CHAPTER 1

How to Plan, Conduct, and Write a Performance Review

Undertaking formal performance appraisals is not an activity most managersrelish, but it's an important part of the job of a manager. You have anopportunity, by reviewing performance effectively, to directly and positivelyaffect the future productivity of your employees. Conducting an effectiveappraisal means more than just filling out the form your company uses, however.What goes on before you fill out the form is critical to getting the resultsyou're looking for.

If all you want to do is get forms filled out, skip ahead to Part Two. If youwant to accomplish something worthwhile that will make your life easier,continue reading.

As part of the appraisal process in many organizations, the manager and employeehave a meeting where the manager explains the appraisal process and the criteriafor judging performance. If the process involves goals, the manager and employeediscuss and agree on what they both would like to see achieved over a certaintime period (usually a year) and, perhaps, the kind of resources the employeewill need to succeed. If you are responsible for defining employee goals, thenuse the initial meeting to explain these goals (and how you will work togetherto achieve those goals, if appropriate).

Throughout the year, document significant behaviors that are worthy ofdiscussion during a performance review. Keep notes as you observe theperformance of your employees. It's simple and easy to do—far easier thanwaiting until the end of the year and then trying to recollect what happened.

Setting Performance Goals

What is a goal? It's an agreed-upon statement of what an employee willachieve in a specified period. A goals statement should also outline theresources necessary to achieve the goals and how you and your employee willmeasure success.

Each goal should be measurable, attainable, moderately difficult, and acceptedby the employee. Here are some examples:

* Number of rejected items from manufacturing line will not exceed 0.3 percentper week.

* Sales per quarter will increase by 5 percent.

* Expense account will not exceed budget.

* Sign up five new customers per month.

In other words, goals should be measurable and aimed at improving theperformance of the employee. Well, so the theory goes. Actually the tricky partis "measurable." It turns out that the things that are easy to measure areusually trivial, and the things that are hard to measure are what separate agood employee from a lesser one. That doesn't mean we give up on measurablegoals. It does mean that perfection is not possible.

Why do we write goals? Written goals allow you to both measure andrecognize achievement. They also let you identify and correct performanceproblems, and they enable you to identify and focus on your top priorities. Aimto limit the number of long-term goals to no more than five. You can writeadditional short-term goals for projects that can be completed in a few weeks ormonths.

How do you write goals? To write goals, you first need to collectinformation from your own records and those of your employees. The next sectionexplains the kind of information you might use.

What kind of information will you need? You and your employees can bestanswer this question because it depends on the specific situation and each job.Some guidelines:

Most goals that relate to productivity are generally expressed in terms thatinclude:

* Volume of work

* Accuracy of work

* Time to produce X

* Cost per unit of X

Volume measures the amount of work performed, for example, the numberof:

* Orders entered

* Cartons packed

* Requisitions written

* Documents filed

Accuracy measures the degree to which the work is performed free oferror, or the quality of the work, for example, the percentage of:

* Orders entered accurately vs. inaccurately

* Cartons packed correctly vs. incorrectly

* Requisitions written correctly vs. incorrectly

* Documents filed accurately vs. inaccurately

Time measures the duration of work performed, per hour, per day, perweek, per month, or per year. Examples include:

* Claims processed per hour/day/week

* Requisitions received and written on the first day/second day/third day

* Documents received and filed on the first day/second day/third day

Cost measures the dollars spent for work performed. For example:

What if goal achievement is difficult to measure? There may be timeswhen an employee has goals that you cannot easily measure. This does not meanthat you should not have such goals. Just be certain to have some criteria forevaluating the level of achievement. Here are some examples:

* Monthly reports. "Performance is acceptable when I turn in completedmonthly reports no more than two times late in any four-month period, withoutmore than one incident of it being more than one week late in any six-monthperiod, and when it is accepted by my boss in all cases with no more than tworevisions that are completed in no more than one week."

* Forecasting. "I will not fail to bring to my boss's attention adversetrends in my performance before the failure point is reached. This will happenno more than two times in any 12-month period."

* Employee development. "Performance is acceptable when training,motivation, and appraisal are discussed during at least two meetings annuallybetween me and each of my direct reports."

Documenting Critical Incidents and Significant Behaviors

An important part of the appraisal process involves recording incidents andbehaviors that are out of the ordinary. These are referred to as "criticalincidents" and "significant behaviors." A critical incident is behavior that isusually extreme (either good or bad) and that should be recorded for legalreasons, for disciplinary measures, or for purposes of recognizing exemplaryactions "above and beyond the call of duty." A significant behavior is one thatcan make a real difference in an employee's performance.

There are many reasons you should keep a record of employees' significantbehaviors:

* It increases the accuracy of the performance appraisal, because it's based ondocumentation rather than memory.

* It provides evidence to support ratings.

* It helps guarantee that you'll consider the performance during the entireappraisal period.

* It reduces bias that occurs when you rate only the most recent behavior.

To be as accurate as possible, write down significant behaviors as soon aspossible after you have observed the behavior. Record only the specificbehavioral facts of the case. Do not include opinions. Do not rely on hearsay!To ensure that the documentation is a representative record of an individual'sperformance, document performance during the entire appraisal period.

In documenting behaviors, be consistent in how you do it. Use the same formatand the same level of detail with each individual. Document both productive andunproductive behaviors. Documenting significant behaviors helps to make theperformance evaluation interview more productive. You'll be more confident goinginto the interview if you have a record of behaviors to back up your ratingsbecause you'll be more confident you're rating your employee accurately.

Documenting significant behavior helps improve communication in the interview.There is less likelihood of disagreement about whether an event occurred whenyou have documented behaviors and incidents. It helps keep the tone of theentire appraisal constructive rather than judgmental. Instead of dealing withimpressions, you're dealing with specific examples of performance. Thediscussion can focus on how the performance can be improved in the future.Employees are better able to see their deficiencies. They know what they must doto improve.

The feedback to employees, both positive and critical, about significantbehaviors can enhance employee motivation to improve. When an employee sees thatspecific behaviors are noted and appreciated, he or she will feel good and workharder to generate such feedback. In the case of behaviors that undermineperformance, the employee may not be aware of the problems. Here are someexamples of significant behaviors you might note:

* Customer called after hours with urgent need for a replacement part to dealwith an emergency situation. Employee personally delivered part, substantiallyreinforcing the loyalty of an important customer.

* Made specific suggestion on manufacturing process that resulted in $50,000 insavings over a six-month period.

* Angrily reacted to an incident on the shop floor that intimidated otheremployees and made it more difficult to investigate what happened.

Accurate documentation of specific behavior and incidents allows an employee tounderstand which on-the-job behaviors are productive and which are not. Suchinformation gives employees what they need to improve.

Writing the Appraisal

If you've collected significant behaviors during this appraisal period, then thefirst step in writing an appraisal that will result in improved or continuedgood performance is to review these notes. Review also any results or othermetrics you have to judge how well the employee has met his or her goals.

Even if your appraisal form only calls for you to "check a box," you generallycan add comments to justify or explain the rating. In fact, if the appraisalprocess is to have any value to the employee, you must provide more informationthan a numeric rating. If you aren't required to make comments, you may want toconsider including them on the appraisal form anyway.

Combined with the significant behavior statements and actual work results,you're most of the way to completing a form and documenting an effectiveappraisal.

Common Performance Review Errors

Another thing you'll want to do is to review the common errors made during theappraisal process. It's a bit more complicated than you think—the businessof providing fair and objective feedback to employees—because ... well,you're human. You can easily avoid or reduce errors by understanding what errorsare common and following the suggestions below for dealing with them.

Contrast Error. The tendency to evaluate a person relative to otherindividuals, rather than basing the evaluation on the requirements of the job.An example would be rating someone low, even though he or she was above average,because everyone else in the department is superior. A review should be based oncomparing performance with established criteria.

First-Impression Error. The tendency to make an initial favorable orunfavorable judgment, which then serves as the basis for appraising futureperformance. All subsequent information is ignored or perceptually distorted. Byconsidering behavior throughout the rating period, you'll reduce this error.

Recency Effect. The tendency to give extra weight to what you have seenrecently and diminish the importance of observations you may have made earlierin the review period. In some cases it may be appropriate to weigh recentbehavior more than old behavior, particularly if it shows improvement.Otherwise, be sure to consider the entire period of appraisal.

Halo Effect. Generalizing from one aspect of performance to all aspectsof performance. People have strengths and weaknesses. It is important toevaluate all aspects of performance throughout the period of the review.

Devil Effect. The opposite of the halo effect, generalizing from one ortwo negative aspects of performance and becoming blind to the positive aspectsof the performance.

Similar-to-Me Effect. The tendency to judge more favorably those peoplewhose background is similar to yours. The more similar the attitudes andbackground, the greater the tendency to judge that individual favorably.Appraise performance and behaviors, not personality or background.

Central Tendency. Occurs when an employee is consistently rated at ornear the midpoint of the scale, regardless of the actual level of performance.This is a problem for several reasons. Such evaluations don't differentiatebetween good and bad performers. They're particularly damaging to the motivationof high achievers, and they don't provide a realistic basis for discussingactual performance and improvements during the appraisal discussion.

Negative or Positive Leniency. Occurs when an employee is rated too hard(negative leniency) or too easy (positive leniency). Again, it creates a problembecause the appraisal doesn't reflect true performance. With negative leniency,good performers may get tired of trying to perform well; no matter what they do,they'll be rated lower. With positive leniency, employees may have unrealisticexpectations about raises, promotions, or other career gains.

To reduce rating errors:

* Ensure the criteria being used are job-related.

* Rate employees in relation to the job responsibilities.

* Put other people's input into proper perspective and don't weigh it tooheavily. If you feel that this additional input warrants changes in theappraisal, discuss it with your boss.

* Consider all performance dimensions and realize that they are not alwaysrelated. A person can do very well on one dimension and perform poorly onanother.

* Don't rate people in any particular order. Don't rate all the best or worstperformers first.

* Don't compare the ratings of employees until after all employee evaluationsare complete.

Legal Issues

When an employment situation becomes a legal situation, there's no substitutefor proof—you must have records or other evidence proving that an employeedid or did not do something, whether it's stealing, lying, or being late toomany times.

What may be more important is that you document the communication you have withemployees, particularly when it involves discussion of performance problems.Generally, if you have not notified or discussed problems with the employee anddocumented those discussions, you have less backup if the employee accuses youof discrimination or similar charges. That means ensuring that the employeesigns any documents you keep about your communication with the employee.

Be alert for performance that's out of the ordinary, either good or bad, andmake a note of it. That way, when it comes time to do the appraisal review,you'll be prepared, and you'll be similarly prepared for court, should it evercome to that. The best way to deal with legal issues is to prevent them byconducting a competent, fair appraisal, demonstrating that you've invested a lotof time analyzing this employee's performance. Then conduct the review as wesuggest, and you'll substantially minimize the chances that your conduct wouldlead to a lawsuit or other legal action. Here are some specifics to remember:

* Keep copies of HR records even if the HR department also has these records.

* Maintain accurate performance data.

* Meet regularly with employees to provide the feedback and information theyneed to perform well, also reducing any surprises and the motivation to sue.

* Document, document, document.

Conducting the Review

How to talk about your employees' performance. The first thing you can do toconduct an effective performance appraisal is to make sure there are nosurprises in store for the employee. This means you should have communicatedwith your employees on a regular basis about how they are doing with theirparticular assignments and how they are collaborating with others.

The formal appraisal session should be mainly a way to summarize and continuethe informal interaction that has previously taken place between you and youremployees. It should also be a time to look at how you and the employee cancontinue to work well together in the future. Your job in this session is not totell the employee all the things you think he or she did wrong over the pastyear. One reason performance appraisal sessions are often dreaded is thatmanagers and employees feel the managers have to find something to criticizeabout the person being appraised. What can happen in that situation is that themanager might mention a negative comment the employee made or the fact that theemployee was late to work two times over the past six months or similar trivialpoints. This causes employees to feel resentful and become defensive, and itadds nothing to their motivation to improve performance.

Approach the person you're appraising as a partner rather than a judge. Thisminimizes hostility. Also, by focusing on your employee's development ratherthan on fault finding, you'll set a positive tone and the discussion becomesmore productive and easier for both of you.

You may be conducting a performance review because it's required, but it's alsoa great opportunity to help your employees achieve job goals. Talk with youremployees one-on-one about your expectations for them. Talk about goals,resources to help them achieve these goals, and what you're planning on doing tohelp. With some, you'll set goals to meet certain performance results;withothers, you might set target levels for different "ratings"; for others, thegoals might be related to on-the-job behavior; for others still, the goals mighttarget both behaviors and results.

Set goals, work toward them with your employees, and discuss what worked or didnot work at the next review. That's easier said than done! Nevertheless,employees want to know where they stand. They want to receive feedback on theirperformance. Both ongoing discussions and periodic performance appraisals enableyou to provide employees with this information.

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