Love it or hate it: The Annual Employee Review is a must!

Communications with employees and/or communications with management are the most important moments any company can create. Let's get one thing out of the way first. Employee reviews are not mandatory nor is there any required way of doing them by any law. Legal situations may come up, usually in a discrimination or termination situation, and well done employee review will be your best friend in getting a fair result.

An employee review, if done well, will improve the employee which will in turn improve the whole company. Guaranteed. Here's the formula that works.

Consistency in reviews is crucial, which is why a standardized type of form is important. Each review should follow the same format. If your company has a standard form then use it. A bad form, used well, is better than no review. (You can always work to improve the form.)

Since there are no perfect employees or managers, discussion on areas that need to be changed can be taken as constructive criticism or as being picked on. After disagreements during reviews, and then you go right into the financial review, most employees will say that you gave them a bad review just to keep the raise low. They won't hear that constructive criticism will help them to work better, helping the company, and creating more opportunities to get better pay! A smart company will separate the employee review from the financial review. If you give all employees raises at the same time, then do the reviews on the anniversary of their employment. If raises are based on anniversary date, reviews should be done in a fixed annual schedule. Take the slowest time of the year so managers and employees have time to prepare the reviews.

An employment review should cover:

• Basic 'housekeeping'. Does the employee show up on time, adhere to basic schedules, and prove to be generally reliable?
• Safety. Does the employee follow posted safety rules, use required safety gear and set a good role model for others in the shop?
• Presentation. Does the employee represent the company as required? Are uniforms worn within guidelines? When customers see employees do they present a positive image of the company?
• Work quality. Does the employee strive to make the best products? Are their installations neat with few callbacks? Do they make quality sales calls?
• Work quantity. Does the employee meet the standards set by the company for timeliness of completion, units produced, papers filed?
• Follow up on previous goals set. Just what it says, a quick review of last year's goals and where the employee and the company stand.
• Creation of current year's goals. THE MOST IMPORTANT AND THE HARDEST PART TO DO.

The timing and setup for the review is crucial. The review is how well the employee has succeeded in reaching personal and company goals. It is a time to define changes needed and discuss variations from company policy or plans.

The financial review is how much the employee can and should earn if they reach goals. If you do the financial review and the employee review together, the employee is only waiting to hear how much they will earn, and everything else, the truly important part, falls on deaf ears. If the raise is not as much as the employee expects, and few are, then the review turns into a defense of the companies financial positions rather then the give and take conversation needed to improve the employee's performance. We'll fully cover the financial review in two weeks.

Even a very good employee has some areas that can be improved, or the close to perfect employee needs challenges set to keep them on the top of their game, maybe to pass on their good work habits to others.

Let's discuss timing and the set-up of the review. There should be a standard company-wide cover letter that explains the review using the categories above. Manager and employee together should set the time, date and location for the review. Almost all employee review formats include a numerical or letter grade quantifying the employee's achievements in the category. There are usually 8-12 categories. If there are more than that, consider redrawing the review itself to get down to that level. The employee and the manager each grade the employee's achievement in all categories, and both writes out their goals are for the upcoming year.

Set the time and place for the reviews. Pick a room without visual distractions, but if you can't, then arrange the seating so that you are the one looking at distraction. The review should take 45-60 minutes. Don't schedule just before yours or the employee's lunch time or the ending time for the day. Minds wander to errands that have to be run or just going home. Avoid Mondays, which are usually a busy business day, and Friday's because every one's mind is already on the weekend. From the manager's point of view, schedule no more than two per day or six per week.

Wait a minute right here---six people just said how can I limit myself to six a week, when I have five crews with seven men each. That's an easy one. The crew foreman is the correct person to do the review, and you do the review on the foremen. It means teaching the foreman to do reviews, and the best possible way to do that is to give the foreman a well thought out and planned review. A good rule-of-thumb is to have nor more than 8-10 direct reports.

Let's go to the review. All cell phones and blackberries off. No interruptions unless it is a major catastrophe. No employee wants to think you have something more important to consider than their future. A private, comfortable place to talk. Don't go back to the manager's office, which sends the unsubtle message of who is the boss. If that is the only place, then sit in front of your desk to be equal with the employee.

Here comes another wait-a-minute! How can the manager reprimand the employee for being late for the past month if he/she doesn't show their power coming from behind the desk? This gets right to the core of the employee review. If you have an ongoing problem that should be addressed, address it immediately as it occurs. Don't think the review is coming up and you will handle it there. Run your business correctly...if the review wasn't coming up, you would have corrected the problem, so do it. The review should be about trends in the employee's work and not one specific issue.

When you set-up the review date with the employee go over the review form and ask them to honestly rate them self and set goals for the coming year. Most managers will say they set the goals and the employee does the job to meet them. A good review session will bring out that the employee wants to learn a second language or learn how to use the computer, maybe upgrade their driver's license, or learn a new skill in the plant. Unless you are starting a new location, you will find that in a well done review that employee's goals will be practical and well founded in the current workplace.

You won't get perfect answers the first year, but you will in the second year, when employees work through the results from the first interview with this format.

Let's get to the review itself. Two minutes of chit-chat and then go to work. First, ask the employee what they rated them self on the first category. I have done thousands of reviews, so maybe eight thousand category questions, and in 75% of them the manager and the employee have the same grade. If the same grade is a high one, offer congratulations to the employee and move to the next category. If it is a low one, then look at the employee and say "we agree that you are not at full speed here, what can you do, and what can I do to get you to the top grade?" Let the employee speak first. The results will surprise you. Just about always you should go ahead with the employee plan. If you tell the employee what to do it is a burden on the employee, however, if they want to do something and need support in some area it is an opportunity to have a win-win result.

If you have ten categories, I promise you that five or six will be dead-on with what you have written.

The next choice is that the employee has written a lower grade than you have. Same as above, let the employee strive to improve and you say thank you. It doesn't hurt to praise the employee here by pointing out that in this category you felt they did a good job, but if they feel they can improve, you support that all the way.

The last possibility is that your rating is lower than that of the employee's self-rating. This is the case where you will spend ten minutes planning. First minute or two, explain why you have your grade, then let the employee explain their grade. You will learn a lot right here. More often then not, one of the two of you will change their grade. Assume you are using a 1-5 rating scale, with one being a major problem in the category and 5 is a home run. Problems in the work place occur when an employee thinks he/she is a four and you see a two. This is either a problem that needs to be stomped on, or an opportunity to improve an employee's attitude or work effort.

Of course, the manager will not know in advance which categories will be this way, so the manager must be prepared to discuss all ten, but in reality, you will only discuss two or three in any given review. If there are more than that you have bigger problems. This employee will need special training and handling to not become a lost cause.

Going into the review the manager should have sketched out a remedial plan for any category getting a two or less on a five point scale. Even if the manager and employee come up with the same answer, and it is a two, you should discuss this area. The good news is: the employee agrees with you that there needs to be improvement, so you will be creating a two-way approach to improvement.

We have run long enough for today. Next week we'll discuss the goal setting parts of the review, and the week after, the financial review.

If you have any questions, ask them in the USGNN Forum and we will be right back to you with answers.