New ways to look at employee reviews for your small business

by Susan Solovic, THE Small Business Expert

Most – if not all – employee review processes seem to work as well as the rating system in Lake Woebegone, where all the women are strong, all the men are good looking, and all the children are above average.

Many companies fall into the trap of rating almost everyone as “successful” each year, which is often just one check box above “needs improvement”. So what does this mean? It exposes a cruel love-hate relationship with the “annual review.” When evaluations get almost “standardized” like this, they become a rote exercise that delivers little to no incentive for employee growth. But at the same time, in most companies employees know that their raise is tied to their review, so they circle their anniversary day on their calendars each year looking forward to a bump in their “take home pay.”

An institution with no fans

A big problem with employee reviews is caused by the fact that we typically give yearly evaluations. Honestly, can you really reflect an entire year of work in a single evaluation? Do you keep notes throughout the year? What sticks best in your memory, the good or the bad? The system is really as unfair you as the business owner as it is to your team.

One possible improvement is to separate the discussion of competence and professional growth from the pay raise discussion and touch base with each employee at least twice a year. This allows you to put the focus on performance at each session. Of course, it also puts an extra meeting on your calendar for every employee who reports to you.

The separate compensation-based meeting would be more straightforward and shouldn’t take much time. However, you might see some of your employees making a more earnest attempt to grow professionally when they realize their “pay talk” is just six months away.

Peer employee reviews are another variation some companies are trying. Perhaps in today’s vernacular we should call Peer reviews “crowd-sourced” performance reviews. They aren’t new; they’ve been around for decades in some companies. Of course you need to be certain that those providing input on an employee’s review and raise are familiar with his or her work. And you need to be watchful of personality conflicts that can skew the results.

Keeping the status quo

Despite the problems inherent in reviews, I suspect most of you will stick to traditional formats. I urge you to approach the employee review process with the future of your business and the future of each employee in mind. Both your employee and you should consider this question before you meet: “What can the company and employee each do to improve the business and further the career of the employee in the coming months?”

You can answer this question by touching on various categories, such as:

• Training,
• Continuing education,
• Advancement,
• Process improvements, and others.

Some employees in your business will be eager to do things to build your business and advance their careers. Some others will be pretty happy just doing what they’ve always done. Your goal should be to recognize those who have aspirations for advancement and help them achieve their goals to the best of your ability.

At the same time, some people who are happy with their jobs and not looking for significant advancement can be extremely dedicated to your company and very dependable employees. You don’t want to upset that balance either. Recognize their value and be sure they feel your gratitude.