This article was published by Washington, SMART CEO, May, 2006

Author: Les Shaver

David Baxa suspected that his company's regular performance assessments weren't serving their purpose. The president and CEO of VISTA Technology Services in Herndon, VA, knew his supervisors didn't put the necessary effort into the annual event. That meant his employees weren't getting the direction they sorely needed.

Unfortunately, Baxa isn't the only CEO that's wondered if he's getting the most from his annual reviews. The review remains an annual rite of passage in companies of all sizes across the country. Yet, many supervisors and managers don't know how to use it to get the most from their employees. By training managers on how to give reviews and provide consistent feedback throughout the year to employees, CEOs can take a big step toward fixing their annual reviews. By adding in a way to synthesize grades across departments and properly reward and filter employees based upon those grades, a CEO can develop a happier workforce and a more accurate picture of his organization's strengths and weaknesses.

BACK TO SCHOOL

When Baxa decided he needed to revamp the personnel reviews in his organization, he started with the supervisors.

"Each manager was trying to reinforce their own employees," he said. "Everybody's review looked the same. We tried to reinforce that we expect this to be a more critical and constructive process."

Addressing the management situation is often a good first step in fixing the review process, according to Ilona Birenbaum, principal and co-founder of The Wynhurst Group, a human resources consulting firm in Arlington, VA. While managers are often technically proficient at their jobs, Birenbaum contends many lack good performance management skills. This shows through when it's time for performance reviews.

"It is often not something that comes naturally for managers," she said. "One common pitfall for many companies is not putting an emphasis on developing managers and leaders to do an effective job of managing the performance of their staff."

To properly develop managers, organizations need to make a top-down commitment to training managers and arming them with the tools to succeed, said Ethan Gill, CEO of HR Advantage, a human resources and recruiting firm in Vienna, VA. "Even if it's basic training on how to track performance, human resources needs to train the managers on how to be great performance appraisers."

Basic skills help but, in many cases, it's best to send managers back to school.

"The managers and supervisors who sit down and write the evaluations, need to be trained on the process," said Brenda Tranchina, president of Human Resource Strategies, a human resources consulting firm in Tucson, AZ. "They need to be familiar with the evaluation tools and the ongoing process from making sure the employee understands their job duties, description, and expectations to sending them to an interactive class where they can learn to have performance conversations."

Even if you give supervisors all of the classroom training in the world, there's still a debate as to whether they'll be truly unbiased when handing out grades. When Baxa discovered that his supervisors were giving their employees high marks, he needed a way to synthesize his numbers. He figured the simplest way to do this was to bring all of the managers together to debate which highly rated performers actually deserved their marks.

"If one manager rates someone as a high performer he has to sell that to the other managers," Baxa said. "If he can't convince the other managers that an individual should be rated as a high performer, that grade probably won't stick."

Robert Acosta, CEO of Ventera, an information technology, professional services, and management consulting firm in McLean, VA, does something similar. He brings his senior managers together and the group rates employees on how they execute projects, how they represent the company, how they work in a team setting, and what they do to make themselves better consultants.

"We take those scores and compare everyone with their peers," he said. "We make sure that, before they sit down to get reviews, we have compared everyone."

Gill sees the value in these types of grading systems, but he thinks it's unnecessary if human resources give managers on-going training and support.

"The consistent training of what a four means or plus rating means is part of the managers training and development," he said.

SETTING THE TONE

While grading an employee isn't easy, it's not the biggest challenge managers face when evaluation time rolls around. Communicating the grade is far and away the biggest hurdle for supervisors.

"It's become a dreaded process," Birenbaum said. "The managers hate doing them because they hate to be the bearer of bad news and the employee hates them because they don't want to be judged."

With so much tension and downright dread on both sides, it's not hard to imagine how a performance assessment could take a wrong turn if handled incorrectly. That's why Tranchina emphasizes the value of practicing them in a classroom setting.

"We have it [in a] classroom setting, but it's not a lecture," she said. "I prefer that they have an opportunity to practice it, rehearse it, and get feedback on how they are doing and coaching on how they can improve before they can conduct an actual evaluation."

To make sure things run smoothly, Birenbaum developed specific rules of engagement for the actual assessment. Scheduling an adequate amount of time, usually an hour to an hour and a half, and keeping the appointment remain Birenbaum's cardinal rules for evaluations. Like in real estate, location also plays a vital role.

"Make sure that you secured a private location, office, or conference room," Birenbaum said. "Do not have a review in a public place, like a restaurant. You never know who is nearby or how the reviewee is going to react."

The approach a supervisor takes can vary by employee. Regardless of whether the reviewee is emotional and likely to break down or if they're prone to get confrontational, the supervisor must make them comfortable.

"You need to decide what you will do to put the reviewee at ease," Birenbaum said. "You can think about your own experiences with performance feedback discussions. It might be good to look for ones that worked well or that you maybe even enjoyed and then look at some that did not go so well. From that you can figure out what you want to emulate and avoid."

Being upfront with an employee can help their comfort level throughout a review.

"For the meeting the supervisor must keep small talk to a minimum, go over the order of the topics, outline what will be covered during the discussion, and state the importance of the exercise," Gill said. "It is important to take the mystery out of the discussion."

When it's time to kick off the evaluation part of the process, good news is always a nice opener.

"Start with the positive aspects of the review and the employee's strengths," Gill said. "Be sure to highlight noteworthy accomplishments."

On aspects of an employee's performance that are less than stellar, Gill advises that supervisors must remember to educate and advise.

"Define specifically what the employee can do in order to improve their performance," he said.

In between praising, advising, admonishing, and coaching the interviewer must always remember one of the most important rule of reviews - letting the reviewee speak.

"Ask for feedback, engage the person in the conversation, and make it a two way street," Birenbaum said.

ONGOING EVALUATION

Yes, the day or days (if they're done more than once a year) of the actual performance review are important and companies, managers, and human resources must ensure that it goes smoothly. But if there isn't meaningful interaction between the employee and their supervisor throughout the rest of the year, that day essentially means nothing, regardless of how well it's planned.

But too many companies focus on reviews as just a one-day event. That's the wrong attitude according to Tranchina.

"When performance evaluations are not being useful, it's often because they're looked at as an annual event," she said.

Tranchina doesn't advocate doing a performance review every two weeks, but she does encourage communication throughout the year.

"By the time the manager sits down to write the performance review, there are no surprises," she said. "It's all been discussed. There have been conservations on an on-going basis throughout the course of the year."

When experts hammer home the importance of communication, they aren't just talking about correcting mistakes. In fact, a big part of open dialogue is making the effort to communicate with employees when things are going well.

"You don't want it to become a situation where you only talk to them when there's a problem," Birenbaum said. "Regular check ins with your staff, even if it's going out to lunch and finding out how things are going, is important."

With busy schedules, frequent business trips, and personal commitments always getting in the way of constant communication, formal process can also go a long way to ensuring supervisors and employees regularly interact. That's why Baxa has a short, one-page form that his managers must submit six months after the annual review. While the form is not a formal performance appraisal, it tells Baxa that his managers have had conversations with their employees to discuss performance and progress.

"We've identified a handful of superstars," he said. "Then we go out of our way to give them the biggest bonuses, the biggest raises, and the best assignments. Those are the ones you don't want to lose."

"We're saying to each manager that at least at mid year they need to have a conversation with their staff and report that they've had a conversation," Baxa said. "They need to have a dialogue that communicates what performance has been in the past and what our expectations are over the next review period. We don't just silently hope there are conservations between managers and employees."

WORTH THE COST

Taking the time to do multiple reviews and getting managers together to calibrate results definitely costs VISTA time and money. Still, Baxa said the process is well worth the effort.

"I know my employees better," he said. "Each of our managers is more critical about performance and the results that each of their employees is achieving."

If the reviews tell Acosta's human resources staff and managers that an employee isn't on the right track, they can implement a program to help those underperformers.

"We talk very clearly about the people that are doing well and the people that need to get better," he said. "We implement performance improvement plans for the people who need to get better."

On the other side are those rising stars in an organization. At Ventera, Acosta's performance review structure allows the company to reward those people.

"We've identified a handful of superstars," he said. "Then we go out of our way to give them the biggest bonuses, the biggest raises, and the best assignments. Those are the ones you don't want to lose."

While a comprehensive annual review program that's tied to bonuses or pay boosts based on performance can definitely increase employee morale, there are also benefits for an organization.

"From a CEO's perspective, it's a tool that is useful in terms of them being able to identify potential strengths in the organization and look at the people they want to mentor and bring along for growth and development," Tranchina said.

Performance reviews can even help a CEO know what direction they want to steer their organization.

"If a performance appraisal is done right, the CEO can have an accurate assessment of the current state of the business," Gill said. "That will help them predict future success and determine if their staff has skills and competencies required to execute the business strategy that they are putting together. They can determine where the gaps are in the strategy and if they need new skills."

On the flip side, inaccurate reviews could bring disastrous results for an organization going down a new path.

"If everyone is getting four's and five's and there's no consistent definition of it, there's no way that a CEO can make an accurate decision," Gill said. "An inaccurate review or fluffy one could lead a CEO to make a wrong decision and the company could go way off of track."

By changing his performance review process, Baxa not only has Vista on the right track, he's also confident that his workforce is filled with energetic and fairly compensated employees.

"Between our new review process and putting together an incentive bonus program that rewards specific performance, I think we've energized our entire workforce," Baxa said.

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