Do Reviews Work?

As my company grows, I need to be more careful about performance evaluations — I've handled salary and performance reviews informally in the past. What's your advice on holding reviews and performance appraisals in a small company, and do they really work?

Performance appraisals are one of the greatest personnel management tools available. Reviews are a regular and organized way to give constructive feedback, to let employees know how their contributions are making a difference, and what they can expect in the future.

Unfortunately, performance reviews are rarely as effective as they should be — and the process often seems to be about as pleasant as a visit to the dentist. For many big company employees, reviews are nothing more than an annual appointment to find out what their new salary will be. However, reviews should be a forum to address not only performance success and improvement, but also issues of interest to the employee.

In a perfect world, reviews take place everyday as continual feedback. But formal reviews work best if they are set up as a professional appointment. Consider holding brief reviews quarterly instead of annually, so that they are less intimidating for both the employee and manager.

Additionally, once you actually hold the review, consider asking this effective question: "How did you make this company better since your last review?"

Finally, always tell the truth, and make an effort to address performance problems sooner rather than later.