Done well and taken seriously, comprehensive appraisals can help employees and strengthen employers. Done poorly, they can spell big trouble.
Ohio State University's "Tattoogate" scandal and the departure of football coach Jim Tressel shocked many Central Ohioans. But if OSU officials had been keeping close tabs on Tressel's performance evaluations, they might have noted clues to what was to come. In an otherwise strong 2005-06 review, the coach received "unacceptable" ratings for timely reporting of violations and timely reporting of phone and unofficial visit logs. Earlier reviews flagged problems with Tressel's reporting of student violations--the very issue that led to his resignation.
More recently, OSU Athletic Director Gene Smith conducted only verbal reviews with Tressel, leaving no paper trail and no written evidence of continued violation reporting problems. At best, such a lack of documentation leaves a gaping hole in an employee's personnel file; at worst, it can expose an employer to accusations of willful ignorance, or to nasty litigation.
Employment attorneys and human resources pros say proper appraisals must be comprehensive, balanced and always, always in written form. An employer conducting verbal reviews could be playing with fire if a dismissed employee later files a wrongful termination lawsuit. That didn't happen in Tressel's case--he opted to go quietly--but the risk was real.
Attorney Barbara Letcher, of counsel with Newhouse Prophater Letcher & Moots, says performance appraisals "are important, provided you do them right. They can be very motivational." On the other hand, Letcher says, "If the performance evaluation is not specific and doesn't identify problems, it's hard to address problems."
Comprehensive appraisals can improve productivity and alert employees to issues before they become acute. But a botched appraisal can cost a company time and money if it results in retention of an underperforming employee. Even worse, an employee who's terminated for poor performance may use an incorrectly performed appraisal as a weapon in subsequent litigation.
Appraisals "need to be done right. Otherwise, they do more harm than good," says Scott Warrick, a Reynoldsburg-based employment attorney and human resources consultant. Warrick says many reviews are inaccurate in portraying employees' work quality and performance.
Harmful or helpful, there's no doubt that performance reviews are increasing in frequency. From 2002 to 2007 the percentage of employers holding formal reviews twice a year increased from 19 percent to 31 percent, while the percentage conducting annual reviews fell from 66 percent to 58 percent, according to OfficeTeam, a California-based staffing service.
Here's a look at how some Central Ohio employers handle performance reviews, plus advice from the experts on ways to maximize the benefits and minimize the risks.
Reviews & Goals
After aligning its hiring, development and employee recognition programs around the company's goals and strengths, Columbus-based Safelite AutoGlass brought its performance review system under the same umbrella. It also improved efficiency by moving to an Internet-based review program, which has grown common.
Safelite conducts formal reviews annually, but also encourages regular informal appraisals. Even a supervisor complimenting an employee on a project in the hallway can boost performance, according to Steve Miggo, Safelite's senior vice president of human resources and leadership development.
Miggo says the best performance reviews "simply describe what the individual is doing right, what they can do better and clear goals to achieve going forward."
Worthington Industries has also updated its performance appraisal process in the past four years, aligning it with company goals. The company provides manager training on how to conduct comprehensive reviews.
"We believe delivering quality performance evaluations is a requirement of all managers," says Eric Smolenski, Worthington Industries' vice president of human resources. "The process is facilitated and monitored by human resources, but the rubber meets the road in each individual manager-employee performance dialogue."
Lori Hall, manager of human resources services for the Employers Resource Association, which provides HR consulting, training and other services for mid-sized employers, says performance reviews better inform employees when the criteria tie into the organization's goals. "Then, the employee understands the contribution they are making to the mission," Hall says.
Performance review criteria will differ by industry and job level, but most evaluations stress communication skills, ability to complete work on time, quality of work and ability to handle conflict. "There are certain qualities you always want in an employee," Warrick says.
Informal sessions between managers and employees are useful, but the actual review must be formal and in writing. Any review must outline the employee's successes and shortcomings, says attorney Allison Day, a shareholder with Littler Mendelson, a law firm specializing in employment law issues. Managers must be trained for objectivity and to be specific about areas in which an employee's performance falls short.
When performance issues go unnoted in an evaluation, the employer could face trouble if a terminated employee files a wrongful dismissal lawsuit. "If that isn't documented, it's going to be a hard sell for a court and a jury," Letcher says.
Even worse than failing to document poor performance can be sugar-coating a review. If a review praises Joe for being a team player, but Joe gets fired two months later for quarreling with other employees, Joe's lawyer is likely to present the review as evidence in a wrongful termination case.
Warrick calls issuing good reviews to bad employees "the Achilles' heel of performance appraisals." On the other hand, he says, when managers are honest, "All kinds of [good] things can happen. A performance appraisal can help you avoid a written warning." For many employees, Warrick adds, written warnings "are so humiliating that they don't recover."
Reviews should be both balanced and transparent. There is danger in blindsiding an employee with an unexpected negative appraisal. Rather, the appraisal "should be a summary of what has already been discussed with the employee. There should never be any surprise in the review," says Hall.
One critical step in the review process is obtaining the employee's signature. Even with a witness, an unsigned performance review can become an issue. "You don't want a situation where you have an evaluation in the file and the employee denies having seen it," Letcher says.
What if an employee simply refuses to sign? "In your policy manual, put something in the disciplinary section stating that all employees must complete all company documents on demand," Warrick advises.
Vague comments in a review can come back to haunt an employer. Saying an employee "doesn't fit the corporate culture" or "has a bad attitude" can be interpreted subjectively, Day cautions. If a review labels an older employee as a "poor fit" in an organization with a younger employee base, the comment could become the basis for an age discrimination lawsuit. Avoiding generalizations and documenting specific negative employee actions will give the employer a stronger argument in court.
The use of witnesses in employee reviews can be positive or negative. If an HR representative or official sits in, the employee may assume there is trouble and be less forthcoming. "The downside [of having a single person conduct the review] is you don't have witnesses to what was said," Day says. On the other hand, "If the [review] document is good enough, you don't have to worry about the witness."
Current technology allows supervisors to document employees' specific positives and negatives as they occur. "You can create an online diary of events so when you do evaluate, you have a more comprehensive look at the whole year," says Lynn McNabb, director of human resources for the city of Whitehall.
Such record-keeping can also help to maintain the focus on annual goals--both the employee's and the company's. Without regular tracking, a goal set in January might not be discussed until the following January, McNabb notes.
A formal review should summarize the employee's year, but compliments and concerns should be aired and documented as needed, Smolenski says: "Managers should not wait to recognize good performance, nor should they wait to acknowledge unacceptable performance or behavior."
Not About Dollars
Historically, many employers linked performance evaluations to employee compensation. A "superior" rating might mean a 7 percent raise and a $2,500 bonus, while a ho-hum "meets expectations" review might equate to a 2 percent raise and no bonus.
Such ties between evaluations and raises have been in large part suspended during the recent economic doldrums, as employers canceled raises or even cut pay. "In this recession, companies have been [instituting] wage freezes, so as of late, [pay and performance] have been separated," Hall says. "Some companies, as a philosophy, don't want the performance to get caught up in the talk of compensation."
When performance is tied to pay, it can be problematic if salary and benefit increases don't differentiate enough between performance levels. "It's more meaningful when the employee has a true incentive in terms of compensation," Hall says. If the difference between mid-level and high-level performance raises is just 1 percent or 2 percent, incentive may be lacking. A differential of 5 percent to 7 percent would provide plenty of incentive, but Hall says she's "not sure how realistic that is in the current economy."
Performance reviews are not a one-way street. A supervisor who conducts a review without much employee input risks overlooking ways to improve performance and may damage the employee's morale. "The manager can't see everything. The employee might come up with issues that the manager did not consider," Warrick says.
Most experts recommend that employees complete a self-review to complement the supervisor's review. "If there's a divide, it's an opportunity for dialogue. If there are distinct differences, [the supervisor] can talk to others to gain additional insight," McNabb says. Self-reviews also get employees involved earlier and educate them about the review criteria, Letcher says.
Safelite wants reviews to foster dialogue and employee feedback, so it encourages self-reviews. "This increases a sense of accountability and ownership on the part of the associate for their performance," Miggo says. "Plus, input from the associate can help leaders gain insight on how to effectively coach for strengthened or improved performance."
Hall says human resources managers should not conduct reviews by themselves, and should sit in only under certain circumstances, such as when it might be helpful to offer guidance for a new supervisor. In most cases, a manager who knows the employee should lead the review. "HR can be invited to sit in as a witness if the supervisor thinks there might be a problem," Hall says. "Otherwise, it's perfectly acceptable to just have the employee and the supervisor."
When a manager conducts the review, the employee may be more confident the process will be fair, because the reviewer knows his or her work. "The person who delivers it must have credibility, so we really need someone familiar with the employee's work on a daily basis," Warrick says. If the employee works with multiple supervisors, all may participate in the review meeting.
Review sessions should be motivational for employees and leave them knowing exactly where they stand. "If they're not doing a great job, don't tell them they're doing a good job," Letcher says.
Typically, Warrick says, a manager may devote several hours to preparing an employee review, plus an hour for the actual meeting. The employee should see the written review before the session. The more time the employee has to prepare, the more the review becomes a collaborative process. "I don't think this should be a passive process. I like the idea of an employee expressing themselves because they have to participate. At a minimum, the employee should see the review in advance," Warrick says.
At their best, performance reviews can help select a company's future leaders. Worthington Industries conducts "skill/will" assessments for senior executives and for employees it considers to have management potential. Employees who score high are ticketed for additional training and development.
Each Worthington Industries business line participates in a review of its upper management. "In this way we have a very transparent view of where we are strong in capability and leadership and where we may need some improvement," Smolenski says.
Safelite's Miggo agrees: "To [lead], you need to constantly evaluate talent, coach performance, establish trust with candor and have the courage to make the tough calls when needed."
Bill Melville is a freelance writer.
Reprinted from the October 2011 issue of Columbus C.E.O. Copyright © Columbus C.E.O.