Q&As: Difficult Performance Review Issues

Q: My top employee isn’t satisfied with her salary review. What should I do?

A: Don’t go back and redo a salary review unless you feel that your performance review preparation was sloppy. As soon as other employees hear that you are reconsidering review outcomes, you will become inundated with requests for reconsideration or will have sullen, resentful employees on your hands.

Self-test before giving a salary review. Ask yourself in advance, “If the employee complains about his salary increase, will I feel he is right and want to increase it?” If you would, pay the employee the money he deserves up front.

Give your top performers great increases, and give your laggards small increases, if any. Avoid the common tendency to make only modest differentials between the increase given to an excellent employee and the increase given to a poor employee.

Q: Should reviews be in writing?

A: Absolutely. The most pressing reason for maintaining a written copy of a performance review is as a paper trail against a legal claim. And, be aware that in a discrimination action, you may need to provide the court with records on all employees, not just the one who has brought suit.

Written reviews also give you a means of tracking employees’ progress over an extended period of time. You can use this documentation to assist them in improving their weaker points during the year. You can also use written reviews when considering which employees to promote or reassign.

Q: What are the biggest mistakes managers make in reviews?

A: Inflating the review of an average or poor worker is the most common and most serious mistake managers make in giving performance reviews. You should always tell it like it is. Another common mistake is the tendency not to pay top performers what they really deserve.

Some managers focus on an employee’s performance over the past couple of months, as opposed to over the entire year. Remember, employees are aware that their reviews are coming up and it is a natural tendency for them to pull out all the stops just before a salary review. To counter the effect of this, you should keep notes on each employee’s performance throughout the year.

Managers usually have a good idea about who is likely to complain about a review—especially the salary increase component. There is a temptation to pay “whiners” more than they deserve to avoid an acrimonious review. Resist this. Salary increases should be rewards for performance and achievement, not bribes.

Plus, you need to keep total salary increases within target. If you overpay an underperformer to keep from hearing her complaints, an overachiever may have to suffer the consequences and receive less of an increase than she deserves.

Q: How do I present a really negative review?

A: More than anything else, don’t sugarcoat a negative review. Remember, should you end up firing the employee, you greatly increase your chance of being hit with and losing a lawsuit if the fired employee’s recent performance reviews have been positive. You can, however, search for some positives to show the employee you are being objective.

Repeat the overall performance summary twice to ensure that the employee gets the full impact of his or her review. Always state a few clear, specific examples of any shortcomings.

Don’t get into a long-winded argument with employees. If they disagree with your appraisal, tell them that you understand that they are in disagreement with you. Tell them that, nonetheless, you stand firm in your beliefs regarding their performances. You may want to suggest continuing the discussion the next day so that an employee has a chance to cool off.

Q: How can I keep employees from sharing their reviews and/or salary levels with one another?

A: The bottom line is that you can’t. You can request review and salary confidentiality, but many people, especially younger employees, will share this information anyway. What you need is an equitable pay and review structure. That way, even if your employees know each other’s salary level and review history, they will feel fairly treated.

Q: My business is in a cash bind and can’t afford raises. Should I skip or delay reviews?

A: No. Review employee performances even if you can’t afford to offer increases right now. Be candid with your employees. Explain the situation realistically but portray the future in a positive light so that they will want to remain in your employ.

You have several alternatives for handling the issue of raises. You could tell your employees what their new rate of pay will be when the company can afford to implement the raise; you can inform employees that actual raise levels will be determined when the company’s financial picture improves; or you can offer cash bonuses in lieu of raises if certain preset financial objectives are met within some specified period of time.

Q: Should all employees be reviewed at the same time?

A: Yes. Try to conduct all reviews at about the same time. An exception might be made for managers. You may want to review management staff a few days prior to reviewing support staff.

Even if you have policies to the contrary, many employees are going to share information regarding their reviews with coworkers. Some employees may expect better reviews than they receive if other employees have gotten great reviews in the recent past. And, with emotions running high at review time, work tends to slow. If you consolidate reviews to a specific period of time, you can minimize the effects of this and get on with business until next year!

About Bob Adams

Bob Adams is a Harvard MBA serial entrepreneur. He has started over a dozen businesses including one that he launched with $1500 and sold for $40 million. He has written 17 books and created 52 online courses for entrepreneurs. Bob also founded BusinessTown, the go-to learning platform for starting and running a business.