For most managers and supervisors the annual employee performance review is about as much fun as completing a 1040-tax return followed by a root canal. So, it is no wonder that many supervisors put off doing performance reviews and some even skip them altogether. Supervisors who delay or skip annual performance reviews are missing a great opportunity to motivate their employees. For the supervisor, the annual performance review may be just another work task, but for the employee the annual performance review is equivalent to the Super Bowl.
I have seen employees get nervous prior to their annual review similar to how athletics get nervous prior to a big game. Most employees, prior to their review, are nervous because they are wondering if their supervisor will recognize their accomplishments, overlook their failures, and acknowledge that he or she is a productive and worthwhile member of the organization. Employees are also nervous because they are worried that their supervisor will not provide them with an accurate performance review. Above all else, employees want to receive an accurate evaluation of their performance.
Employees define a "winning" performance review not only by a pay increase but also by how accurate he or she is evaluated. An employee defines a "losing" performance review by the number of inaccuracies in his or her performance review. Too many inaccuracies in the performance review will cause an employee to feel unmotivated to further perform their job--even if they did receive a pay increase.
The following formulas demonstrate the relationship between performance review, pay, and motivation.
Inaccurate Performance Review + Pay Increase = Decreased Motivation
Inaccurate Performance Review + No Pay Increase = Decreased Motivation
No Performance Review + No Pay Increase = Decreased Motivation
No Performance Review + Pay Increase = Decreased Motivation
Accurate Performance Review + Pay Increase = Motivation
Accurate Performance Review + No Pay Increase = Motivation
As the above formulas indicate, the most important step a supervisor can take to motivate any employee is to provide him or her with accurate performance reviews.
Inaccurate Performance Review + Pay Increase = Decreased Motivation
Inaccurate Performance Review + No Pay Increase = Decreased Motivation
Employees who receive inaccurate performance reviews, plus pay increases, will not be more motivated to increase their performance for two reasons. One, these employees quickly come to understand that pay increases are not contingent on improving their performance levels. Two, these employees develop a "why try" attitude when faced with working with a supervisor who is not able to accurately measure their performance.
Employees who receive an inaccurate performance review plus no pay increase, are likely to develop a "why try" attitude along with a "what's the use" attitude. An employer, who provides employees with inaccurate performance reviews with no pay increases, is an employer who is likely to have a high turn over rate.
No Performance Review + No Pay Increase = Decreased Motivation
No Performance Review + Pay Increase = Decreased Motivation
Employees who do not receive yearly performance reviews plus no pay increases, are likely to develop a "why try" attitude which says, "If no one in the company is likely to notice or reward my effort, why try to improve my performance?"
Employees who do not receive yearly performance reviews, but still obtain yearly pay raises, do not obtain additional motivation because they learn that no performance increases are necessary in order to obtain more money. These employees may not be complaining about their lack of performance reviews because they are obtaining yearly pay raises; but are you, as a supervisor, really increasing employee motivation when you provide a pay increase without a performance review? No, you are not! In fact, you are in danger of decreasing an employee's motivation level if you provide a pay increase without an accurate performance review attached. In this case, an employee is likely to develop a "why improve if no one monitors" attitude.
Accurate Performance Review + No Pay Increase = Motivation
Accurate Performance Review + Pay Increase = Motivation
Employees who receive an accurate performance review that indicates their work performance does not warrant additional pay can be encouraged to improve their work performance-provided the supervisor sets up conditions which encourages under performing employees to achieve success.
In cases where an employee receives an accurate negative performance review, a supervisor should setup a 3-6 month time interval in which the employee will be given a second chance to obtain a more favorable performance review. During the 3-6 month interval the supervisor should set clear performance expectations along with coaching/mentoring in order to help the employee improve their performance. If the employee improves their performance, the employee would be provided with the same pay increase they would have received during their first performance review.
An employee who receives two negative performance reviews should be asked if they have any personal problems that are interfering with their success, and if their current position is the right "fit" for their abilities. A good book to read on the topic of employee performance improvement is "Discipline Without Punishment: The Proven Strategy That Turns Problem Employees into Superior Performers" by Dick Grote.
Employees, who receive both accuracy and a pay increase during their performance review, are likely to be the most motivated. Emphasis, in this scenario, should be placed on the accuracy of the review versus the amount of money the employee receives. A 5% pay increase is likely to motivate an employee as much as a 10% 15% or 25% pay increase. An employee who is paid $40,000 a year is likely to be as motivated as an employee who is paid $50,000, $60,000, or $70.000 a year.
As the above formulas indicate, money alone does not increase employee motivation levels, only accurate performance reviews can increase employee motivation levels. In order to complete an accurate employee performance review follow these tips:
1.) Keep the performance review as objective as possible. This means that you want to measure the employee's performance level and not their personality traits. For example, you can measure the number of times an employee has been late to work, their absenteeism rate, the number of projects completed successfully, the number of coworker complaints received, the number of goals met, and the number of customer complaints or complements received.
2.) Understand that an accurate performance review is not done within a few hours, but instead is an ongoing yearlong process. Keep a file open for each employee where you can easily add monthly performance measures, compliments and complaints, along with dated memos regarding your observations of the employee's performance. An employee can tell the difference between a rushed review and one that is carefully crafted.
3.) Do not surprise an employee with either an accurate or inaccurate performance review. A motivated employee requires ongoing feedback on a regular basis, so do not save it all up for a once-a-year praise or criticism meeting. If an employee created a negative accurate performance review for him or herself, do not give him or her the impression that you are pleased with their performance.
4.) Use the same measurement standards and criteria for all employees who have the same job descriptions. Do not evaluate an employee in areas that go beyond his/her job description.
5.) Use the employee's last review as a benchmark standard for their next performance review. Also, if you are a new supervisor, you need six months of observation time before you can complete an employee's review by your own observations. A new supervisor should ask the employee's last supervisor to help complete an upcoming employee review. If the employee's last supervisor is not available, ask for feedback from other supervisors that have observed the employee's work.
6.) Professionalism, both in writing the review and in your presentation, is an important standard. An employee performance review can either be your friend or enemy if you are sued for wrongful termination.
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