The dreaded performance reviews – managers hate writing them and most employees hate getting them. So why do we do them? Because people need feedback and because we believe we must have a way to assess whether or not a person is “worth” a certain dollar amount or due a promotion.
What if we uncoupled the two reasons and came up with something that both managers and employees alike would actually look forward to? Let’s start with the money piece. The vast majority of research says that money is not the most important motivator for people at work. There are other more important factors such as recognition, upward mobility, work environment, flexible hours, culture and benefits, just to name a few.
Performance is very subjective so let’s make it concrete. Sit down with each employee and create a list of mutually agreed upon goals that need to be accomplished once a year and apply the SMART, (Specific, Measurable, Achievable, Results-Based and Time-Bound), criteria to them. Only have 2-4 that are most important for the employee to accomplish – no more than 6 or you will get mediocre performance on all of them. Review these goals with the employee at least once a quarter and make course corrections as needed during these meetings. Make them simple, specific to the employee, her team, and her areas of responsibility. The overall goal is to help them learn new skills, get better at certain tasks or behaviors and have an opportunity to grow, so help them do so. A standard performance review is generic – an individual goal plan is focused on the employee. Have celebrations for goal achievement and non-monetary rewards that are tied to the goals.
Take the “raise” piece and treat it separately. First, make sure you are paying mid to upper range for the position itself. If not, you will lose your best people because they want to be paid fairly for the work they do. Second, most companies decide whether or not they are giving raises each year by how well the company did, typically 1-5%, so whatever time of year you do this, just do it for everybody. If employees met their goals or are on track and it’s a mid-way point, give them the raise. If they did not, keep their salary the same. It’s a pretty easy measure – yes or no – not some subjective measure that ends up making everyone mad. State that in order to get annual raises, goals must be met.
Bonuses can be used to reward outstanding performance and recognize those employees that really shine. The key to all of the pay-based recognition is that you make it known, have it in writing, and be very clear of your expectations before awarding any bonuses or raises. Most importantly, don’t tie this to any sort of traditional review. Met the goals or not? Outstanding performance based on expectations or not? Much easier, more rewarding, and actually gets the performance to grow the company and your people.