Ok, the blog title might be a stretch. Employee Reviews are no one’s core competency in small business. They can be time-consuming, sometimes awkward, and potentially polarizing. Done well, reviews can help your team grow, make you a better manager, and enhance company culture.

Done poorly?

I have seen good employees quit on the spot, dedicated employees give up, and poor employees continue to wreak havoc on your business. “Everyone comes in wanting more money and a trophy,” one owner complained to me. “I don’t sleep for days leading up to review time,” says another.

For something that is supposed to help your business, that’s a lot of potential destruction.

Sleep Better

First, you can reduce the urgency and stress of reviews by following these best practices:

1. Review employees continuously.

Great managers provide feedback all the time. They also know how to adjust their feedback style to match the employee. When you find someone doing something well, share some praise in a way that is valuable to the employee. Some appreciate a public accolade while others prefer something in private.

2. Accept feedback readily.

Reviews should be a two-way conversation. Always ask for constructive feedback on your management style. Thank them for it, don’t be defensive, and don’t wield it later. Building trust is one of the benefits of a good review process.

3. Know your team already.

I see a marked improvement in companies that use learning or work profile tools to better understand one another. Some try to type personalities, others focus on learning styles. Find the one that helps you, but it is not a replacement for spending time interacting with employees.

The goal is to make sure your constructive feedback or accolades are not a surprise come review time.

Manage Expectations

The above steps don’t eliminate the need for the review, but they help to set a tone for more productive and less traumatic sit-downs.

What about compensation?

Before the Big Recession, the annual review was a happy time for most employees. Get a report card and find out how big your raise will be.

Post-Recession, after a year or two (or five) of ‘Sorry, we can’t do any raises yet,’ employee frustration and then anger set in. Companies that did not have managed compensation plan were at a big disadvantage when it came time to adjust pay.

Employees expected to see a “catch-up” raise while businesses had adjusted to the new normal of lower margins and less money available for raises.

It’s never too late to get better at managing compensation expectations. Here is how you get started:

1. Establish career paths for each job/role in your business. One way is to define Level I, II, III for each hourly position with the mastery requirements for each level. Each level comes with a corresponding pay range based on duration. This creates incentives while capping pay for employees that don’t progress.

Read this post on managing job descriptions.

2. Introduce cost of living raises as a separate element of the pay review. Generally, these are applied across the board so even the capped employee might see a 1-3% raise as the economy evolves.

3. Put pay raises into your fiscal budget to begin mid-year. If you have met your budget goals, then it should be easy to allow those raises to go through. If you haven’t, then make the mid-year adjustments you need.

4. When pay review time comes, sit down with the employee and review their entire compensation package, value of benefits, and progress in their career.

The key to managing expectations is consistency. The first year might still be a little rocky if you have not been methodical in the past, but once you get past that – these employee reviews will become a more positive experience for everyone.

If your organization is struggling with maintaining the ideal employee culture, give me a few minutes and let’s see if I can help get you unstuck.