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Performance appraisals are a critical tool for documenting how employees are doing and for providing legal evidence of employee accomplishments or problems. However, managers must know how to conduct a review if it is to yield useful information.

At the author’s company, Rea & Associates, company executives noticed that over the course of two years, the corporate environment seemed less focused and communication was less evident. With no clear idea of why these changes had occurred, the company set out to update its performance appraisal system.

To develop the best possible system, human resources personnel sought feedback from employees through interviews. The information they gleaned from these conversations was used to help develop a new performance appraisal program. Human resources also used its experience in developing performance appraisal systems for clients and, in addition, referenced industry-specific guidelines. The program is based on six key managing concepts: having clear definitions, providing basic training, allowing self-evaluation, including multiple reviews, giving specific comments, and focusing on the future.

DEFINITION. First, any performance appraisal must be based on clear definitions of the objectives against which employee behavior and achievement will be measured. To achieve this, the company took steps to establish definitions through clearly stated employee goals and to implement them through a three-step program.

First, all managers were asked to provide clear outlines of each employee’s day-to-day tasks. These were used to write clear job descriptions. HR then developed definitions of what would constitute poor, average, good, and exceptional performance of the job. These definitions were not based solely on completion of the tasks but also included the personal characteristics or competencies of how to achieve success.

For example, the definition of “demonstrate adaptability” sets out that employees should be able to adjust to multiple demands, shifting priorities, and unexpected events. The skill is further defined, stating that employees should maintain their composure in the face of criticism, conflict, or hostility as well as project a positive outlook and rebound quickly from setbacks and disappointments.

In addition to developing the list of specific tasks on which job performance ratings would be based, HR solicited input from all company employees and shareholders to develop a list of 16 general competencies. These included working efficiently, communicating effectively, supporting teamwork, and demonstrating adaptability. To elicit suggestions, they asked, “What does it take to be a success within Rea?”

BASIC TRAINING. The second key management concept is to make sure that the company gives every new employee a solid foundation on which to build a successful performance. That means providing good orientation and basic training, as well as perhaps providing a mentor or coworker who can help the newcomer become acclimated.

At Rea, each new hire goes through a one-day intense orientation training program that covers company philosophy and gives the new employee one-on-one time with the president of the firm and senior managers. The program also gives employees a chance to meet other new employees from other offices within the firm and an opportunity to clarify a bigger picture of where they fit within the firm and where the firm is headed during the next three to five years.

Rea also uses the buddy system. A strong-performing staff member—preferably of an age similar to the new hire— is assigned to be a “buddy” to a new employee. The buddy follows a checklist of tasks that the new person needs to learn in the first 30 to 60 days, making sure that he or she masters each skill. The checklist includes items such as how to navigate the computer system, provide basic services to the client, and fill out timesheets.

This combination of orientation and one-on-one training gives the new employee multiple sources of information. It has greatly increased human resources’ ability to convey what is expected by the firm and what goals top-notch performers should aspire to achieve.

SELF-EVALUATION. A third concept embraced by human resources was that of allowing employees to offer a self-evaluation in which they discuss with their supervisor how they believe they’ve made a contribution to the success of the company. This two-way dialogue has improved employee retention by showing workers that their opinions matter.

Since this practice has been initiated at Rea, most employees have enjoyed this opportunity to discuss their performance. Periodically, however, employees are reluctant to evaluate themselves. Managers, who are trained to recognize this anxiety, find ways to help the employee complete the assessment—usually through an interview session.

One of the obvious advantages to self-evaluations comes from the adult learning theory. This theory suggests that people learn best when they can have some control over the output and when they have input on their own future performance.

A second and perhaps more strategic reason for the self-evaluation is the effect it has on the dialogue between manager and employee. The employee who is required to complete a self-evaluation will become a more critical thinker and a better participant in performance-oriented dialogue. In our experience, it was sometimes the reluctant and shy employees who provided the highest quality information in their self-assessments.

After the employee has presented his or her self-evaluation, the manager has the chance to either agree or disagree. This candor can greatly strengthen the manager-employee relationship. The self-assessment has been so successful at giving managers a chance to promote growth and greater productivity that the company has formalized the practice. All employees must now provide a written self-evaluation as part of the performance appraisal process.

MULTIPLE REVIEWS. Each employee reports directly to one manager, who conducts that employee’s evaluations. But in performing their duties, employees often also interact with other managers. To get a true picture of each employee’s performance, the company gives managers a chance to evaluate employees they work with, not just those who directly report to them. This addition to the appraisal system provides evaluations with different perspectives on the performances of each employee.

In the company’s work, where employees are linked to specific clients and specific projects, it is common that someone other than the manager will have significant information about an employee’s performance. Thus, allowing those people to contribute to the performance appraisal enhances the quality of the information provided.

In some cases, the company also seeks evaluations from an employee’s peers. However, this must be handled carefully. Peer evaluations should never be linked to pay raises. Allowing employees to take part in determining a colleague’s raise can create a bias in the process.

SPECIFICS. When implementing the new program, the human resources staff stressed that feedback must be focused on specific tasks so that employees could see objectively how to improve in the future. Providing this level of specific feedback requires that managers give the process daily, or at least weekly, attention.

For most managers in the company, this was the toughest part of the new program. It was difficult for managers to find the time to jot down specifics. However, coaching a performer to greatness requires specifics such as congratulations, criticism, and encouragement on specific projects. By asking questions and giving employees reminders of past experiences, managers can strive to create an environment of trust and high expectations.

When human resources personnel evaluated the program a year after implementation, they found that specific feedback was best when given immediately and that this commitment was difficult for managers. After conducting a series of interviews to critique the company’s nine managers on the specific strengths and weaknesses of their performance- appraisal delivery, human resources discovered that most of the managers were spending considerable time on the evaluations—but only once a year.

Though most managers were doing a better job of evaluating employees than before the program was implemented, none were taking the time throughout the year to take notes, put letters in personnel files, or record the instances when they called an employee aside and thanked them. Managers were retrained on the importance of these specifics-oriented evaluations.

FOCUS. The new program places the focus of performance appraisal on the future. Managers are required to devote 75 percent of a performance appraisal to the employee’s goals and future direction. These written goals are then reviewed and updated annually. The company’s 75-percent rule is based on the premise that the employee’s greatest impact on the company lies in his or her future actions.

To do this, the performance appraisal process is goal-oriented. One or two key goals that the employee chooses with the manager’s help instantly create a future focus around which discussion can take place.

This process is most difficult when evaluating an employee who has held the same job or performed the same function for a number of years. Establishing goals in such circumstances proved challenging for managers. However, these types of evaluations can be critical in ensuring that employees are always learning and achieving new objectives. The company expects all evaluated employees, regardless of tenure, to produce and achieve meaningful goals. Even as one employee approached retirement, he maintained a goal—to create a seamless transfer of clients and tasks before his retirement date.

The goals can be team-oriented or specific to the individual. Whatever the content of the goal, it must be achievable and measurable. It must also include a time line.

In reviewing past performance evaluations, human resources found that many of the goals set out for employees, such as improving customer relations, were not measurable. The vagueness of the goals limited the potential positive impact to the organization, even though the goals were good ones.

As our experience shows, revamping the performance appraisal program to motivate employees is well worth the effort. By implementing these six ideas, any manager can move a company and its people forward.

Dan Toussant is a shareholder and human resource consultant for Rea & Associates Inc. in Canton, Ohio. He has earned the Senior Professional in Human Resources designation. Toussant also consults on issues including recruitment, team member development, performance appraisals, HR policy issues, and management training programs.