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The Green Sheet Online Edition

August 24, 2009 • Issue 09:08:02

How to do effective performance appraisals

By Vicki M. Daughdrill
Small Business Resources LLC

ISOs employing merchant level salespeople (MLSs) need to conduct performance appraisals on a regular basis. Constant change, new regulations, organizational restructuring, new products, services and technologies, and changing delivery systems are just some of the reasons why.

Performance appraisals provide:

  • Insight into the work being done and into employees who are completing the work
  • Communication for the development of new or improved ideas and the discussion of greater responsibilities and career advancement
  • Clarity to employees about how the quality and quantity of work is perceived
  • Timely feedback to increase performance and productivity
  • Recognition of good work with positive feedback
  • Two-way communication to help clarify company goals
  • Two-way communication to help managers grow and improve leadership styles
  • Guidance for managers on how to conduct professional performance appraisals

The dreaded eval

Some managers fail to conduct employee reviews because they fear the possibility of disagreement and confrontation, as well as accumulation of hostility over past events. Once an argument starts, managers feel they have to win. So do the employees. Usually, neither wins.

Lack of interpersonal and interviewing skills is another common reason for avoiding reviews. If you do not know the techniques for directing the appraisal interview effectively, you are not likely to look forward to completing it.

But other issues arise as well. Many managers fear making matters worse by talking about performance. Some are anxious over who will review the completed forms. Sometimes their opinions may differ from higher level managers, and they allow this to overshadow real communication, which makes the entire process seem phony. Also, if the company's questionnaires are too complex, they take over the process and make it seem too bureaucratic.

An additional challenge centers on our challenging economy. The fact that an employee's work is favorable does not automatically ensure a promotion or raise, but employees sometimes expect one or both. This mistaken notion often results in disappointment for the employee, which may end up in the MLS quitting.


A performance appraisal is an opportunity for a conversation between a manager or supervisor and MLS, to discuss what they expect from each other and how well those expectations are being met. Performance appraisals are not adversarial proceedings or social repartee. They are an essential communication link between two people with a common purpose.

Leading those discussions is not always easy, but you can learn the principles and techniques for conducting effective appraisals and apply them to all of your employees. Performance appraisal systems must be workable, equitable, ongoing and as unbiased as possible.

Effective appraisal interviews depend in part on establishing limited, attainable objectives. The objectives are to:

  • Set goals
  • Judge results achieved in the past, and
  • Establish goals for the future

Effective appraisals focus on:

  • Performance, not personalities
  • Valid, concrete, relevant issues, rather than subjective emotions and feelings
  • Reaching agreement on what the employee is going to improve in his or her performance and determining what you can do to assist the employee in improving performance and productivity.

Legal issues

Many legal issues surround how employers can conduct reviews. The following are simply guidelines; they are not intended to replace legal counsel or representation.

Uniform Guidelines on Employee Selection 1978 is the controlling federal law in the area of performance appraisals. Your appraisal system must have no adverse impact on any of the areas covered by the law, such as race, sex, religion, national origin, age or handicapped status.

The Equal Employment Opportunity Commission requires that any measure of employees must be valid and fairly administered. You must be able to prove:

  • A skill is a valid, true and necessary requirement of the job.
  • You consistently observe the employee performing the assigned tasks.
  • Your rating criteria must be the same for all employees of the same grade, class or group.
  • Performance can be described accurately and be based on documentation, such as logs and diaries.
  • No sexual innuendo or sexual harassment colors the appraisal - or any other employee communications.
  • Access to performance appraisals and other confidential items is controlled and limited because every employee has the right to privacy.
  • Performance is accurately measured and described, and less-than-adequate performance is not praised.

Five steps

There are five steps to conducting effective performance appraisals.

    1. Do your homework

  • Review the employee's job description and requirements. Make sure it accurately describes the position as it is today.
  • Review the goals and standards you established with the employee.
  • Review the employee's history: job skills, training, past jobs and performance.
  • Review your logs to determine special assignments, as well as successes and opportunities for improvement created during the review period.
  • Seek input from customers who have direct and frequent contact with the employee - both internal and external.
  • Evaluate career opportunities for the employee including salary ranges.
  • Prepare the manager's portion of the performance appraisal document.

    2. Set the stage

  • Set a mutually agreeable time and location for the interview.
  • Make sure the employee understands the purpose of the appraisal, the process and how the results will be used. Emphasize the need for two-way communication.
  • Be professional when extending the invitation. Do not joke or make light of the process. This will undermine both your credibility and the opportunity for achieving worthwhile objectives.
    • Ask the employee to prepare for the interview by asking themselves several questions:
    • What were my specific accomplishments during this review period?
    • What goals or standards did I fall short of meeting?
    • What are my career objectives?
    • How could my manager help me do a better job?
    • Is there anything that the organization or my manager does to hinder my effectiveness?
    • Does my present job make the best use of my capabilities?
    • How could I be more productive?
    • What have I done since my last review to prepare myself for more responsibility?
  • Ask the employee to complete the self-assessment portion of the performance appraisal form.

    3. Conduct the interview

  • Remember, this is a conversation. Your objective is to maximize the employee's participation.
  • Do not discuss other employees' performance or behavior. Listen and agree to investigate issues. Remember that complaints may be based on personality or style differences and may not be actual issues.
  • Prepare specific questions and areas for discussion.
  • Rehearse the questions if necessary. Do not begin the process until you are in full control of the issues and your emotions.
  • Minimize distractions and interruptions. Clear your desk and your mind of everything unrelated to the current situation. Hold all calls and close the door. Make sure the room temperature is comfortable and that the employee will be seated in a comfortable chair. Allow plenty of time to complete the meeting so you don't have to end the discussion before it's completed.
  • Be sure the employee - not the performance appraisal form - is the center of your focus.
  • Create a "sandwich." Begin with the positives, fill with the areas of opportunity, and end on a positive note.
  • Ask open-ended questions like, "How are things going in general?"; "How can I make things better?"; "What is your opinion of _____?"; "How do you feel about _____?"; "What do you think caused _____?"

    Be careful to avoid:

    • Evidence of bias or prejudice such as race, religion, education, family background, age or gender
    • Placing too much attention on characteristics that have nothing to do with the job, such as sincerity or friendliness
    • Over-emphasizing favorable or unfavorable performance
    • Relying on impressions rather than facts
    • Holding the employee responsible for the impact of factors beyond his or her control, such as computer reliability

    Be sure to include:

    • Measuring results of the employee's performance, not behavior unless it adversely impacts the employee's performance
    • Contributions made by the employee during the review period
    • Performance issues that are new or ongoing
    • Any professional or personal development that may be required for future advancement
    • Setting goals for the next review period

    4. Close the discussion

  • Summarize the discussion and any agreements. Be positive and enthusiastic. Be sure to include commitments you have made. If there are areas of disagreement, review how you and the employee have agreed they will be resolved.
  • Provide an opportunity for the employee to ask questions as well as offer new ideas and suggestions.
  • Thank the employee and reinforce any agreements.
  • Schedule any follow-up meetings that may be necessary.

    5. Follow up

  • Complete the documentation on the performance appraisal form and create any action plans discussed.
  • Consider your performance in leading the discussion. Ask yourself:
    • What did I do well?
    • What did I do poorly?
    • What did I learn about the employee?
    • What did I learn about myself?
    • Did the employee give me any feedback that gave me new insight into myself?
    • What will I do differently next time?
    • Follow through: Ensure that agreements are kept and plans are followed.

10 things to keep in mind

Here are the top 10 guidelines for performance appraisals:

  1. The process is not easy, but using the principles and techniques provided in this article, you can learn to do an effective job.

  2. Different managers have different styles and approaches. You must decide what works best for you and your company.

  3. The annual performance app-raisal is not a social event. Be careful not to lose your credibility by treating it lightly.

  4. The entire process must be carefully thought out and planned. Be sure to do your homework. Remember, you are in control and must not begin the interview until you have command of the issues and your emotions.

  5. Remember to adapt for different kinds of employees.

  6. Establish proper goals. They must relate directly to the job, and they must be S-M-A-R-T: Specific, Measurable, Action oriented, Realistic, and Time and cost restricted.

  7. Keep a log, diary or list of the year's outstanding performances, as well as areas for improvement. acknowledge both throughout the year (successes publicly, areas for improvement privately) so there will be no surprises when you get to the year-end review.

  8. Follow the five steps for conducting an effective performance appraisal.

  9. Remember to create a "sandwich" - begin with the positive, fill in with the opportunities for improvement and close on a positive note.

  10. Follow through.

Every ISO with employees needs to conduct routine performance appraisals. Using these tools, you will be able to conduct an effective performance appraisal and continue to provide a climate conducive to on-going success. end of article

Vicki M. Daughdrill is the Managing Member of Small Business Resources LLC, a management consulting company. E-mail her at vickid@netdoor.com or call her at 601-310-3594.

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