BUSINESS Employee Performance Reviews and solutions to company challenges. Give team members a chance to be part of the solution, and they may surprise you with insights and suggestions. Oh, and be sure to avoid any non-emergency interruptions (such as taking calls) during the review discussion! Where there are performance deficiencies worth mention- ing, discuss these in a constructive manner. Explain what each core issue is and preferably provide actual examples, why it matters and what can be done to improve performance. Use phrasing such as, “Let’s make a point to work on this together so I can help you to be successful.” Avoid making this a nega- tive session or some sort of Spanish Inquisition event. Don’t wait until next year to revisit major issues. Establish frequent follow-ups for major concerns. Although managers certainly have both a right and obligation to discuss performance deficiencies during a review process, it is equally important that managers discuss areas where the employee’s performance has improved, is positive and possi- bly exemplary. Bridging the Language Barrier Before we go further, let’s address the common usage of certain words that can cause issues. If you’re a business owner/manager standing on top of a mountain in the Swiss Alps and shout out the word “review,” the echo coming back is “raise.” Although these two terms tend to be inexorably linked in the minds of most employees, they don’t have to be. Reviews are typically annual, and they oſten coincide with the possibility of a raise. Larger firms tend to have a more structured and formal process wherein the manager provides feedback to the supervised employee (oſten using a form), and the employee has a legitimate opportunity to ask questions, discuss and comment. Such reviews are oſten scheduled ei- ther at year-end or early in the year aſter the next year’s budget has been established. Some companies intentionally schedule six-month non-monetary, formal reviews to encourage better communications and focus on performance, absent the mon- etary consideration. The Annual Cycle Approach One of the problems with this common annual approach is that when a reviewing manager has lots of direct reports for whom a performance review is required, this annual review process can place a heavy incremental workload on the reviewing supervi- sor. Hint: Review your “span of control,” which is a manage- ment term meaning how many direct reports each supervisor 18 KEYNOTES MAY 2020 must manage and thus likely prepare performance reviews for. Conversely, it’s convenient to deal with such reviews as a batch (once a year) and be able to move on to focus on other pressing business matters. The Anniversary Cycle Approach For reasons previously listed, some companies elect instead to handle reviews on an employee’s hire anniversary, thus spread- ing the workload over the year. If the formal review event is once per year, then either method will theoretically ultimately yield the same basic re- sult, and each has its own pros and cons. Selecting a method may be driven more by how many employees work for the company. Whatever method the firm employs, it is highly recommended that the formal review cycle not be greater than one year. Next, let’s discuss the relationship between performance and reward. Performance Reviews and Compensation The first step in preparing compensation increases is to establish an overall budget for wages, usually developed via a percentage increase over the current-year level. This is a “steady state” num- ber, meaning that it’s separate from any wage or payroll increases associated with new hires that may need to be handled separately. Let’s say you establish a budget for next year that includes an overall (steady state) wage increase of 3%. Don’t forget to increase your company’s wage-related payroll tax liability and possibly your company’s 401(k) contribution accordingly. It’s highly recommended that you avoid across-the-board pay rate increases. While this may be less time consuming, it’s usually an expedient copout that sends the wrong message. Better to let employees know that things like effort, attitude and achievement matter. Yes, this means that some may only receive a 1% whereas some others might get a 5% increase. Of course, you need to be thoughtful about how you arrive at such decisions. Keep in mind that if the higher-paid people receive much more than the 3% average that’s baked into the budget, mathematically, this means there won’t be much (or possibly any) leſt to distribute to the others. You should avoid using pay increase levels to offset major deficiencies or inequities in base wage rates. In other words, if for some reason (perhaps a promotion or change in quali- fications or certifications) an employee is significantly un- derpaid, cure that deficit by adjusting their base wage rate, even if this has to be accomplished over a period of time. Yes, this may translate into shattering your 3% budget, so plan accordingly. WWW.ALOA.ORG
