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As a small firm (~75 employees), we have never had a formal employee performance review system. What are the benefits of implementing one?


James Bryant
Title: CFO
Company: BBD
(CFO, BBD) |

A formal performance review gives supervisors a chance to communicate expectations, no matter how minimal the expectations may be. It also provides an opportunity to share both positive and negative feedback. Both are crucial to an employee’s growth and development. Employees may not be aware of their mistakes unless you point them out, but they also need to know that you recognize their successes. Supervisors may choose to help the employees set both short and long term goals during the review. These goals may also help facilitate discussion in the follow up reviews the supervisor will have with the employee.

But reviews should not solely be focused on the employee’s performance. Supervisors should give the employee an opportunity to openly share his/her thoughts on the company. Employees may be able to see improvements the company could make that no one else can.

Reviews are also more effective when performed more than once a year. Regular reviews allow supervisors to provide timely feedback to employees. Some companies try to set monthly reviews, but quarterly is a more realistic goal.

david waltz
Title: Assistant Treasurer
Company: Integrys Energy Group
(Assistant Treasurer, Integrys Energy Group) |

If you are communicating expectations and providing feedback to your people you are acomplishing the major objectives whether you do this "formally" or not.

As companies get bigger, it seems to me that formalization devolves the process into a "check the box" compliance mentality rather than any desire to achieve the objectives above.

There is a lot of software out there these days to help formalize these systems, but again it is not needed if you are accomplishing the above. It might be great that the employee can update their progress on a goal in the system, so if the manager checks they will see that the employee is x% completed toward the goal. For me, if I am really interested in their progress I will ask the person directly rather than check some software program to see if they updated their status.

Ray Calabrese
Title: Treasurer
Company: Interim Treasurer
(Treasurer, Interim Treasurer) |

Here is one good reason to have a review policy. You will never be able to get rid of a poor performer for performance reasons if you haven't been reviewing that person. If you do fire someone without a well documented file you and you're challenged with a wrongful termination suit you won't have much of a case.

Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |

Ray makes an important point here. Even in small CA companies with "at will" employment, this is an important consideration. You might get an ADA complaint, age-related complaint, loss of wages (options, bonus, variable comp) complaint. That the person was fired is clear...what you *owe* them is not. If you have cause documented (and done for all employees so you're not just picking on this one) it becomes dramatically harder for a disgruntled ex-employee to succeed against you in a claim.

Michelle Rogers
Title: CEO
Company: Virtually There CFO Services
(CEO, Virtually There CFO Services) |

A side from serving as a documentation process for performance management issues, performance reviews provide tangible feedback to the employee as to their job performance, how well they are fitting within the culture of the organization and can be used as a communication tool for coaching/training needs. In my experience, employees do not come to work trying to fail however, as a company grows, the demands on it's employees change. Much like individuals mature over time, so do organizations and a performance review process is one opportunity to formally communicate what is required of the staff member as well as discuss their individual career goals. Our organization uses Sonar6 which is a hosted performance review software tool. We are in our first year of using it but so far, I am enjoying the features of the software. As with anything, it's the quality of the process/effort which will impact the effectiveness or end result.

Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |

If you don't give feedback, you've given uncertainty.

If your organization learns to give feedback, positive and negative, you have the dual benefit of an employee who is reassured about where they stand *and* a formal communication process for goals and results, keeping everyone on track. What's not to love?

Topic Expert
Malak Kazan
Title: VP, Special Projects
Company: ERI Economic Research Institute
(VP, Special Projects, ERI Economic Research Institute) |

I would concur with the comments and add that what is discussed during the formal review should come as no surprise to the employee since feedback about performance is an on-going process. It shouldn't be considered an event. As far documentation, emails, appointment records, etc also serve as documentation of "performance feedback".

Steve Marino
Title: Controller
Company: National Support Services, LLC
(Controller, National Support Services, LLC) |

A formal review process is often a strategic opportunity for a small company. It can serve to provide clear direction and priority to what is expected of employees, and can set the stage for linking annual (or interim) objectives with the goals of the business and compensation opportunities. If done properly, such a process is a great motivator. If it is not well thought out or well executed it can act as a disincentive. Be very careful, as implementing a formal review process is much more complex than it appears (which is why there are many books written about it). I'd be happy to share insights if you'd like to contact me separately at marinosteve1ataol [dot] com.

Somnath Ray
Title: Sr. Manager
Company: EDGAR Online
(Sr. Manager, EDGAR Online) |

I am interested in learning more. Sounds interesting.
An Employee or the Human Capital is the most important asset of an organisation. Thus the formal review process if done correctly and without any bias (which is the key thing over here) helps in motivating an employee in adding value to an organisation which in turn makes an organisation profitable in the long run.

Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

In addition to the comments posted above, a performance review process helps to align goals, provides input to the performance to plan reporting process and certainly, stimulates and motivates the top performers in your organization.

Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

When companies start out, the management team knows everyone personally, and there may not be a need for a specific performance review. In large companies, there are so many people and levels of management review that a detailed and formal process is required to ensure consistency , fairness, and compliance with non discriminatory employment regulations. In between is where the problem lies.
I believe the problem lies in communication of performance issues between and among management and employees. During the course of day to day business people know who is doing what well or badly, and what needs to be improved, but they just dont have the time, momentum or personal courage to address the issue. A formal review process forces the issue. Since the challenge is to bring reviewer and reviewee together, the main prupose of the review document is to stim,ulate discussion ina routine as opposed to targetted environment. In this case the questions and structure of the review is un important compared to actually causing a face-to-face or heart-to-heart discussion. We recently introduced a 3 question review form in a 20 person company. The questions were (in not more than 5 lines)(i) What were your achievements this last year, (ii) What problems did you face this year, (iii) what changes would you like to see in the coming year.

And to spread the workload, the employees were asked to complete their self evaluation to be reviewed by their supervisors. This enabled the task to be completed surprisingly quickly, and we felt that the employee assessments were generally accurate and often more critical than supervisor evaluations.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

I have yet to see an annual review process that has positive outcomes. As said by previous posters, if your employees don't know daily or at least weekly how they are doing, an annual review does nothing.

Also, in a small company, taking the time to write the reviews, give them and then track them becomes a significant use of resources, which in most instances would be better used for the real goals of the business.

I have also seen very few processes that are truely objective with real, measurable goals. Unless you have a system that has this, it is a waste of time.

As far as documenting bad performance, this is easy to do and must be done immediately upon the exhibition of bad performance, and I believe would be adequate documentation for separation of the employee. I have actually seen annual reviews be counter-productive in dismissing an employee who suddenly starts displaying bad performance.

Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |

While (from my comments above) I have a different take from Scott...he (you) is (are) spot on.

If you have a process in place and a stellar performer has gone off the rails, DOCUMENT. At Intel we had what is called CAP or "corrective action plan". Capping usually meant that the person had been marked for dismissal; however it did have "here is the problem; here is the result we want; here is the timeframe." So, it was (maybe is still) a fair process that documents the disconnect. I've used similar approaches since then, and it is both a prophylactic and is a fair approach to helping the employee determine for themselves how to improve, or in some cases make peace with leaving.

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