It’s that time of year, when managers fret about performance reviews and team members fret about pay rises, bonuses and promotions.  The dreaded performance review becomes less about performance and much more about how ratings impact pay.

Imagine that you have invested significantly in growing your team’s skills so that you outperformed your competitors in a very challenging market and positioned yourself for a recovery in the external environment.  Then, a lot of this work is undone by linking performance to a necessary average 1% pay rise, demotivating everyone.

Or perhaps your team has grown the business in a booming market, but less than competitors and has lost market share.   Large bonuses  are handed out even though performance was not great, there was little preparation for the future, and the skills base of the team was static.

The lesson in both the above cases is that we should never combine performance reviews with salary reviews.  The problem is that performance reviews very often turn into a discussion about compensation.

Here are a few tips for running your next performance review:

  1. Separate salary reviews and performance reviews to different times of the year.
  2. Share clear guidelines as to how performance reviews will be carried out and how performance is evaluated.
  3. Prepare, prepare, prepare: gather materials, set the tone and expectations early, and ask for team member input.
  4. During the performance review focus on:
    1. The team member’s objectives (ideally you have used agreed “SMART” goals).
    2. Performance against the objectives.
    3. How the team member can improve.
  5. The emphasis should be on helping employees grow. Make the connection between applied learning and business objectives and use your coaching skills to ensure this happens.
  6. Make ongoing feedback a core management competency. Provide performance feedback continuously, progress reviews should be held at least quarterly.  Reviews should never be restricted to just one meeting once per year.
  7. Document performance throughout the year.
  8. Make team assessment more common – no one person does it all.
  9. As your team member’s performance grows adjust your delegation accordingly, with bigger tasks and less oversight.

The details of how people qualify for raises and bonuses should be communicated in a separate process.

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