Best practice performance reviews are part of an overall performance management system, a process that begins with objective setting, includes ongoing coaching and feedback throughout the year and culminates with an annual review.

Set Objectives

Objectives should be set at the beginning of the performance year and be mutually agreed upon by the supervisor and employee. We all know that objectives should be S.M.A.R.T. -- specific, measurable, attainable, relevant and timely. It should be clear how they relate to the company's business strategy, vision, mission and values.

But objectives should also be motivating and inspire employees to do their best throughout the year. These objectives empower employees to do whatever it takes to create value for their customers, the firm and themselves. And if circumstances change during the performance year, update the objectives. There is nothing motivating about being held accountable for objectives that are no longer relevant due to things out of one's control, such as a corporate reorganization.
 
Coaching

Ongoing coaching is another key element of best practice performance management and another step toward providing a motivating annual performance review. For employees missing targets or underperforming, it provides the opportunity for course correction. For employees who are on track, ongoing coaching builds or maintains employee confidence and reinforces positive behavior. Ongoing coaching sessions also provide the opportunity to reaffirm or adjust original objectives. Are these objectives too easy or too difficult? Remember, you are as much a cheerleader as you are a supervisor to your staff.

Just the Facts

Base your review on facts. The written evaluation should include a factual summary of your employee's accomplishments that is fair, balanced and representative of annual performance. Resist using the halo effect -- don't focus on the most recent one or two projects the employee completed.

Don't overemphasize a weakness or strength; fully recognize outstanding performance, and acknowledge obstacles that are overcome. Employees who sacrifice for the company deserve to be recognized for these efforts, both at the time of the event and at the formal annual review. Simple recognition doesn't cost anything, but recruiting and retraining to replace employees who were demoralized and left your firm can cost much. 

Focus on the impact of the employee's results. Go beyond merely listing the employee's accomplishments, and acknowledge the value of his or her results by describing the impact delivered to the business and customers. People need to find meaning in what they do.

How did the employee grow over the past year? Point to the personal and professional growth he/she achieved during the performance period.
Even for performance that is less than stellar, it is possible to deliver a motivating review. It is important that the news not come as a surprise. You accomplish this by open communication through coaching and giving feedback throughout the year, as well as having your employees provide a summary of their accomplishments versus objectives.
 
Feedback

The same principles in delivering successful feedback throughout the year also apply when delivering an annual performance review. You evaluate your highest performer and your least successful employee using the same metrics.

Feedback should always be constructive, not destructive. Focus on the performance, not the person. After you identify what aspect of performance was not up to expectations, encourage the employee to explore what could have been done to prevent the negative result. Turn the conversation into a learning opportunity and follow it up with encouragement. You may be the supervisor, but you are on the same team. It is your responsibility to ensure the conversation does not turn adversarial. Your employees need to know that you want them to succeed as much as they do. The employee should leave the performance review session confident in his/her abilities and committed to turning performance around.

There may be generational, gender or cultural differences between you and your employee. These are not reasons to alter feedback, but you should be sensitive to those differences to ensure an effective and respectful dialogue.

Finally, request your employee use this feedback to create a personal development plan. Depending on what performance gaps have been identified, this is an opportunity to demonstrate your interest in an employee's development and future. Don't dilute the performance feedback message with a full-blown development plan discussion, but set the stage by demonstrating your commitment to the employee's development. Would you consider providing an opportunity to earn an advanced degree, attend a conference or seminar, or rotate to a different department to gain additional experience?

Resources

For firms with a one-person human resource department or where someone performs HR duties in his/her spare time, there is assistance available to conduct effective performance reviews. Software, such as Performance Now, is readily available. Also, for a small annual fee, firms can join the Employers Association of New Jersey (www.eanj.org). It is a clearinghouse of human resources information and guidance that can assist you with a variety of HR activities.

Performance reviews that motivate directly impact your employee morale and ability to attract and retain the best and brightest employees. There is a war for talent going on, and you need to leverage every opportunity to keep your staff engaged, effective and focused on a future with your firm.

CATHERINE Z. HORN, CPA, SPHR, is a senior human resources manager with Alcatel-Lucent. She is vice president of the New Jersey Society of CPAs Middlesex/Somerset Chapter and chair of the NJSCPA Planning Committee. Horn can be reached at cathyhorn@alcatel-lucent.com or 908-582-1967.