You can't live with 'em and you can't live without 'em. Sound like a punch line from a stale old joke? Maybe, but that's exactly how many harried managers feel about giving annual performance appraisals. For many, this yearly rite is a time-consuming exercise in discomfort and futility that is about as welcome as a trip to the dentist. But for those who handle the process well, the annual review acts as a powerful catalyst that dramatically improves performance.

What's the difference between a constructive, empowering, and satisfying performance evaluation and one that leaves both the supervisor and the employee feeling like they've been mugged by a street thug? In a word, communication. The degree and level of communication determines the effectiveness of the review process. If you merely deliver your perceptions about the employee's work performance, most likely they won't match with the employee's perceptions. Miscommunication occurs, and a substantial gap between the two of you results.

An effective evaluation is collaborative--a dialog needs to take place. During the course of an appraisal, verify that you both understand and agree with the data being presented. You lead this process, but give your employees an opportunity to offer constructive feedback. The objective is always to seek and reach mutual understanding on past performance and future goals.

To eliminate or reduce most miscommunication, be specific. For instance, it's not helpful to say that the employee is "often late for work." To have a constructive discussion about tardiness, cite specific times and dates when the employee was late. And remember to focus on the results, not the excuses.

In the case of exemplary behavior, the same thing holds. Describe specific things the employee did that actually contributed toward the effectiveness of the organization. It's not enough to say that the employee has a "good attitude." In what ways was this attitude demonstrated on the job, and why did it help? Employees need to hear specifics.

All jobs are measurable and all goals must be quantified. Obvious advice? Yes--but how many of your reviews become too subjective? Hard numbers are the most effective and most objective way to gauge results. If you're reviewing an assembly worker or a salesperson, quantifying his or her output is probably a simple matter. The challenge is to develop objective measures for soft goals.

For example, a project manager might have a goal to complete projects on time and within budget. Consider developing a scoring system, like the example below:

100% on time, some under budget
100% on time and on budget
90% on time or on budget
80% on time or on budget
less than 80% on time or on budget
By focusing on measurable results, you can better determine standards for exceptional, average, and subpar performances.

Avoid surprises
One of the central goals of a performance appraisal is to avoid surprises. When it's time for the annual review, both you and the employee should have a good understanding of what's going well, what's not going so well, and what could be done differently. In addition, the employee should already know the rewards for good performance and the consequences of below average work. The review is not the time to unveil unknown information; rather, you should concentrate on the past year's performance and develop a plan for reaching next year's goals.

Praise effort, reward results
Effort is a necessary requisite for job success, but it is not a sufficient one. Praise employees who try hard, but reward only those who produce results. Establishing a "results = rewards" policy motivates your employees to try and to succeed. It also increases the perception of fairness.

Hold people accountable
You've clearly defined goals for your employees, and you've quantified their performances. If results are lacking, have the courage to hold people accountable. No one wants to play the villain, but if you cover shortfalls and remedies in a professional manner, conscientious employees can use the feedback to improve. And those who don't progress have no excuse if you are forced to terminate them.


The greatest benefit of a review session is the opportunity it provides for planning the employee's future goals. A good plan keeps you and the employee focused on the right things, and it helps turn the review process from something that happens once a year to a dynamic and collaborative effort.

SMART planning

Planning for both professional goals and personal development should be SMART--an acronym for Specific, Measurable, Acceptable, Realistic and Time-bound:

  • Specific
    A goal to "work harder" is ambiguous; a goal to "increase revenues by 20% over this year's figure" is not.

  • Measurable
    It's easier to understand the effort involved in reaching a goal if the desired result is measurable (e.g., increase revenues by 20%, call 30 prospects each day).

  • Acceptable
    An employee will take responsibility for pursuit of a goal only when that goal is acceptable to him or her. To gain acceptance, it's critical to involve the employee in the goal setting process.

  • Realistic
    Even if an employee does accept responsibility to pursue a goal that is specific and measurable, it won't be useful if it is not realistic. Increasing revenue by 20% over the next year may be attainable; increasing it by 20% within the next week is not.

  • Time-bound
    Without a time deadline, a goal has no built-in performance accountability.
Resource needs
Goals are worthless if the employee doesn't have the necessary tools to reach them. That's why good planning also means developing a list of resources needed to achieve the performance goals, including training, capital equipment, management support, and time.

Be careful that agreed-upon goals don't overwhelm the employee. Often, it's helpful to break yearly goals into quarterly and monthly objectives. Such a process helps you monitor progress and achievement throughout the year. It also provides concrete data for the next evaluation.

Discuss the employee's primary responsibilities in the past year. (A written summary of responsibilities should be provided to the employee.) Discuss how they relate to overall objectives.
Discuss employee's strengths / areas for growth in the five general performance categories.
Discuss employee's significant accomplishments from the past year.
Discuss possible ways to improve performance.
Discuss barriers to effective work performance and job satisfaction in the past year.
Discuss employee's goals and needs for the next review period.
Discuss long-term career goals and development needs to achieve them.
Discuss employee's feedback / suggestions for supervisor.
Discuss anything else the employee or supervisor would like to address.
Complete Performance Review forms. Attach supplementary documents: employee self-evaluation, position-specific factors, plan of improvement, or other accompanying documentation of performance.