There are few things that business owners and managers hate more than employee performance reviews. With the exception of a very few companies that do it right, the process is generally considered to be a huge waste of time by employees and managers alike while generating a lot of ill will.

However there are good reasons why a business needs to be doing performance reviews – and not just because your HR Director says it’s important:

•  Everyone needs to be on the same page when it comes to priorities, focus and culture – a good performance review process will enable that.
•  Employees need valid, timely and constructive feedback if they’re ever going to get better (or find a better seat on the bus).
•  Business owners need a consistent and objective way to rate employees and give merit raises.

A lot of small business owners or entrepreneurs don’t do formal performance reviews – but whether it’s formal or not, reviews, ratings and raises are still going on and avoiding the problem or the process can be an even bigger problem than doing it poorly.

Tim Moran knows these issues well – a 30 year HR leader in companies like NCR, Frito-Lay and most recently Hallmark Cards, Tim is an HR Consultant who recently wrote a book aptly entitled: “Performance Reviews: Why We Hate Them and What You Can Do About It!”

In the book, Tim makes a strong case for how we ended up with today’s painful and bureaucratic performance review, why it especially doesn’t work now and a great blueprint for a better way to do things.

A lot of Tim’s experience and key points in the book are directed to larger, more corporate environments…however the best ideas apply to any business owner who has at least 1 employee.

Here are some of the key points that I think apply to small business owners:

‘Traditional’ employee performance reviews are too bureaucratic for today’s fast paced world

Employee Performance reviews came out of the business management sciences of the 1950′s and 1960′s when the world moved a much slower pace and you could probably count on your company’s strategic objectives and focus to be valid for at least a year or two at any given time. Business changes rapidly today and things will be even faster tomorrow. Using a very structured, detailed objective management process for your entire workforce isn’t practical and frankly no one has the time. You (and your staff) have to be flexible and able to change direction and priorities quickly.

Leadership must buy into actively supporting a formal process

Employees are very sensitive to what’s going on around them and if the business owner and leadership team can’t be bothered to go through a performance review process, then the employees are never going to take it seriously either. This approach will guarantee a huge waste of time and a potential hotbed for lawsuits down the road.

You need a quick, easy and effective process if it’s going to get done

The good news is that Tim does more than just point out what’s wrong with the current status quo. He recommends a simple, single page process that is easy to implement…and easy to manage and maintain over time. Because it’s just one page, employees and managers have to be concise and focused on what’s important. Finally – this simple approach lends itself to more honest and open communication…actual talking because there’s not a lot of red tape and painful forms to hide behind.

The best process is one that will get used and by keeping things simple and straightforward, Tim’s approach makes that a lot more likely.  I love Tim’s definition of Performance:

“What you do (Results) + How you do it (Behaviors) = Performance

Generally every employee knows what they’re supposed to do – ideally much of that is measurable or it ties back to business level results (revenue, profit, or other Key Performance Indicators).  The ‘What’ becomes the biggest part of the review – looking at the quality, productivity and timeliness of the results the employee delivers.

The other component, the ‘How’ looks at how they do things – did they get along with others? Did they step up when needed? Did they live up to the company’s core values?

The end result is 4 quick scores – 3 of them on Results and 1 on behaviors, rate them from 1 to 5, take an average of the 4 scores and you’ve got your annual rating.

It’s easy to do, easy to understand and it will help you have the discussions you need to be having anyway.

There’s still going to be work and effort involved in rating and reviewing employees, but Tim’s approach takes away a lot of the perceived overhead and should let you get down to what’s most important – are your employees helping you drive towards the outcomes you want and doing it in a way that makes you want to keep working with them.

Are you frustrated with your Employee Performance Review process?

Or do you really even have a process? If you don’t have one…or if you don’t like what you have, then I strongly recommend picking up Tim’s book- it’s only about 70 pages, but he hits all the high points and makes a lot of sense.

What are your thoughts on Employee Performance Reviews? Love ‘em? Hate ‘em? Need help with yours?  Give us a call.  We’ll be happy to help.