The performance appraisal and the merit pay review are major events in an employer/employee relationship. All too often, their unique and separate functions are misunderstood and, as a result, the processes are mishandled and the employer/employee relationship suffers to the detriment of the business.

Performance Appraisal Process

The formal performance appraisal should be conducted on a regular schedule at least once per year and it must be prepared for by both the owner/manager and the employee. The review cannot be beneficial if either participant is winging it as they go. The performance appraisal is an objective assessment against the criteria of the job description as well as against the goals that were established in the last review. It is not a comparative assessment against other employees.

Review the job description prior to completing your performance assessment. Review records of the last performance appraisal and any other performance discussions that took place during the prior 12 months. Examine the objectives established in the last review. Make sure you have a clear picture of the performance. Is this observed or reported performance? Have you received solid inputs from other managers? Do you have specific examples of behaviors to support the performance assessments?

Have the employee complete their own assessment of their performance and achievements against goals previously set. Set the date, time, and appropriate place for the formal discussion. Listen carefully as the employee presents their views on their performance. Then provide your assessment. There will be areas of agreement and (perhaps) disagreement. The areas of agreement are easy; the challenge comes in communicating areas of disagreement in such a way that the employee will accept your recommendations.

Then develop an action plan. Keep things positive by demonstrating your sincere willingness to help them strengthen any developmental areas.
When preparing your list of goals, make sure they contain the following critical elements:

• Goals must be specific.
• Results must be measurable.
• There must be time bound completion dates.
• Each objective should be stated as a result to be achieved.
• The objective must be traceable to the company's goals and within the responsibilities of the employee.

Establish Career Development Goals.

Focus on the person and their career needs and aspirations. Examine the future and identify what would be the perfect role for the employee. Then, given those desires and growth objectives, define the actions that the employee will take and the steps the company will take to help the employee achieve those objectives. Realize that some of these goals may be associated with personal development and may not appear to relate to the company goals. However, anything that will make the employee feel better about himself or herself will produce benefits for the company.

Make sure that everything is recorded and that both you and the employee sign the appraisal form. Provide a copy to the employee and place one in the employee's file. If it has been a contentious review and the employee does not want to sign, indicate that on the form and provide a copy to the employee.