relations Movement driven by Elton Mayo and his Hawthorn Studies which researched the link between productivity and the work environment. His original research was conducted at the Hawthorne Works in Cicero, Illinois, and focused on lighting changes and work structure such as working hours and break times. Elton Mayo came to the concluded that paying attention to a worker's basic needs would improve productivity. The Great Depression ushered in changes to the rules of doing business and pensions, minimum wage and labor standards.
1950's - The US government began implementing performance management via the Performance Ratings Act and the Incentives Awards Act to incentive and reward employees for superior performance.
1960's - Salary Reform Act introduced Pay For Performance as another mechanism for driving performance and financially rewarding high achievers.
1970's - Aubrey Daniels, know as the "father of performance management", was one of the first to make extensive use of the science of behavior analysis in business.
According to Wikipedia, "Performance Management (PM) was coined by Dr. Aubrey C. Daniels in the late 1970's to describe a technology for managing both behavior and results, the two critical elements of what is known as performance"
1980's - MBOs (management by objectives) where introduced.
Peter Drucker introduced the concept in his 1954 book, "The Practice of Management."
According to the Economist, "Drucker pointed out that managers often lose sight of their objectives because of something he called “the activity trap”. They get so involved in their current activities that they forget their original purpose."
MBOs became popularized when they become the operating system and HP and part of the "HP Way".
Drucker downplayed the importance of MBOs by stating, "MBO is just another tool. It is not the great cure for management inefficiency … Management by objectives works if you know the objectives: 90% of the time you don't."
Present Day - Based on frustration with the annual review process, many companies are promoting the end of the annual performance review in favor of continuous performance management.
What Is An Employee Performance Review and What Is The Purpose?
An employee performance review is a process by which the job performance of an employee is evaluated against a mutually agreed upon set of key responsibilities and expectations.
The purpose of an employee performance review is to provide feedback to an employee in an effort to improve performance in a way that benefits both the employee and the company.
Employee performance reviews should not be one-sided interactions. They can be extremely valuable feedback loops which can help improve the way the company's management operates and employees perform.
Let's pick that definition apart...
An Employee Performance Review Is A Process
An employee performance review is a cyclical process. It has multiple steps which must be implemented in order for the review to be successful for both the employee and the employer.
So what are the steps of the process?
- Establish key responsibilities and how success will be measured
- Agree upon success criteria
- Meet regularly (monthly at minimum)
- Receive and provide feedback / coach on performance
- Document to provide transparency and avoid communication gaps
An Employee Performance Review Fairly Evaluates Job Performance
To fairly evaluate job performance, the evaluation criteria must be unambiguous.
I've written about this before. Every role in your company needs to have clear key responsibilities and associated success criteria (or KPIs).
It is not easy, but if you don't do this, the employee performance review will feel very random and unfair to the employee and you won't accomplish what you've set out to accomplish, improved results.
Employee Performance Reviews Must Be Frequent Enough
There has been a major shift as of late away from annual performance reviews to what is called continuous performance management. Companies like Accenture, Adobe and Gap and have begun to offer more frequent employee check-ins where an employees performance can be evaluated and improved. As of 2015, over 10% of Fortune 500 companies had done away with the annual performance review.
According to Paul D. Hamerman and Claire Schooley of Forrester Research, "Once-a-year or every six-months feedback is not frequent enough to meet the ever-changing pace of business." Only 6% of all organizations believe thier current performance management process is worth their time. Essentially, the current process is just not working.
Employee Reviews Are Based On A Set Of Mutually Agreed Upon Key Responsibilities
It's not enough to just have key responsibilities and KPIs, the employee must agree to the performance criteria. Your expectations should not be a surprise since the key responsibilities should be based on the original hiring specification for that role.
I've been guilty of assigning responsibilities to employees without getting their feedback and buy-in. When we do this, we are asking for trouble. Some employees may be afraid to speak up and let us know that what we're asking them to do is unreasonable or worse, the employee doesn't have the capability to do the job.
Employee Performance Reviews Are Not Just For The Employee
Lastly, employee performance reviews are meant to provide feedback to the managers who are performing the review. It has been said that people leave managers not companies. While this isn't always true, a performance review can help managers understand how well they have communicated performance standards to their direct reports. If employees are surprised a manager's feedback something is wrong.
I hope this blog has helped clarify this incredibly important management tool.
If you'd like some help improving your performance management process, feel free to contact us or click the link below to schedule a call.