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Mc graw hill the managers guide to performance reviews

  1. 1. Manager’s Guideto Performance Reviews
  2. 2. Other titles in the Briefcase Books series include:Customer Relationship Management by Kristin Andersonand Carol KerrCommunicating Effectively by Lani ArredondoPerformance Management by Robert BacalRecognizing and Rewarding Employees by R. Brayton BowenMotivating Employees by Anne Bruce and James S. PepitoneBuilding a High Morale Workplace by Anne BruceSix Sigma for Managers by Greg BrueDesign for Six Sigma by Greg Brue and Robert G. LaunsbyLeadership Skills for Managers by Marlene CaroselliNegotiating Skills for Managers by Steven P. CohenEffective Coaching by Marshall J. CookConflict Resolution by Daniel DanaProject Management by Gary R. HeerkensManaging Teams by Lawrence HolppHiring Great People by Kevin C. Klinvex,Matthew S. O’Connell, and Christopher P. KlinvexTime Management by Marc ManciniRetaining Top Employees by J. Leslie McKeownEmpowering Employees by Kenneth L. Murrell andMimi MeredithFinance for Non-Financial Managers by Gene SicilianoThe Manager’s Guide to Business Writingby Suzanne D. SparksSkills for New Managers by Morey StettnerManager’s Survival Guide by Morey StettnerThe Manager’s Guide to Effective Meetings by Barbara J. StreibelInterviewing Techniques for Managers by Carolyn P. ThompsonManaging Multiple Projects by Michael Tobis and Irene P. TobisTo learn more about titles in the Briefcase Books series go towww.briefcasebooks.comYou’ll find the tables of contents, downloadable sample chap-ters, information on the authors, discussion guides for usingthese books in training programs, and more.
  3. 3. A e fcasBrieook BManager’s Guideto Performance Reviews Robert Bacal McGraw-Hill New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto
  4. 4. Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Manufactured in the UnitedStates of America. Except as permitted under the United States Copyright Act of 1976, no part of this pub-lication may be reproduced or distributed in any form or by any means, or stored in a database or retrievalsystem, without the prior written permission of the publisher.0-07-143646-4The material in this eBook also appears in the print version of this title: 0-07-142173-4All trademarks are trademarks of their respective owners. Rather than put a trademark symbol afterevery occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefitof the trademark owner, with no intention of infringement of the trademark. Where such designationsappear in this book, they have been printed with initial caps.McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promo-tions, or for use in corporate training programs. For more information, please contact George Hoare,Special Sales, at or (212) 904-4069.TERMS OF USEThis is a copyrighted work and The McGraw-Hill Companies, Inc. (“McGraw-Hill”) and its licensorsreserve all rights in and to the work. Use of this work is subject to these terms. Except as permittedunder the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may notdecompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon,transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without McGraw-Hill’s prior consent. You may use the work for your own noncommercial and personal use; any otheruse of the work is strictly prohibited. Your right to use the work may be terminated if you fail to com-ply with these terms.THE WORK IS PROVIDED “AS IS”. McGRAW-HILL AND ITS LICENSORS MAKE NO GUAR-ANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OFOR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMA-TION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE,AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUTNOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PAR-TICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the functionscontained in the work will meet your requirements or that its operation will be uninterrupted or errorfree. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy,error or omission, regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no responsibility for the content of any information accessed through the work. Under no cir-cumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, puni-tive, consequential or similar damages that result from the use of or inability to use the work, even ifany of them has been advised of the possibility of such damages. This limitation of liability shall applyto any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise.DOI: 10.1036/0071436464
  5. 5. Want to learn more?We hope you enjoy this McGraw-Hill eBook! , ,If you d like more information about thisbook, its author, or related books and websites,please click here.
  6. 6. For more information about this title, click here. ContentsPreface ix1. A Tale of Two Performance Reviews 1 One Fails, One Succeeds 1 The Key Questions 4 Should You Care? 5 What Distinguishes Effective Reviews from Ineffective Reviews? 7 Jessica, Mike, and You 17 Manager’s Checklist for Chapter 1 182. Performance Reviews in the Scheme of Things 20 Reviews as Just One Part of a Larger System 21 Summing Up 33 Other Linkages 33 Manager’s Checklist for Chapter 2 373. Understanding Performance—Good and Bad 38 What Do We Mean by “Performance”? 39 The Stuff of Performance—Good and Poor 42 Implications for Your Performance Reviews 47 Manager’s Checklist for Chapter 3 504. Documenting Performance and Rating and Ranking Systems 51 So What’s the Point of Documentation? 53 Rating Systems 56 Ranking Systems 61 Manager’s Checklist for Chapter 4 65 v Copyright 2004 by The McGraw-Hill Companies, Inc. Click Here for Terms of Use.
  7. 7. vi Contents 5. Documenting Performance—Narrative, Critical Incident, MBO, 360-Degree Feedback, and Other Methods 66 Narrative 66 Critical Incident 71 Standards-Based or Management by Objectives 73 360-Degree Feedback 77 Use of Technological Tools 82 Manager’s Checklist for Chapter 5 85 6. Performance Planning—The Answer to Almost Any Review Problem 86 What Is Performance Planning? 87 By the End of Performance Planning ... 92 Step-by-Step Planning Process—Getting It Done 94 Planning Meeting Steps 96 Manager’s Checklist for Chapter 6 100 7. Review Meetings, Step by Step 102 Warm Up and Clarify Expectations and Roles 104 Describe and Review the Main Job Tasks and Responsibilities 108 Elicit Input from the Employee 109 Discuss and Negotiate (Evaluative Component) 111 Engage in Performance Improvement Problem-Solving 113 Decide on What to Record 114 Finish and Plan for Follow-Up 115 Manager’s Checklist for Chapter 7 119 8. Diagnosing, Problem Solving, and Ongoing Communication 121 What Is Diagnosing Performance Issues? 122 How Do You Do It? 125 Problem Solving to Remove Barriers 129 Ongoing Communication 133 Manager’s Checklist for Chapter 8 138 9. Essential Communication Skills 139 Communication Facts and Principles 141 Generative Skills 142 Responding and Eliciting Skills 153 Manager’s Checklist for Chapter 9 162
  8. 8. Contents vii10. The Rewards and Punishment Dilemma 164 Imagine a Perfect World 164 Back to Our World 166 The Rewards and Punishments Dilemma 167 The Issue of Punishment 168 Addressing the Dilemma 173 Summing Up 178 Manager’s Checklist for Chapter 10 17811. Reviews with Employees of Different Stripes 180 The Underperforming Employee 181 The Performing Employee 193 The Excellent Employee 194 Manager’s Checklist for Chapter 11 19612. Facing Real-World Problems 197 Managing Disagreements 198 Principles of Disagreement Management 199 Addressing Biases and Increasing Evaluation Accuracy 203 The Soft Stuff Dilemma 207 Getting from Bad to Better Systems 209 A Really Poor Review System 211 Manager’s Checklist for Chapter 12 213 Appendix: Resources for Performance Reviews 215 Index 219
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  10. 10. PrefaceP erformance reviews seem to be a lightning rod for disap- pointment, dread, or even wrath on the part of employeeswho have to be “reviewed” and managers who feel they have todo the “reviewing.” It’s hard to find people who express satisfac-tion with their review processes, and it’s not an understatementto say that, by and large, almost everyone hates them—whethergetting them or giving them . . . and for very good reasons. Somehow or other, we’ve managed to forget what perfor-mance reviews are for, and even in situations where someonedoes remember, the process is so poorly implemented that itends up having no value to anyone. Worse, poorly conductedperformance reviews create more problems than they solve andend up costing real time and money that should be used moreproductively. It’s almost as if human resource departments, managers,supervisors, and employees conspire to make sure performancereviews end up as wasted effort. You couldn’t mess them upmore if you tried. Most people have had poor experiences with the reviewprocess because it hasn’t been implemented well. As a result,people (and this applies to managers and employees) havecome to the conclusion that the performance review is a nec-essary evil, so they go through the motions, create a madden-ing paper chase, and grumble all the while. In effect, they’vegiven up. Of course, giving up isn’t exactly the best way to improvesomething. So people carry on, every year repeating what theydid last year and even pretending the badly executed process is ix Copyright 2004 by The McGraw-Hill Companies, Inc. Click Here for Terms of Use.
  11. 11. x Prefacevaluable. In some circumstances, someone will make a sincereeffort to revamp the process, and guess what? The result is abunch of cosmetic changes that have no effect on the value ofthe performance review. Here’s the vicious cycle sequence. Most people have nothad the chance to benefit by being involved in performancereviews that actually work. When you have unpleasant experi-ences with something, and had have never pleasant ones, it’snot surprising that you are unable to shift your thinking in waysthat will actually help you use the “thing” productively. You tendto believe it’s useless, and it becomes that necessary evil men-tioned above.Making Performance Reviews WorkIt doesn’t have to be that way. It may be true that most perfor-mance reviews are wasted, but it is also true that there aremany organizations, managers, and employees who are usingthe performance review as a tool to improve individual andorganization performance, reduce managerial workload,improve employee morale, and create other benefits andadvantages. They may be in the minority, but they prove thatperformance reviews can work and they can benefit everyoneinvolved. The thing is that performance reviews will work only if theyare done properly. Doing them properly may mean a small shiftin perspective and mindset, but that shift is one easily achieved.We also know that effective performance reviews share a numberof characteristics and look different from those that are ineffec-tive. Managers lead the meetings differently. Both managers andemployees talk differently in effective performance review meet-ings. The communication patterns are different. Believe it or not,when reviews are done well, a lot of the pressure and unpleasant-ness associated with them disappears. Dread disappears. That’s where this book comes in. It’s a hands-on, “as-practi-cal-as-you-can-get” guide to making reviews work. It explains the
  12. 12. Preface ximindset you need to review performance properly. It identifies themost common pitfalls for you to avoid. It reminds you about andteaches you how to use communication skills differently. Above all, it brings you back to the real reason we do per-formance reviews. It’s simple—to improve performance andcreate the most success for everyone, from the stockholdersand shareholders right down to the backbone of your organiza-tion, the employees. But … If you are looking for some way to use performance reviewsto hit employees over the head or whip them into shape, youwill not like this book. If you are unwilling to give up the ideathat performance reviews are something done to employees,and not with them, then this book will drive you batty. If however, you really want to reap the benefits that are pos-sible when you review performance effectively, and you are will-ing to commit to the goal of improving performance by workingwith employees, you will benefit from this book. Whether you are hoping to completely revamp your perfor-mance reviews or whether you just want to tweak them, you’llfind this book full of very practical ideas. These ideas, actions,and suggestions will work only if you start with an open mindand entertain the possibility that the performance reviews canbe an exceedingly powerful tool.Special FeaturesThe idea behind the books in the Briefcase Books Series is togive you practical information written in a friendly, person-to-person style. The chapters are relatively short, deal with tacti-cal issues, and include lots of examples. They also featurenumerous sidebars designed to give you different types of spe-cific information. Here’s a description of the boxes you’ll find inthis book.
  13. 13. xii Preface These boxes do just what their name implies: give you tips and tactics for using the ideas in this book to intelligently manage the performance review process. These boxes provide warnings for where things could go wrong when you’re planning and conducting perfor- mance reviews. These boxes give you how-to and insider hints for effectively carrying out performance reviews. Every subject has some special jargon, including the this one dealing with performance reviews.These boxes provide definitions of these terms. It’s always useful to have examples that show how the principles in the book are applied. These boxes pro- vide descriptions of text principles in action. This icon identifies boxes where you’ll find specific procedures you can follow to take advantage of the book’s advice. How can you make sure you won’t make a mistake when conducting a performance review? You can’t, but these boxes will give you practical advice on how to minimize the possibility of an error.AcknowledgmentsFirst and foremost, I’d like to thank Nancy who has to put upwith my wacky behavior and general impatience during thewriting process. Never underestimate the effort involved in thecare and feeding of an author. I would also like to thank John Woods, of CWL Publishing,and Robert Magnan, who patiently and diligently takes myimpaired prose and makes it healthy.
  14. 14. Preface xiii And finally, once again, to my “other” family: Allan, Sylvia,Brian, Marty, and Chris. See you on December 24, 2025 in theold folks home. I’ll send you a rattle in the morning, you oldcougars! And, keep the light on, we’re a’comin’ home.About the AuthorRobert Bacal is CEO of Bacal & Associates, a training and con-sulting firm dedicated to contributing to the work success ofboth individual and companies, by helping managers andemployees work together more effectively to create bottom lineresults for everyone. He holds a graduate degree in applied psy-chology and has been training, providing consulting servicesand writing on workplace issues for 25 years. This book is his fourth on performance-related topics. He isthe author of Performance Management, also in the BriefcaseBooks Series, and has authored The Complete Idiot’s Guide toConsulting and The Complete Idiot’s Guide to Dealing withDifficult Employees and was co-author of Perfect Phrases forPerformance Reviews. Robert is also an accomplished keynote speaker on perfor-mance, communication, and customer service issues; is thefounder of the world’s largest discussion group on performancemanagement; and hosts a number of sites containing freeresources and performance management-related tools. You canvisit his main Web site at His e-mailaddress is, and he invites comments or sug-gestions about any of his books. Robert currently lives in Winnipeg, Canada, but plans a relo-cation to Ottawa, Canada by the end of 2003.
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  16. 16. 1A Tale of TwoPerformanceReviewsI ’d like to invite you to take part in a little detective work as we solve the mystery of the tale of two performance reviews. Thesleuthing task, as it were, is to identify how it’s possible for per-formance reviews to succeed in one context and fail miserablyin another. Ready? Let me introduce you to two managers, two companies, andtwo ways of reviewing performance. It’s likely your situation willstrongly resemble one or the other.One Fails, One SucceedsJessica is a middle manager at the Aquatec Company, a manu-facturing and retail chain that sells bathroom and pool supplies.She’s dedicated and smart and wants to do the best job shecan. Mike is also a middle manager, at another company in thesame sector—Waterworks. He’s also dedicated, smart, andcommitted. Neither is cursed with negative attitudes aboutemployees and both share a common belief that most employ-ees really want to do well. 1 Copyright 2004 by The McGraw-Hill Companies, Inc. Click Here for Terms of Use.
  17. 17. 2 Manager’s Guide to Performance Reviews Every year the managers in both companies are expected toconduct performance reviews with their staff. Jessica and Mikeboth schedule performance review meetings at least once ayear, since that’s what their companies require. With respect to performance reviews, that’s about all thesetwo managers have in common. What they do, how they dowhat they do, and their experiences with performance reviewsare very different. Different though they may be, both use theterm “performance review” to describe what they do. Let’s start by looking at these managers’ feelings about theperformance review process. Managers’ perceptions of perform-ance reviews are often excellent indicators of how the perform-ance review systems are working for them. Strong dislikes alsoaffect how managers conduct performance reviews, and theymake reviews less effective. Jessica hates them. When I asked her if she looked forwardto these meetings, she said, “Lord, no. I’d rather crawl over bro-ken glass than have to conduct these meetings. There arealways a few employees that get really upset during the meet-ings and after, and quite frankly, I’m tired of having to gradestaff as if they are kindergarten children.” In response to the same question, Mike provided a completely different Self-Fulfilling answer. “Well, I find the dis- Prophecy cussions so valuable that I When managers and can’t imagine not doing employees dread the performance them. I see my job as work- review process, two things are almost ing with staff so we all get certain: the process is ineffective and better and keep learning, the managers’ negative perceptions and I think my staff under- are ensuring that it will remain inef- fective. If you and your employees stands that. While there are find the process uncomfortable, you some disagreements during have to look at changing the process review meetings, they are so it is worthwhile.That means creat- rarely unpleasant.” ing a process that’s not quite so How very strange that uncomfortable. two people, equally bright,
  18. 18. A Tale of Two Performance Reviews 3educated, and dedicated have such completely different viewsabout the performance reviews. It’s a puzzle. Maybe theiremployees can shed some light on the mystery. Jessica’s employees have somewhat different opinions, butthere are some common threads in their responses to questionsabout their performance reviews. Generally, they don’t quiteunderstand the point, feel the meetings are unpleasant, andwalk out feeling no better (and often much worse) than whenthey went into the meetings. Mike’s employees generally feel they accomplish things dur-ing the performance review meetings with Mike. For example,one of Mike’s employees said it this way: “I’m always a bitnervous before the meeting, but you know what? By the end ofthe meeting I feel like Mike is working with me to help me, andnot to club me over the head. And I feel better able to get my jobdone as a result of the meetings. In fact, I think the meetingshave helped me improve at my job to the point that I will proba-bly be promoted.” Things get curiouser and curiouser. We know now that Mikeand Jessica differ in their perceptions of performance reviewsand that their staffs differ in their perceptions as well. Let’s takea quick look at the bigger picture. Are there differences in howthe two companies see performance reviews? We can look at this by talking to the human resources (HR)people in each company, since it’s usually the HR people whoare responsible for compiling the performance review paper-work as part of personnel records. John, an HR specialist at Aquatech, didn’t mince wordswhen he was asked about performance reviews. “It drives menuts. I can’t get the managers to do the reviews or the paper-work each year. Some employees haven’t had reviews for morethan five years, and I’m darned tired of nagging managers whoshould know better. It’s not too much to ask, is it, to just fill insome simple forms once a year?” Mary, in HR at Waterworks, seemed to be talking aboutsomething completely different. “Overall our managers seem to
  19. 19. 4 Manager’s Guide to Performance Reviews Cost or spend the time to get the Investment reviews done, but then If you view performance again we’ve worked with reviews as something you have to do them so they understand and as a cost rather than an invest- why it’s important to do ment, it’s likely you are getting little them and helped them value from them and your attitude learn to do the reviews so and understanding of performance that everyone involved reviews need some tweaking. No sur- sees the advantages of prise, really. Most of us have had bad experiences with performance doing them properly. Our reviews as employees and we bring position is that we care that experience with us when we less about getting forms become managers. completed than about managers sitting downwith their employees regularly to talk about how things havegone and how to make things better.” If we had access to each company’s bigger picture, we’dalso find differences. A cost-benefit analysis would show thatthe performance review program at Aquatech is “overhead,”that is, the cost of doing performance reviews outweighs anyreturn that Aquatech receives from them. For Waterworks, it’sdifferent. Its performance reviews actually contribute to thecompany’s bottom line. Their employees improve more quickly,contribute more to the company’s goals, tend to be more satis-fied with how they are treated, and tend to stay longer with thecompany.The Key QuestionsThe question we need to ask is “How is it possible that twomanagers and their companies appear to be doing the samething—performance reviews—and end up with completely dif-ferent results?” The simple answer is that the usefulness of per-formance reviews is determined by how people understand thefunctions, usefulness, and process of reviewing performanceand how they act on their different understandings. If you were
  20. 20. A Tale of Two Performance Reviews 5to sit in on performance reviews in both companies, you’d bestruck by how different those meetings look. They’re hardlyalike at all. Another important question is “Where do my company and Ifit here?” Are you more like Aquatech or like Waterworks?Chances are that you are much closer to the failures at Aqua-tech than the successes at Waterworks. That’s because moreperformance review systems work improperly than properly.Should You Care?Should you care whether your performance review process isworking or not? Yes. Here’s why. Performance reviews are very powerful tools that can con-tribute to your personal success, the success of your employeesand work unit, and the success of your company—providedthey are done properly and the review process is carried outwith the goal of improving success for everyone involved. Ifyour performance review system is not working as well as itcould, you’re losing the benefits you could be getting from yoursystem. Here are some of the benefits you lose due to poorlyconducted performance reviews. • Identifying performance difficulties early on, before they grow into large problems. • Improving the relationships between manager and employee and creating a climate of trust. • Putting manager and employee “on the same side,” creat- ing a climate that’s not confrontational. • Identifying barriers to performance that are not under the control of the employee but under your control. • Identifying which employees can benefit from job training and which might be developed to take on greater respon- sibilities. • Helping each employee understand how his or her job and performance contribute to the company and its suc- cess.
  21. 21. 6 Manager’s Guide to Performance Reviews • Having documentation when and if it is necessary to take disciplinary or remedial action, so both you and the com- pany are protected from unjustified legal accusations. Perhaps a more com- Real World pelling reason for caring Successes about whether your per- In a 1994 study that formance reviews are included over 450 companies, Hewitt effective or not lies in the & Associates, concluded that compa- consequences of having a nies with effective performance man- agement systems outperformed those system that is failing. without on measures like employee Performance review sys- productivity, cash flow, stock price tems are rarely neutral in and value, and profitability. terms of their costs and benefits. They either con-tribute or cause damage. It may be true that damage from poorsystems is hard to find unless you’re looking for it, but poor sys-tems cause real damage to companies and to your ability tomanage effectively. Let’s look at some of these hidden damages of poor systems. • Performance review systems that don’t help employees do their jobs hurt the relationships between employee and manager and create confrontational situations. • Managers doing ineffective performance reviews lose credibility with employees, particularly when the manager acts as if the reviews are valuable when they are clearly not. Employees are smart: they know when a manager is just pretending to do something useful. • Time and resources are lost. The only reason to justify doing performance reviews is if they somehow add value. If they don’t add value, they cost. • Poor performance review systems can make the HR staff seem amazingly stupid when the forms and mandatory requirements they set out are clearly a waste of time. So, let’s recap. What do we know so far? We know that
  22. 22. A Tale of Two Performance Reviews 7Jessica and Mike have very different feelings about the per-formance review process: Jessica hates it and Mike doesn’t.Their employees also have very different perceptions: Jessica’semployees have a strong dislike, a “‘what’s the point?’ attitude,”while Mike’s employees, although not always perfectly comfort-able, see the process as beneficial or worth the time and effort.Comments from the two HR sections tell us similar stories.Finally, we know that Waterworks seems to be receiving clearand obvious bottom-line benefits from performance reviews,while Aquatec isn’t. In fact, for Aquatech, performance reviewsactually cost in time, benefits, and productivity. That brings usto the great mystery, the real question that we need to address.What distinguishes these two companies and these two man-agers from each other? That’s the question we must answer ifwe have any hope of improving performance reviews in ourown companies.What Distinguishes Effective Reviews fromIneffective Reviews?Life would be much easier if we could identify one single vari-able that separates good and poor performance review process-es. If there were just one essential difference, then all you’dhave to do to move from poor to good would be to change thatone thing. Unfortunately, it’s not like that. Effective reviews and ineffective reviews are different inmany, many ways. If you want to improve them, you have toaddress most, if not all, of the ways in which they differ. Let’stake a look at the characteristics of performance reviews thatmake them more or less effective and increase or decrease thereturn on investment.Clear Primary Purpose vs. Befuddled PurposeOne of the challenges in making performance reviews work isthat people tend to try to use reviews for a number of purposes orgoals. In itself that wouldn’t be a problem, except that those pur-
  23. 23. 8 Manager’s Guide to Performance Reviewsposes often conflict, making it impossible for a system to achieveany of its purposes. Performance reviews work best when theplayers (company, managers, and employees) clearly understandwhy they’re doing what they’re doing and when they understandthat performance reviews can’t achieve purposes that conflict. Let me give you a concrete example. Many companies andmanagers want to use the performance review results to makepersonnel decisions that significantly impact employees. Sincethey want to reward good performance, retain top employees,make decisions on promotions, and even determine who tokeep and who to let go, it’s sensible to want to have data onwhich they can base these decisions. They look to the perform-ance reviews to provide that data. They may also want to use performance reviews to improveperformance and to develop staff abilities. On the surface, itmay appear that these two purposes are complementary, but infact, they create conflict and put managers and employees inalmost a schizoid situation. To gather data for important personnel decisions, the respon-sibility for evaluating performance generally lies with the manag-er, not the employee. That’s because the manager is the onemaking those important decisions. Since the employee knows the performance review infor- Building Trust Helps mation may be used to There’s no way to complete- help or harm him or her, ly eliminate cross-purposes the employee doesn’t per- unless one decouples the perform- ceive that it’s in his or her ance review process from pay, reward, best interests to be com- and punishment, something that may pletely open, honest, or be problematic. I’ve found that man- agers with excellent interpersonal accurate about his or her skills who create bonds of trust with performance. In other their employees can manage this par- words, the evaluative, adox well. Managers who do not have manager-centered per- those relationships of trust face many formance review, tied to more difficulties with the perform- rewards and punishments, ance review process. actually pushes the man-
  24. 24. A Tale of Two Performance Reviews 9ager and employee to opposite sides. The employee benefitsfrom highlighting what he or she has done well, in the hope ofreceiving a pay raise or not getting laid off. The tie to rewards andpunishments becomes a wedge between manager and employeeand keeps them from working together to improve performance. We end up here with two purposes or functions that interferewith each other. If the goal is to make decisions about rewardsand punishments, manager and employee often work at cross-purposes and take on confrontational roles. However, if the goalis to improve performance, the only way that will work overtime is if manager and employee work together cooperatively, inpartnership, within a non-threatening climate, as partners in theprocess. Of all the things that distinguish effective performancereviews from ineffective, this is the toughest one to overcome.All of the ones we describe later can be fixed. This one, howev-er, is basically a paradox, since there are legitimate reasons touse review data to make decisions and to use review data toimprove performance. But you should determine what is mostimportant to you and your work unit and company. Define yourprimary purpose and aim at it, while being aware that otherpurposes can creep in and cause conflicts.Unclear vs. Clear DefinitionThere are currently a lot of definitions and different terms used todescribe meetings where performance is discussed. For exam-ple, there are performance reviews, performance appraisals,employee reviews, and performance management, just to namea few. Some of these terms differ only slightly in meaning andsome differ significantly. Believe it or not, you’ll find that whereperformance reviews don’t work well, it’s often the case thatpeople don’t share a clear common definition and understandingof performance reviews. Managers and HR staff assume thatpeople understand it the same way, but there’s no guaranteethat’s the case. We need a definition that explains both theprocess and the main purpose of the performance review.
  25. 25. 10 Manager’s Guide to Performance Reviews Performance review I recommend using Usually a face-to-face performance review meeting between manager rather than performanceand employee to discuss the employ- appraisal or performanceee’s performance for the purpose of evaluation because it cap-removing barriers to performance. It tures the idea of reviewingdoes not stand on its own, but is inti- performance together.mately tied to other parts of a larger Here’s one way of definingperformance management process. it. The performance review is usually a face-to-face meeting between manager and employee to discuss theemployee’s performance for the purpose of removing barriersto performance. It does not stand on its own, but is intimatelytied to other parts of a larger performance managementprocess. We need to define performance management also, but we’lldo that later on. A definition is useless, of course, unless everyone involvedunderstands it. Whether you use this definition or another, it’simportant that executives, HR staff, managers, and employeesall understand it. That means communication among all of theparties.Past vs. Future OrientationsPerformance reviews tend to fail, to cost money rather than addvalue, when their primary focus is on what’s happened in thepast. The explanation is really quite simple. What’s done isdone. Nothing from the past can be changed. If we wish to influ-ence performance to boost success, we need to look at thepast, learn from it, and apply what we’ve learned to the presentin order to influence the future. Someone once said, “You don’tdrive by looking in the rear-view mirror, so why do you managethat way?” That’s a darned good question. On the other hand, where manager and employee analyzethe past to identify patterns and causes of reduced performanceand work together to remove those causes in the future, per-
  26. 26. A Tale of Two Performance Reviews 11formance improvement occurs. Don’t dwell on the past. Use thepast to inform the present.Blaming vs. Problem SolvingMaybe it’s part of human nature, but we tend to want to blamesomeone for things that go wrong. You see this everyday in thenews, sports, interpersonal relationships, and politics: a hugepercentage of the discussion on issues centers on finding faultwhen something goes wrong. The blaming process tries to iso-late who is at fault. Problem solving is different. Its major purpose is to identifywhy something went wrong, and not necessarily who causedthe problem. On some occasions, the who becomes relevant,but only in terms of identifying the causes of the problem inorder to fix it or prevent it from happening again. Also, blamelooks backward, while problem solving centers on the presentand the future. The blaming process also contains a huge emo-tional component. The “blamer” usually blames with anger,while the “blamee” reacts emotionally, often with anger, but alsowith defensiveness or trying to strike back or avoid blame. It’s probably clear to you why a focus on blame makes per-formance reviews ineffective. First, it creates emotional reac-tions in the person targeted as the one to blame. Second, blam-ing doesn’t bring about solutions.Forms vs. ProcessAnother feature that distinguishes between failed reviews andsuccessful reviews is the emphasis: is it on completing theforms or on carrying out a productive and constructive prac-tice? One common complaint of both managers and employeesregarding performance reviews is that it seems like “one bigpaper chase”: apart from getting forms completed, they don’tsee any purpose in it. Managers often set the focus on formsboth before and during review meetings. If the goal of perform-ance reviews is perceived as completing forms, it’s damaging.
  27. 27. 12 Manager’s Guide to Performance ReviewsDoing To vs. Doing WithIn looking at differences between managers who succeed withperformance reviews and those who apparently do not, some-thing else emerges. Managers who do not profit from perform-ance reviews often believe, consciously or not, that they mustdo or give something to the employee. In other words they seetheir roles as evaluating, as deciding how well the employee hasdone. Managers who profit from performance reviews considerthe review as an opportunity to discuss performance withemployees. If, for example, you could observe Mike and Jessica duringtheir reviews with employees, you would see that Jessica doesmost of the talking during her sessions, while Mike does muchless talking and far more questioning and encouraging theemployee to self-evaluate. This is important, since it puts Mikeand each employee on the same side and, even more impor-tant, it puts some evaluative and problem-solving responsibilityjust where it should sit—on the shoulders of the employee.Why? The employee is the only person who is there for everyjob task he or she performs, the constant observer of perform-ance. The manager is not. Despite what most managers think,an employee doing a job for eight hours every day knows a lotmore about the job than the manager and is in a far better posi-tion to solve job-related problems than anyone else. If theemployee isn’t allowed the opportunity to do so, a very valuablebenefit of the performance review is lost.Narrow vs. Broad Views of PerformanceIneffective performance reviews tend to focus almost entirelyon what the employee has done and what the employee needsto do to improve his or her performance. That’s in line withsome of our cultural values that suggest that we are the mas-ters of our fate and we control our behavior and the results ofthat behavior. The problem is not that these cultural values arecorrect or incorrect, but that they are incomplete. The behav-iors of an employee, the results, and the contributions are
  28. 28. A Tale of Two Performance Reviews 13affected by various factors, many of which are not under thecontrol of the employee. If our goal is to improve perform-ance, we must look at a broader spread of causes and notonly at the employee. Even the most talented employee isgoing to have difficulty performing well if he or she lacks thetools, is impeded by poor business and production planning, isnot given sufficient resources, or is adversely affected by thework environment. So, it’s important—particularly when tryingto determine “what went wrong” and “how to fix it”—to lookbroadly for causes and solutions.Skilled Managers vs. UnskilledJust as employees differ in terms of job skills, managers varyin terms of the job skills required to manage employees or,more specifically, to plan and conduct performance reviews.Almost anyone can sit down with an employee, tell where he orshe screwed up, and threaten with punishment. We’re fairlygood at that. To lead a performance review that builds positiverelationships and improves performance requires moreadvanced interpersonal, communication, and problem-solvingskills. In short, it takes little skill to do something badly. It takesfairly sophisticated skills to do something well. The skills of themanager have an effect on the success or failure of the per-formance review process.Generic vs. Specific ToolsThere is a strong tendency for HR departments to want a con-sistent method for evaluating, reviewing, and documenting per-formance. They havesome valid reasons for Dialogue—Anwanting this, at least from Effective Countertheir perspectives, since it If you are given generic tools to use,helps them do their jobs generic forms that you must use, youand makes their lives easi- counterbalance them with a focus oner. Since personnel records communication and dialogue with the(and usually documents employee. Dialogue allows you torelated to performance succeed in spite of poor tools.
  29. 29. 14 Manager’s Guide to Performance Reviewsreviews) end up with HR, they usually provide a standard formor set of forms for managers to use. Since the forms are “standard,” they are by necessity gener-ic and not related specifically to any one particular job. In somecases, more sophisticated HR departments will provide differentforms for managers and for janitors, for example, but nonethe-less standardization is an important goal for HR departments. The problem, though, is that a generic set of forms doesn’tbring out or record information specifically enough to helpmanagers and employees improve performance. If managersfollow the form and the standard processes suggested orrequired by HR and do only the minimum (completing theform), the process becomes virtually useless. That’s becausegeneral estimates of employee attitudes or skills aren’t going toimprove anything—although they are good at making employ-ees angry. To improve performance, you need specifics andyour employees need specifics. As a manager, you may be working with performance reviewtools that are flawed and way too general. That’s a good exampleof how your performance can be affected by an outside variable.The solution, apart from lobbying to improve the tools, is to gobeyond them. Nobody requires you to limit your discussions dur-ing performance reviews to only what is on the form. Get specific.Behavior/Results vs. Personality/AttitudeWhen you look at performance, you can look at a number ofthings, such as the following: • observable behavior • observable results • quantifiable contributions • personality • attitudes Generally we believe that people’s actions are very muchaffected by their personalities and attitudes. I’m not going todebate the issue of whether that’s accurate or, if so, to what
  30. 30. A Tale of Two Performance Reviews 15extent. That would take a book devoted only to that subject. What I can say is that a fast way to completely destroy thevalue of performance reviews is to focus too much on personal-ity and attitude. Here’s why. Most of us are a little sensitiveabout discussing our actions and behaviors when there’s a pos-sibility that we’ve done something inadequately. Discussing ourattitudes or personalities, though, almost always makes usdefensive, if not angry. Take a look at the following statements,all of which address personality or attitude. • If you were more aggressive, you’d probably do better. • Sometimes it seems like you are lazy. • I think the fact you are so introverted and shy makes you less effective. • People have commented on your poor attitude. Statements like that, used in performance reviewmeetings, are bound tocause problems. Perhaps Do You Need tonot for everyone, but for Discuss Attitude?most people. We simply You may feel you must dis-don’t like being judged on cuss an employee’s attitude. Alwaysthe basis of who we are. If start with behavior first. For example,we have to be judged, “You’ve missed a lot of work lately.we’re more comfortable Let’s discuss why that’s been the case” is better than “Your attitudebeing judged on the basis about work seems to be affectingof what we’ve done, since your attendance.”that judgment is a littleless personal. There’s a way to address attitudes and personalities withinperformance reviews that’s not so destructive. We’ll talk in moredetail about this in Chapter 11, but here’s the trick: start withbehavior and actions. When you ask the question, “Why did thisineffective behavior happen?” track backwards from behavior tothese other, softer variables. Also, don’t do the tracking yourselfin this diagnostic process. You encourage the employee to do it,through appropriate questioning.
  31. 31. 16 Manager’s Guide to Performance ReviewsData as Accurate and Objective vs. Data as IndicativeParticularly when people use tools that seem to measure per-formance in a numeric way, as we find with employee ratingsystems, there’s a very strong natural tendency to treat thosenumbers or evaluations as being objective and accurate, partic-ularly after the fact. People forget that the “data,” such as rat-ings on a one-to-five scale, are still very subjective and do notreflect the same kind of measure as “real” numbers, like dollarsales or number of widgets produced in a month. Real numbers are quantifiable and if you count correctlyshould give you the same result no matter who counts. Theseare objective and accurate measurements. With rating scales,that’s not the case. The rating or number assigned reflects avery subjective judgment. Misuse happens and poor decisionsare made when that data is considered accurate and objective.It’s not. It’s not accurate because it really doesn’t involve meas-uring. It’s not objective either. Managers and companies that forget this can get into trouble.Treating any performance review data as objective and accuratewhen it is probably not can result in poor personnel decisions.It’s best to treat all performance review data, except that deter-mined by real quantitative measurement, as performance indica-tors, but not accurate exact measurements of performance.Overemphasis on Manager vs. EmployeeRelated to earlier comments about doing to employees and work-ing with employees, performance reviews that succeed and addvalue tend to emphasize the employee’s input rather than themanager’s. Both, of course, are important. The manager providesa sounding board for the employee and is an important source ofinformation about how performance can be improved. However,the ultimate goal is to encourage employees to review their per-formance all the time. For that they need the opportunity to learnhow to do it. So, if you want a performance review system thatruns at maximum potential, it’s good to keep in mind that youwant the employee doing most of the “review work.”
  32. 32. A Tale of Two Performance Reviews 17Integrated vs. Dangling or DisconnectedThe last item that distinguishes effective performance reviewsfrom ineffective is the degree to which those involved (execu-tives, HR, managers, and employees) understand how perform-ance reviews are linked to other processes in the workplace. The awful reviews tend to be unconnected to anythingimportant (except perhaps pay) and are seen as largely irrele-vant to regular day-to-day life. They become a task viewed asan imposition and a burden, something to get out of the way,rather than a valuable tool that helps the company, manager,and employee succeed. On the other hand, effective performance reviews arealmost always linked to other things. For example, they shouldhave links to strategic planning, tactical planning, training anddevelopment, system and production improvement, and per-sonnel strategies. Performance reviews work within a system ofperformance management that includes performance planning,communication during the year, and ongoing performanceproblems. We’re going to explain all these linkages, particularlyin Chapters 2, 6, 8, 10, and 11. For now, it’s enough to say thateffective performance reviews need to be linked to other impor-tant processes and that all the parties understand those links.That creates meaning and perceptions that the performancereviews are, indeed, relevant to everyone.Jessica, Mike, and YouWe’ve explained a significant mystery here—how two managersand two companies can both have performance review systemsin place and yet achieve drastically different outcomes. The rea-sons are, in one sense, very simple. Jessica and Aquatech, onthe one hand, and Mike and Waterworks, on the other hand,have very different understandings of what performance reviewsshould do and how they should be done. Those different under-standings affect what the managers do—and that’s the key. As Isaid earlier, if you could sit in on the review meetings at those
  33. 33. 18 Manager’s Guide to Performance Reviewscompanies, you’d be hard pressed to identify many similarities.They are doing completely different things, but calling them bythe same name. The complexity comes from the sheer number of differences.Effective and ineffective performance reviews are different in somany ways. Consequently, to go from ineffective to effectivemeans that most of the characteristics of poor reviews need tobe altered or, if they cannot be changed, worked around. Whether you are like Jessica or like Mike or somewhere inbetween, the good news is that it’s possible to turn thingsaround. You can’t do it overnight, but you can do it—and youcan start seeing results quickly and little-by-little improve-ments. Here’s a starting point for you. Use the checklist that followsto identify the barriers you need to remove to improve your per-formance reviews. • Definitions are unclear and you and your employees have no common understanding. • Reviews focus on past and not present and future. • The emphasis is on blaming rather than solving problems. • Reviews focus too much on the forms rather than the communication process. • Managers dominate and control rather than share control. • The view of performance is very narrow. • Managers lack the skills required to conduct reviews. • The tools are too generic and not customized.Manager’s Checklist for Chapter 1❏ Examine how you do performance reviews now. Identify whether your reviews more closely resemble effective reviews or ineffective reviews, as outlined in this chapter.❏ Recognize that poor performance reviews make you look foolish and ineffective to your employees and damage your credibility as a manager.
  34. 34. A Tale of Two Performance Reviews 19❏ Commit to the idea that the primary function of perform- ance reviews is to improve performance—and not to find someone to blame for actions past.❏ Evaluate the tools you use to review performance. If they are lacking, begin thinking how you can have them changed and improved or how you can supplement them.❏ Give careful thought to the idea that performance is not completely under the control of the individual employee, just as you don’t have total control of your own perform- ance, and that to improve performance you need to take a wider look at what impedes individual performance.
  35. 35. 2PerformanceReviews in theScheme of ThingsA t this point I hope you’ve bought into the simple premise of this book—that performance reviews must add value to thecompany, to you as a manager, and to your employees. If theydon’t serve any function for the company, it’s hard to justifydoing them at all. No value, just cost. As a manager, if youcan’t see the value of doing them, then you won’t want to dothem or you won’t spend the time to do them properly. Let’s notforget the employees, a group we often ignore. If employeesdon’t see value for themselves, they aren’t likely to cooperateduring the process. In this chapter we’re going to talk about laying the founda-tion so that the performance review adds value. In particular westart from the premise that by itself, and unconnected to other“things,” the performance review is virtually useless or evendamaging.20 Copyright 2004 by The McGraw-Hill Companies, Inc. Click Here for Terms of Use.
  36. 36. Performance Reviews in the Scheme of Things 21Reviews as Just One Part of a Larger SystemIn Chapter 1, I mentioned that one difference between reviewsthat work and reviews that don’t is that effective reviews areconnected to other things in the organization. They don’t dan-gle. Here’s what that means. What happens before the meetingsand after the meetings is at least as important as what happensduring the meetings. If nothing relevant goes on before andafter, there’s almost no point in doing reviews at all. The performance review or performance review meeting isonly one part of an overall strategy for improving performancethat we call performance management. Performance manage-ment is an ongoing communication process, undertaken inpartnership, between an employee and his or her immediatesupervisor that involves establishing clear expectations andunderstanding about the following: • The employee’s essential job functions • The ways in which the employee’s performance con- tributes to the goals of the organization • The meaning, in concrete terms, of “doing the job well” • The ways in which employees and supervisors will work together to sustain, improve, or build on current employee performance • The means of meas- uring job perform- Performance manage- ance ment Ongoing communi- • Identification of bar- cation process between employee and supervisor for the pur- riers to performance pose of improving job performance and actions to and contributions. Performance man- remove them agement is a system.That is, it has a The performance number of parts, all of which need toreview is just a part of the be included if the performance man- agement system is to add value to thewhole that is the entire organization, managers, and employ-performance management ees. One of those parts is the per-system. What are the other formance
  37. 37. 22 Manager’s Guide to Performance ReviewsPerformance PlanningPerformance planning is the starting point for performancemanagement and it is essential in laying the groundwork foreffective reviews later on. Performance planning is the process of communication between manager and Performance planning employee intended to cre- A process of communica- tion between manager and ate agreement about what employee so both are clear on what the employee is to do, the employee is expected to do or how well he or she needs achieve in the coming year and how to do it, and why, when, success is to be determined. and how success is to be determined. Performance management starts here. When each employ-ee has goals that he or she and the supervisor understand com-pletely and in the same way, it’s more likely that the employeewill succeed. It’s the achievement of these goals that’s going toform the basis for the performance review later in the year. Inother words, first you plan for performance by setting the tar-gets for the coming period/year; then, you use the performancereview to examine whether the employee met those goals andmake sure any problems are addressed. Imagine you and your family are going on a trip. You get thekids ready, make sure there are enough toys to keep the kidssane (you hope!), make sure the car (these days it’s probablyan SUV) is mechanically sound, and hit the open highway. Youdrive eight hours the first day and stop at a motel. In the morn-ing you set out again and, at the end of the day, stop at anothermotel. After dinner you convene a family meeting where youreview the trip. “So,” you might ask, “have we had a goodtime?” Another useful question might be “Did we get to wherewe wanted to go?” Think of it as an informal performancereview of the trip. Unfortunately, it doesn’t make a lot of sense to ask thesequestions and expect useful responses, because you and yourfamily didn’t do any planning. You had no goal or destination.
  38. 38. Performance Reviews in the Scheme of Things 23There wasn’t even a common understanding of the purpose forthe trip. Was it to attend favorite Aunt Sarah’s funeral in NewJersey? Was it a vacation to the beach? Was it to scout out atown you might want to relocate to? Obviously, you can’t decidewhether the trip was useful or achieved its goals, if you didn’tset any goals and nobody knew why you were making the trip. The lack of planning prevents you not only from answeringquestions about how well the trip went, but also from asking theright questions. If the pointof the trip was to go to Don’t SkipAunt Sarah’s funeral, then Performanceyou might ask, “Do you Planningthink we helped nieces Some review systems and forms areNancy and Rebecca set up so that you can complete them without having done any performancethrough a tough time?” You planning at all. For example, ratingwouldn’t ask, “Well, did we systems can be completed withoutall have a good time and any planning. Regardless of whetherwin money at the casinos?” your formal review system requires Proper performance performance planning or not, do it!planning is the bedrock of Don’t let the forms dictate.any review. Unless you firstdetermine your goal, you can’t know if you got to where youintended to go and you certainly can’t know why not. There’s one more element to the performance planningprocess. Both manager and employee must share a commonunderstanding of what’s expected. If you look to our travelmetaphor, imagine how the “trip review” meeting would go ifeach member of your family had a completely different idea ofthe purpose for the trip. Most probably, your meeting would bechaotic and cause frustration and anger. Your teenager wouldn’tagree with your six-year-old and you might not agree with yourspouse. It’s the same with performance reviews.Ongoing Performance CommunicationIf you look at performance reviews and how they are often usedin the workplace, you come across a startling, scary phenome-
  39. 39. 24 Manager’s Guide to Performance Reviewsnon. Many, if not most, managers and HR departments see theperformance review as a once-a-year event. It’s “something toget out of the way so real work can get done.” This view andthe resulting behavior virtually guarantee that the performancereview meetings will fail miserably and ensure that there will bea lot of bad feelings associated with the meetings. Why? Jessica in Chapter 1 is the prototypical manager who setsup performance reviews so they fail. We identified some of thethings she does to destroy any value they might have, but let’sconsider one more thing. Every year, once a year, Jessica meets with Freddy, one ofher staff. Now, Freddy has always “come out OK” from themeetings. This year, in the annual meeting, Jessica says toFreddy, “Freddy, I’m sorry to say that your performance thispast year has been horrible and, if it doesn’t improve in the nextthree months, we’re going to have to let you go.” How do youthink Freddy is going to react to this bolt of lightning? Of course Freddy will be upset because, for all intents andpurposes, he’s been shanghaied. After he gets over his shock,if he doesn’t do anything stupid, one of his questions is goingto be “Why the hell didn’t you tell me earlier?” A very goodquestion! Surprising Freddy this way is certainly going to make themeeting exceedingly unpleasant. It also calls into questionJessica’s motives. If Jessica is interested in helping Freddy suc-ceed, than doesn’t it make sense to bring up the performanceissues much earlier in the year and work with him so he canimprove? If, however, Jessica’s motive is to get rid of Freddy,then it makes sense to not tell him until the performance review,so he has less chance to fix things. We can’t know Jessica’s motives, but one thing is sure. Bydropping this bomb, she’s destroyed any trust or positive rela-tionship she might have had with Freddy. That’s bad enough,but she has also damaged her relationships with all her staff.This is not going to remain a secret: Jessica’s other employeesare going to know.
  40. 40. Performance Reviews in the Scheme of Things 25 Performance reviews done in the absence of ongoing com-munication about performance throughout the entire year costbig time. Ongoing performance communication is a two-wayprocess throughout the year to ensure that job tasks stay ontrack, that problems are red-flagged before they grow, and thatboth manager and employ-ee keep current. A Continuous Ongoing communica- Processtion isn’t just to build and Thinking of performancemaintain good relation- reviews as annual events invites prob- lems. You can avoid many of thoseships between manager problems through ongoing perform-and employee. It might be ance communication, which involvesthat that is the least impor- manager and employee in discussiontant part of the process. and dialogue to keep performance on In terms of the success track and to identify problems earlyof the company, the work on so they can be addressed as soonunit and the manager, the as possible. It occurs all year round asmost important function of needed—and it’s always needed all year around.ongoing communication isto help identify problemsearly so they can be addressed early. Let’s look at Freddy again. Assuming that his performancehas dropped significantly during the past year, the companyand the work unit have suffered from the performance deficitsfor a complete year. Maybe they’ve lost sales or customers.Maybe the quality of their products has declined. Maybe newproduct ideas have dried up. Whatever Freddy was expected tobe accomplishing, his poor performance has hurt. Even ifFreddy cleans up his act in the upcoming year, whatever waslost is lost forever. That’s not a “touchy-feely” loss. That’s a bot-tom-line financial loss that can never be recouped. Contrast this result with how this situation is handled byMike, our excellent performance reviewer. Early in the year,Mike notices some things that hinted at problems with Freddy’sperformance. While Jessica felt she was too busy to watch overemployees, Mike felt it was important to keep at least one eye
  41. 41. 26 Manager’s Guide to Performance Reviewson things during the year. Rather than waiting until the end ofthe year, he intervened. Equipped with some observationsabout Freddy’s behavior, he talked with Freddy, or rather led adiscussion with Freddy about performance. It turned out thatFreddy was having some family problems. Mike and Freddy worked together to ensure Communication Freddy got the help he Yields Flexibility needed and, within a few Ongoing communication weeks, Freddy’s work during the year also allows shifting started to return to his gears and changing the parameters of previous levels. an employee’s job when it is required. Do you see the differ- Details of performance expectations can be changed. Performance plans ence? Since Mike paid can be revisited.This creates a contin- attention and acted quick- uous feedback loop so it’s possible to ly, losses to the company respond quickly to changes in the and work unit were mini- environment. mized. A side benefit was that Freddy very muchappreciated Mike’s help and other employees heard of Mike’sefforts. The result: better relationships all around. Ongoing performance communication can be summed upin a single, simple two-word phrase—no surprises! By the timethe performance review rolls around, the employee should pret-ty much anticipate the outcomes of that meeting. Also, thereshould be no surprises for the manager. Any problems thatarose during the year should have been identified and discussedat the time. Solutions might already be in place.Gathering Data, Observing, and DocumentingThe next component of the performance management systemis gathering data, observing, and documenting. As part of aneffective performance management system, all three activitiescan occur anytime during the year. Data gathering and observa-tion are done during the year, outside the performance reviewmeeting; documenting happens during the year and during andafter the performance review meeting.
  42. 42. Performance Reviews in the Scheme of Things 27 If we are going to discuss performance during performancereview meetings, we can’t do that in a vacuum. To be mosteffective, performance discussions need data and substance.For example, it’s one thing to say, “Your performance is poor”and a completely different thing to say, “Last month, your pro-duction figures were down by 20% and I think we need to talkabout that.” The difference is huge. Discussions based on vague judgments are guaranteed tocreate bad feelings and, even more important, are not specificenough to help employees improve. Gathering data and observ-ing behavior and the consequences help keep discussionsfocused on more concrete and specific aspects of performance.That in turn makes it possible to work together to identify thewhy’s of performance—why performance may have been lessthan desired or why performance improved. The latter is impor-tant so both you and the employee know what worked, so it canbe repeated. Also gathering data, observing, and documenting whatyou’ve observed help you identify problems early on—providedyou are doing these things throughout the year. Let’s explain the meanings of “observing,” “collecting data,”and “documenting.” Observing refers to what you have seen orheard directly that relates to an employee’s performance.Observations may be based on an employee’s actual observablebehavior. For example, in a call center, monitoring calls wouldbe observing. In sales, it might be listening to how the employeeworks with customers. Another example: seeing how an employ-ee interacts with team members at meetings. Observations canalso be based on the results or consequences of an employee’sbehavior. For example, you might observe that at ateam meeting, severalmembers got upset when Observing The process ofthe employee used certain seeing or hearing or other-sexist phrases. You observe wise noting employee behavior and actions and/or thethe behavior and you results of those actions.observe the effects of that
  43. 43. 28 Manager’s Guide to Performance Reviewsbehavior on others. Both behaviors and consequences/resultsare part of your observations. Collecting data is a little bit different. Information exists inthe workplace that can indicate whether an employee is doingbadly or well. That information may be in the form of data. Hereare some examples: • Dollar value of sales by the employee • Number of complaints about the employee • Number of customer commendations • Days absent • Number of creative ideas generated and implemented This information can be extremely valuable during the per-formance review meetings. “Hard” data is less colored by opin- ion; it’s not completely Collecting data A objective but it’s better process of seeking out than vague comments. information/data related to Therefore, it’s a little less an employee’s performance, prefer- volatile to talk about num- ably in as concrete and objective a ber of days absent then to way as possible, during the year. talk about the employee’s attitude. You should collect data throughout the year, as an ongoingprocess, and not just a task just prior to a performance reviewmeeting. It spreads the load a little bit and it allows you to iden-tify problems during the year when it’s not too late to remedythem. It’s also fairer to the employee, because the data repre-sents the entire year and not just a short time that may not berepresentative of the year. Documentation is simply the recording of information aboutthe employee’s performance. That happens during the year, asneeded, and as a result of the interactions between you and theemployee during the performance review meeting. When docu-mentation is done throughout the year, the primary purpose is torecord important information so it won’t be lost or forgotten. Forexample, you might observe a customer-employee interaction
  44. 44. Performance Reviews in the Scheme of Things 29that went badly. Apart from dealing with it as soon as possible,you might also want to make a few notes so you can discuss theincident with the employee later on, without having to rely com-pletely on memory. Documentation based on the performance review meetingprovides a summary, on paper, of the discussions, conclusions,and action plans that are decided upon in that meeting. Usually,they are kept permanently in an employee’s personnel file.Performance Review MeetingsPerformance review meetings refer to meetings between man-ager and employee for the purpose of communicating andreviewing performance. It’s common for these meetings toresult in some sort of evaluation or appraisal, which is related tothe performance review, but different. Evaluation (or appraisal) of performance focuses on howwell or how badly the employee has done. Because evaluationsare usually undertaken for the purposes of rewarding and pun-ishing employees, they tend to put manager and employee ondifferent sides of the table. A performance review, while it may have an evaluativecomponent, is focused on improving performance regardless ofthe current levels of performance. It’s a problem-solvingprocess that puts employee and manager on the same side. The distinction gets fuzzy in real life, of course. You can useappraisals to improve performance and you can includeappraisals as part of performance reviews, but it’s important topay attention to the different focus and purposes. I firmlybelieve we should stop using terms like “performance apprais-al” and “employee evaluation” and instead use “performancereview” to reflect a way of looking at performance that isintended to add value to the company because it helps man-agers and employees improve performance over time. Since this book is about conducting effective performancereviews, you’ll find in subsequent chapters a lot more detailabout the process and how to make reviews work. One final
  45. 45. 30 Manager’s Guide to Performance Reviews Once-a-Year point: there’s a tendency Syndrome to think about perform- The performance ance reviews as a “once-review is a tool to improve perform- a-year event”—and that’sance. Don’t get locked into thinking not the case. In fact it’sof reviews as a once-a-year event, quite possible to havesince you may find you gain more by review meetings at anyhaving them more often.You need to time. Some managersdecide how often based on some rea- have short, five-minutesonable cost-benefit estimate. performance review mini- meetings once a month.Performance Diagnosis and Problem SolvingLet’s recap where we are in the overall performance manage-ment process. We started with performance planning, workingwith the employee to clarify job roles, responsibilities, andexpectations. We communicated all throughout the year aboutperformance, so we could catch problems early and so therewould be no surprises during the review meeting. We gatheredinformation and made some observations of the employee’sperformance, again throughout the year, and we reviewed per-formance with the employee. None of that has any value unless we can somehow use thisprocess to improve performance. We’ve talked and clarified andnow we need to move closer and closer to creating a plan ofaction to improve performance, regardless of the current levels. Performance diagnosis and performance problem solvingare the missing link between talking about performance andimproving it. Performance diagnosis is the process by which you workwith the employee, applying information to identify the underly-ing causes of poor performance and reasons why performancehas been good and to identify barriers to better performance inthe future. Clearly, unless you know the why’s of performanceyou can’t develop a plan to remedy or improve it. You can’teven figure out how to maintain existing performance when it isat a high level.
  46. 46. Performance Reviews in the Scheme of Things 31 Performance diagnosis The process of working with an employee to discover the why’s of performance. It results in answers to questions like these: • “Why is your performance declining?” • “What barriers have you been hitting that are affecting your per- formance?” • “Why has your performance improved this year?” When does performance diagnosis happen? It should be amajor part of the performance review meeting, but if that’s theonly time you apply the diagnostic process, you’re going to beless effective. It’s also a year-round process, as is its compan-ion, performance problem solving. Performance problem solving is the process by which youidentify and create a strategy—an action plan, if you like, toaddress and remove the barriers to performance you identifiedusing performance diagnosis. Or, on the positive side, it may sim-ply be to identify the actions you want the employee to continue,since they have been successful. Again, let’s not focus only onwhat’s not gone well. Yes, we need to fix problems, but we alsoneed to know what’s going well, so it can continue to go well. By the end of performance diagnosis and performanceproblem solving, regardless of whether it’s part of the reviewmeeting or not, you shouldend up with a set ofactions that you, the For One and for All When you diagnose a prob-employee, the work unit, lem with an employee andand/or the company are formulate a successful plan of actiongoing to undertake. If your to remove a barrier, you will oftendiagnosis and problem- find that the same issues apply tosolving outcomes are others who do similar jobs. So, thisaccurate, you will end up process not only can help you towith better performance. improve the performance of the one Here’s an example. employee, but also can provideDuring the performance insights and information that you can often apply to improve the perform-review, Mike, the manager, ance of many employees.and Bob, a salesperson,
  47. 47. 32 Manager’s Guide to Performance Reviewswent over some of the yearly sales figures and found that Bobwas doing well selling to customers whose first language wasEnglish but was making virtually no sales with those whosemother tongue was Spanish. During the diagnostic discussion,Bob and Mike decided that Bob’s inexperience with the cultureand language of a major group of customers negatively affectedhis ability to work with them. (That’s the diagnostic part.) Theyagreed that it might help if Bob did two things: first, learn moreabout the Hispanic culture and Hispanic customers, and sec-ond, take some basic Spanish lessons. The idea was to showpotential customers that Bob (and the company) valued theirbusiness enough to try to speak their language. The result wasthat Bob’s sales figures rose in that demographic. The companydecided to follow similar strategies with some of its other staffmembers who expressed an interest. This is a great example of how the diagnostic and problem-solving process can work. Not only can it succeed in improvingone individual’s performance, but also the ideas generated canbe used to improve the performances of others.Action and Following Through on CommitmentsIt’s easy to take for granted that any plans and commitmentsemerging from the performance review and diagnostic processare going to be implemented—that there will be follow-throughand follow-up. It’s dangerous to make that assumption. If, forwhatever reasons, those plans and commitments do not turninto actions, the whole value of the process is lost. After all, wedon’t do performance management for the fun of it or to have afine old chat. So the last component of the performance managementprocess is to follow up and follow through. That means check-ing to make sure commitments are being kept and to monitorprogress of the implementation plans. In the example above, Mike and Bob agreed to meet again amonth after the review/diagnostic meeting to discuss theirprogress. At that meeting, Mike indicated he’d gotten approval
  48. 48. Performance Reviews in the Scheme of Things 33from the company to pay for the language lessons and seminaron Hispanic culture and history and Bob reported on varioussources for training. At that point they agreed on everything andthey proceeded to implement the plan. Also, at the meetingBob came up with another suggestion—to pair with a Hispanicemployee who would serve as a mentor. So, they set that up.Periodically, they’d talk informally about how things were going(ongoing communication).Summing UpYou may have noticed that the overall performance manage-ment process we described isn’t linear. The steps aren’t neatand ordered. There’s overlap. For example, diagnosing per-formance is usually part of the performance review meeting,but it’s also something that can stand alone. A lock-steppedmechanical process for managing performance isn’t a goodidea: it’s not flexible enough. If you keep in mind the purpose—to improve performance—and don’t get locked into inflexiblerules, you’ll do far better. The exception to this is this rule: tobenefit from the process, you have to do all of the steps.Other LinkagesNow that you have a sense of how the performance reviewworks as part of the performance management system, let’slook at how the performance management system fits in withother things that go on in your organization. We certainly don’twant performance reviews to dangle, unconnected to the relat-ed steps of performance management, since they would losetheir value. Similarly, the performance management systemshouldn’t dangle either. By understanding how it connects to theother things the organization does, you can maximize the valueof the entire process. One thing you will notice about the rest of this chapter isthat it doesn’t discuss the linkages between performance reviewand pay, promotion, reward, and punishment. There’s a reason
  49. 49. 34 Manager’s Guide to Performance Reviewsfor this. Performance reviews work best when they are notlinked to rewards and punishment. I also recognize that it’s like-ly (and even sensible) that they are linked in your company. Notto worry. The use of performance management and perform-ance reviews to make personnel and salary decisions will bediscussed in detail later in the book.Strategic Planning and Unit/Company GoalsAre you comfortable with the idea that an employee’s truevalue is related to how well he or she contributes to the goals ofthe work unit and the company? You should be. Believe it or not, it’s not uncommon for employees to be lowcontributors because their jobs and responsibilities have notbeen carefully planned and “rationalized” in terms of the workunit’s goals. Theoretically, everything an employee does shouldresult in a contribution. The link between the unit/company goals and perform-ance management is important. In a well-functioning compa-ny, here’s how it works. The company has goals, targets, andso on for the upcoming year and for several years beyond that. Your work unit’s From Unit Goals to goals should map out Employee Goals what and how the unit is When establishing goals for to contribute toward an employee, the starting point should achieving the company be the goals of the work unit, to ori- goals. Then it cascades ent and align the smaller goals with down. Each employee’s the larger goals, so that if the employ- ee achieves his or her goals, by neces- performance goals and sity the employee is contributing to responsibilities are the goals of the work unit. derived from those of the work unit. The linkage is forged during the performance-planningphase of performance management. That’s why it’s so impor-tant to put the employee’s work in the context of the work andgoals of the work unit. Do that and you start to maximize indi-vidual contributions.
  50. 50. Performance Reviews in the Scheme of Things 35Training, Development, and Succession PlanningHow do you decide how to allocate money and resources to thetraining and development of your staff? In many companies,decisions about training and development are made without anyrational rhyme or reason. Sometimes, training is arranged whenthere is a budget surplus you need to get rid of. Other times,employees make a request when they see a need and therequest is approved or rejected based on very fuzzy criteria.When there’s no way of determining what training is needed andwho should receive it, training budgets end up wasted. Like per-formance reviews, the purpose of training and developingemployees is so they can increase their contributions to thecompany. Without some sort of links to the company’s goals,the work unit’s goals, andthe performance levels andjob tasks of employees, Anticipate Needs When planning for train-you’re wasting money. ing and development, look How should you decide at past and present performance andon allocating training and anticipate what the employee mightdevelopment resources? need to cope with a changing envi-By using the information ronment in the future.Training andand analyses you create development should reflect what willwith each employee during be needed in the future, even if it isthe review meetings to not needed right now.determine how best toimprove performance. The results of the reviews drive the deci-sion-making process. Once you’ve identified barriers to performance or opportuni-ties to improve performance and you understand why theyexist, you investigate whether the causes of the barriers couldbe remedied through training and development. If so, then youallocate resources. If, however, the true causes of the perform-ance deficit cannot be addressed through training, then youdon’t allocate resources to it.
  51. 51. 36 Manager’s Guide to Performance ReviewsBudgeting and SpendingThe performance review and larger performance managementprocess can and should be used to make decisions about budg-eting and spending. It’s rather amazing that it usually isn’t usedto make financial decisions. As a result, performance manage-ment loses some of its potential value. Before we look at the link between budgeting and spendingand performance management and review, here’s a brief, com-monsense look at the financial functions. It’s a bit simplified, butfor our purposes it works. When you budget or spend money,you want to maximize the benefits from spending. Not only doyou want the best value when you purchase something, but youalso want to have it contribute to whatever goals you may haverelated to the purchase. In well-run organizations, budgets aredecided and spending is approved based on the need for theexpenditure and the value of the expenditure with respect to theorganization’s goals. So, the organization may pay for trainingwith the expectation that better trained employees will performmore effectively. Now the question: how do you know whether a particular purchase or expenditure will actually help your com- pany achieve its goals? Finding Unnecessary Sometimes you guess. Expenditures Sometimes you may feel When you begin to link you “just know.” Or, you performance management and review decide on expenditures to expenditures, you might be quite based on an analysis of surprised at the number of expendi- tures that really have no reason, your present, past, and almost no potential to improve over- future goals. all performance. One common exam- Here’s the link. When ple is updating computers. Quite fre- you focus on identifying quently companies do that and performance barriers, receive no additional value, since their diagnosing performance current computers are quite capable issues, and developing of handling the workloads. Finding plans to overcome those cases like this is managing smart. barriers, you can use that
  52. 52. Performance Reviews in the Scheme of Things 37information to decide on what you need to purchase. It’s amethod of tying expenditures to productivity, beginning at thebottom of the organization. For example, during performance reviews with your staff,you identify some production problems. Several of your staffare under-performing in their job tasks. In discussions withthese staff members (and others as well), you discover that thereason that productivity is less than maximal is that some of thetools available are no longer state-of-the-art. If that diagnosis isaccurate, it’s clear that to solve the problem, you need to pur-chase new equipment. Of course those purchases need to beplanned with respect to other corporate issues. The perform-ance review and problem-solving process tells you about howyou can best spend your available resources.Manager’s Checklist for Chapter 2❏ The performance review becomes useless if it is not con- nected to the other steps in the performance management process.❏ Pay special attention to what goes on outside the review meetings. In particular, by investing time up front in per- formance planning, you will generate more benefit from the review meetings and keep them shorter.❏ Live by the credo of “no surprises in reviews.”❏ Make sure you have effective communication with your staff throughout the year. That way you not only prevent surprises, but also catch problems before it’s too late.❏ You can use the information you collect in the performance management process to make more effective decisions about training, development, budgeting, and spending.
  53. 53. 3UnderstandingPerformance—Good and BadL et’s restate a key point. The real value of the performance review comes from its function as a communication vehiclefor manager and employee to identify barriers to performanceand develop plans to eliminate or overcome those barriers. Itsmajor purpose is to help everyone succeed to the extent possible,so that the employee, the manager, and the company all benefit. Can you use performance reviews for other things? Yes. Willyou do so? Probably. Still, if you don’t use the review process toimprove performance, then it becomes a cost and not an asset. One of the reasons performance reviews end up ineffectiveand disliked by all is that managers leading the process applyan inaccurate idea of performance and what causes it. It soundsfunny, when you think about it. Performance seems like a verysimple concept. How can people get it wrong? Many managers believe that performance, good or bad, istotally under the control of the individual employee. If you startfrom this assumption about employee control, it’s only logicalthat you review performance as if the employee is responsible for38 Copyright 2004 by The McGraw-Hill Companies, Inc. Click Here for Terms of Use.