Before you start defining the elements of a healthy performance review process, it’s worth investigating how or where your process went wrong. Historically, performance reviews were created with the best of intentions and remained unchanged for centuries.
The idea that people are motivated by knowing where they stand within an organization gave birth to the “rank and yank” method of ranking employees into top, average, and poor performing tiers (and eliminating those at the bottom). This was popularized by Jack Welch, former CEO and Chairman of General Electric (1980-2001).
As with many common business practices, the millennial generation is challenging the way performance reviews work. Not only have forced ranking and merit-based raises been found ineffective, leaders and human resources professionals have reported performance reviews to be a significant waste of time.
While performance management is sometimes a necessary evil, thankfully, the delivery system and the value it provides is trending in a healthier direction. Let’s have a look at five elements of a healthy performance review process.
The traditional performance review that takes place once or twice a year tends to be an anxiety-inducing event in which employees are sometimes blindsided by their supervisor’s perception of their performance. To be effective, performance feedback should be delivered on a regularly scheduled basis so it becomes less stressful and includes more than an overview of how they have performed over the last twelve months.
Employees will have a better chance to grow, improve, and possibly change their approach to work if they’re receiving timely, specific feedback rather than waiting several months to a year after the fact to hear about their performance.
2. A Strong Focus on Goals
A healthy performance review process includes more than just feedback, it’s a great opportunity to establish goals and expectations. This is another reason the review process should be done more regularly. As soon as current goals are met or exceeded, you can put new ones in place, rather than waiting until a formal review to adjust strategy. This will help keep your team members from growing bored or frustrated and keep them focused on imperative business objectives.
Meeting to discuss an employee’s performance, as well as their goals, helps you as a leader understand the direction they’re heading and how you can guide them, as well as how you can align their strengths and interests toward the shared goals of your team. If you have a learning management system in place, you can also pair some of these performance goals with specific learning or training objectives and track progress in real time.
3. Two-Way Conversations
“Talking at,” your employees can make them feel intimidated, or worse, annoyed. The lack of two-way communication is one of the many reasons the traditional performance review is ineffective — more than anything, the employee just wants it to end as they might be feeling belittled, unimportant, or unheard.
Instead, use the designated review time to have a two-way conversation. Spend time discussing how your employee feels about their own performance and how they feel about your performance as a leader. Ask for their thoughts on the company’s current mission and goals. Encourage them to be decisive, and solicit their ideas. Where possible, put what they tell you into action, so they know that your interest in their opinion isn’t perfunctory. This method of communication is more aligned with the modern workforce; today’s employees, especially the millennial generation, prefer coaches to managers.
4. Balanced Feedback
You already know that going into a performance review with only negative feedback can discourage an employee from making the corrective behavior necessary to get on track. A poor performer still needs to understand how their skills are valuable to the organization, the areas they are making strides in, and where you see potential for improvement.
Similarly, providing only positive feedback (even to an outstanding performer) isn’t helpful either. A healthy review should balance both positive and negative feedback. Growth only comes from pushing people past what they thought they were capable of, and an ambitious employee will look for a manager willing to do just that. Your job as a leader is to do the pushing; by acknowledging areas of improvement, and establishing new goals.
5. Performance-Based Incentives
A system of goals and evaluation criteria is a step in the right direction if you’re hoping to boost performance. But your employees will never feel intrinsically motivated to improve unless there is some benefit or reward tied to success. If they know the only reward for above-average work is the approval of their manager, you won’t see much growth.
Make sure your performance reviews are connected to a tangible reward or incentive for each employee. How you reward the employee should be individualized, and is dependent on available budget, but it could be anything from a restaurant gift card to a quarterly bonus, or even a permanent raise for the highest performing employees. Don’t let your most valuable employees feel unappreciated, demonstrate their value to them with tangible assets–verbal affirmation is nice, but it doesn’t pay the electric bill.
When you do away with forced rankings and outdated goals and start having meaningful conversations with your team, you can soften the cutthroat atmosphere at work and engage your employees as individuals. This in turn will create a culture of trust, allowing for constructive criticism and healthy performance reviews that include regular, balanced feedback, goal-setting, and an opportunity for a two-way conversation. Furthermore, a healthy review process tied to measurable incentives will not only result in higher performance, but happier employees as well.
To learn more, check out 6 Tips to Tackle Performance Reviews for Managers and Employees.