Performance review time

Martin Price

You're just settling back in to work after a long break that makes the Christmas rush appear a distant memory and you wonder if it ever happened at all.

Watching the summer sun go to waste as you sit at your desk behind a barrier of brick and glass - you are woken from your daydream by an email from the boss. It's time for your annual review. Cast iron proof that you're back at work and the last thing on your mind as you prepare to clear the backlog of work.

Performance appraisals are one of the most stressful times of the year for both bosses and employees. Why a lot of them are done around this time of year period is a mystery. Traditionally, it is crunch time; the boss, shoved into the role of a reluctant judge, has to tell any number of edgy employees that they are pulling their weight, dragging the chain, or operating in the no-man's-land in between.

For employees, the appraisal is seen as the big (and often only) chance to gain an increase in salary or even a promotion, as well as an often unwelcome opportunity to see just what the boss thinks of their work.

Even an average appraisal outcome can cause friction in the office if an employee believes that the appraisal did not match their perception of their performance. According to Tom Coens and Mary Jenkins, authors of Abolishing performance appraisals: Why they backfire and what to do instead, 80 per cent of employees sees themselves as in the top 25 per cent of performers.

Martin Price of HR Equations, a strategic human resources consulting firm, believes that the performance appraisal needn't, and shouldn't, be a stressful time for anyone.

"Too much emphasis is placed on grading systems and rating scales - instead, make sure the process focuses on creating ongoing conversations between the manager and the employee," he says. "The annual review should just be the last part of a running race, not a separate event."

Price believes that performance should be 'embedded' into the culture of the organisation.

"Make it part of 'how we work around here' - one good way of doing this is by having team meetings every week without fail, which are forward-looking and constructive, not blaming and, most importantly, focus on action-points for the next week. We want to hear line managers say stuff like: 'yes I know you made a mistake, that's OK, but what are we going to do about it next week?'."

Price believes that performance appraisals and salary reviews should be judged on two criteria: performance and potential.

"We should stop calling the annual pay review a 'review'. It should be forward-looking about the staff members' likely value over the next 12 months. We should start calling it an 'annual pay forecast' instead.

"To do this, the pay decision needs to include a rating for potential, as well as a rating for performance. There's a huge difference between a mediocre performer with low potential versus a mediocre performer with high potential."

The more people are involved in your performance review, the better, says Price.

"A peer, a boss, a subordinate ... even a customer - now there's a scary thought. It is called 360 degree feedback where the best assessment comes from a variety of people. It can be a bit frightening if it has gone from nothing though so it needs to be designed with care."

Dr Marie Wilson, associate professor of management at Auckland University, defines performance as 'the interaction of the person and their environment' and believes that performance reviews can be rewarding for both management and subordinates provided that clear goals are set at the beginning of the year.

"Appraisals are important to close off a particular performance cycle, and set goals and objectives for the next one. They are one part - and an important part - of an overall, well-structured performance management system, and their value is dependent on getting the rest of the system right as well.

"Recent research has indicated that clarity of goals is the number one predictor of performance improvement, and is even stronger if coupled with frequent, fair, informal feedback - that is, not waiting for annual or periodic formal reviews - and building on employee strengths rather than just giving bad news."

However, Wilson says that particular care must be taken for personal or political agendas to be kept out of reviews.

"The research is pretty clear that the power dynamics in the workplace definitely impact performance appraisal communication. In particular, employees are unlikely to raise issues where they feel uncertain or need help or clarification if that is likely to result in reduced bonuses or career opportunities or other negative consequences. A better format is to separate reviews that are summary judgments for a period of time and involve pay determinations, from those that are conversations with employees about career and professional development.

Some organisations not only separate the conversations in time, they are actually conducted with different managers."

Wilson also points out that bosses are prone to making biased desicions about their employees' performances.

"There are definite rater biases operating in both directions. Bosses may adopt more conservative central positions - everyone is average - because they don't want conflict with their subordinates. This means they may not identify poor performers and they don't want to justify their ratings elsewhere - so they don't highlight high fliers either."

What can an employee do if they think they have been hard done by in an appraisal?

"Discuss it with their manager, and ask for clarification on the feedback given. If there is no or insufficient justification, they can check their employment contract or company policies to identify ways to resolve it as an employment dispute. The ERS is also very helpful as a back-up to workplace practices," says Wilson.

Another area of contention is the actual pay adjustment made after or during the appraisal, says Wilson.

"Most raises still seem to happen in small amounts on an annual basis and few are truly negotiated. One of the most influential writers in the pay-for-performance literature has suggested that if you are not 100 per cent sure of what performance is important, then you should just pay for length of service - that is, move everyone a certain amount each year."