Annual Review – To Do or Not To Do

The words “Annual Review”  or “Performance Appraisal” often bring on a shudder or a sense of dread. Do you actually know anyone that starts their day or week by boasting about how much they are looking forward to writing out and conducting these?

The idea of weeks of meetings with employees going over months of performance and tying that performance to compensation increase is enough to make even the most seasoned HR professional run screaming. Small business owners? Well, they would actually rather not do them at all, but somewhere in their mind, they know they should do something. What is that best option, most reasonable, something?

The first question is: Do you need to do an annual review with your employees? Yes, BUT. It doesn’t have to be as scary, complex, or overwhelming as it may sound.

The second question is: Do I have to give an employee a pay raise when I conduct an annual review? NO. In fact, there should be a policy in your Handbook that states a review and a compensation increase are two separate processes, and that a review does not automatically trigger a compensation increase.

Are you the type of leader who periodically meets with their employees, sets written goals, and provides feedback on what has been done well versus what needs to be improved on?

Yes? Fabulous! This is in essence an Annual Review, with a Development Plan layered in. How does a quick summary and only focusing on a Development Plan each 12 months sound?

No? Now is the time to start. Why? Your employees need to hear from you. And you need documentation, ideally signed by you and your employee(s). We’re not talking about the 10-page document full of corporate buzz-words like “KPI” that make your eyes cross.

To make the Annual Review process as simple as possible, be intentional with how to build a collaborative relationship with those that report to you. The path forward is one-to-one Meetings. These standing, recurring meetings keep both the manager and the employee focused on feedback, removing obstacles, seeking clarity, and taking all the steps and actions necessary to achieve or even exceed goals set and agreed to at the start of each employment year (every 12 months).

After a full year of one-to-one meetings, both manager and employee should be ready to put a summary of their thoughts, ideas, concerns, and new goals, to paper. That is the basis for the Four-Step Annual Review/Annual Development Plan process.

1.    Employee Self- Evaluation

Set the table for having a two-sided summary conversation with your employees. Start with a self-evaluation and give them a week or two to fill it out. You’re telling them, “You tell me how you think you did the last twelve months, I’ll take that into consideration, and we’ll have a two-sided conversation about it.” There is no way you can write everything down or remember every achievement of every employee. Self-evaluation is an important opportunity for the employee to tell you things they find important.

2.    Summarize Overall Job Performance

Consider this the “draft” Annual Review in short summary form. It looks like this: You did this well – congratulations! These are the areas of improvement we need to focus on, as we have discussed  Attached I have proposed goals to be discussed.

Aside from the employee self-evaluation, your annual review should only be one or two pages long. Briefly recap the last 12 months and work with them to align their work and personal goals for the next 12 months. Or, you can do away with the annual review entirely and move to an annual development plan.

3.    Draft the Development Plan

Based on what the employee has put on their self-evaluation, goals perhaps not yet attained in the prior 12 months, and your desires for continued employee growth, what are the goals that you believe make sense for these next 12 months? Try and get them to align with department goals, which should align with company goals.

4.    Schedule a Collaborative Meeting – Finalize Agreed to Goals

This is the meeting of the minds. Manager and employee spend less time going over the details of the year prior and instead focus on celebrating major accomplishments and collaborating on how to overcome concerns and keep growing and developing, by agreeing to a set of goals.

5.    Follow New Development Plan

For as many one-to-one meetings as possible, during the next 12 months, make the development plan a major focus. It helps keep both the manager and employee collaborating regularly on what needs to happen by when to reach those goals.

Rinse, repeat, every 12 months. Annual reviews need not be dreaded or feared, when you already know what to say and how to summarize, since you have been meeting with your employees throughout the year and everyone is already on the same page.

Interested in other current employment trends? Click the link to view the recent blog: Small Business Leaders: It’s Time to Bring Joy Back to Work or check back for more on human resources, payroll, insurance, and benefits.