In Part I of “Getting the Most Out of Your Employee Performance Review Process” we covered an overview of the benefits to an employee appraisal program. In Part II, we discussed a few common methods for getting the most of your program. In Part III, we provided you with employee performance review tips and strategies that will help the process proceed smoothly. In Part IV, we focus on goal setting and employee performance measurement.

Employee Performance Review: The Goal Setting Process

One of the most important benefits of the employee performance review is the goal setting process. It keeps the employee focused on their goals for the coming year with periodic milestones to measure progress. The manager needs to take into account the employee’s ability, skill level, and potential to form concise, measurable goals that further the company’s agenda. For many managers, the SMART process provides them with the tools needed to formulate professional development goals.

SMART – Specific, Measurable, Acceptable, Realistic, Time Bound

• Specific – The goal must be specific in order for a manager to realistically appraise the result. Setting a sales goal of “getting more customers” is difficult to measure while targeting “10 new customers” is specific.

• Measurable – Using the example above, it can be argued that the employee achieved their goal of “getting new customers” if they acquire at least two new customers. However, if the goal was acquiring “10 new customers” then they have fallen well short of the mark.

• Acceptable – To ensure that the goal is acceptable to the employee it is important to involve them in the goal setting process. Participation allows them a say in both their personal and professional development.

• Realistic – The goal must be attainable within the time period stipulated. An unrealistic goal will only cause frustration in the long term.

• Time-Bound – There must be a deadline to attain the goal.

Once the goals are set it may be wise to set a series of quarterly or monthly milestones. This allows managers to keep track of progress and help with any issues that have arisen. In addition, the manager must ensure that the employee is given the resources to achieve the goals. This could include resources such as training, equipment, and staff.

An effective employee performance review is a collaborative event where employer and employee agree on past performance and goal setting for the coming year. If performed effectively, it matches employee goals and aspirations to the needs of the company.

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In Part I of “Getting the Most Out of Your Employee Performance Review Process” we covered an overview of the benefits to an employee appraisal program. In Part II, we discussed a few common performance review methods for getting the most of your program. In Part III, we provide you with employee performance review tips and strategies that will help the process proceed relatively smoothly.

Managers Are the Key to Effective Performance Reviews

The reviewing manager must effectively evaluate the employee’s past performance, provide constructive feedback, and set clear expectations for the coming year. For these reasons, managers are the key to effective performance reviews. The problem is that managers who perform this function once a year never have the opportunity to become efficient with the process. An annual refresher course on how to conduct effective performance reviews by human resources may alleviate this problem.

There are other issues to remedy however. An annual review has managers reaching back in memory when trying to gauge employee performance over the course of the year. This can result in key performance issues being forgotten or skewed due to the effect of time. A manager may take an overall impression of the employee and apply it across the board without regard to actual performance or employee development. Or they may “cherry pick” certain performance indicators and make an overall assumption based on the results. So, how does a manager resolve these issues?

Employee Performance Review Tips and Strategies

• For starters, don’t let the formal annual review process get in the way of effectively communicating with employees over the course of the year. Ongoing dialogue and written communication leaves no doubt about what is expected from both the employee and manager.

• Allow some time between the formal review and the actual submission. This allows you and the employee time to digest the information discussed and come back with questions and clarification.

• Schedule the review ahead of time (no surprises like “Hey, its review time, let’s go) and be sure to explain the process that will be followed.

• Identify problem areas in advance and allow the employee time to prepare a response. Also, don’t start off the meeting discussing problem areas or you risk losing positive interaction with the employee.

• Have employees prepare their own performance review in advance of the meeting. It gives an added perception to the performance appraisal.

The employee review process should be designed around employee development and not just a rating system with a pay raise. To get the most out of employees you must inspire them to perform at a high level. It’s a win-win situation when the employee’s goals and the goals of the company are in sync. In Part IV, we are going to discuss employee goal setting and performance measurement.

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In Part I of “Getting the Most Out of Your Employee Performance Review Process” we covered an overview of the benefits to an employee appraisal program. In Part II, we discuss a few common methods for getting the most of your program.

There is more to the employee performance review process than providing and obtaining feedback. Accenture’s report “Mastering Workforce Performance Appraisal” states that “developing accurate behavioral performance criteria can raise an organization to new performance heights, as increasing the quality of performance criteria can boost the impact of several HR processes.” The question is; how do we reach those new performance heights through our employee appraisal model?

The Employee Appraisal Model

For many companies, the performance review is an annual ritual that measures the employee’s performance and issues a pay raise commensurate with that performance. But is that really enough communication between two parties whose goals are so tightly woven together? Or should there be milestones set with more frequent mini-reviews throughout the year in quarterly or monthly intervals? It need not be a lengthy review but simply a progress report to help ensure that employee goals are met or that corrective action needs to be taken.

An effective employee performance review process may look something like this:

• Develop professional and personal development goals with the employee
• Split those goals into quarterly milestones
• Further divide them into monthly objectives and establish progress updates
• Review employee performance annually and set new objectives for the coming year

I realize for many managers this may seem like a lot of extra work in an already full schedule but results are what are important. It takes a lot less time to explain how your department achieved its goals than to come up with excuses as to why it didn’t. A manager who doesn’t achieve their departmental goals may be susceptible to additional supervision from their boss as well. Take the time with your employees, achieve your departmental goals, and open yourself up to being a results-oriented, promotable manager.

Employee Appraisal Methods

Two of the more popular employee performance review methods are Management-by-Objectives and the 360-degree appraisal method.

Management-by-Objectives (MBO) is a performance appraisal method that sets annual goals for each employee and measures the results of attaining those goals. It attempts to marry the employee’s personal goals with the objectives of the company.

360-Degree Appraisal is a performance review method that obtains feedback from various sources including other departmental managers, peers, suppliers, and customers. This type of performance review provides managers with an overview of how the employee operates within the total organization.

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In Part III, we’re going to discuss performance review tips and strategies and Part IV will provide goal setting strategies and measurement.

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Most business owners and managers agree that the performance review process is a necessary component of the employer/employee relationship. Some companies opt for the annual employee performance review while others perform it more frequently such as quarterly and even monthly. While most managers understand the benefits of the process, there are many who do not look fondly on it. That poses the question: Are companies taking full advantage of the employee performance review process and all of its benefits or are they just going through the motions? In this 4-part series of posts we’re going to cover the benefits of the employee review process and how to get the most out of it.

Overview: Employee Performance Review

In Accenture’s report ‘Mastering Workforce Performance Appraisal’ the authors state that “the quality of an organization’s performance appraisal system has a profound impact on human capital development because performance appraisal is the bedrock of many other human capital processes. Processes such as career development, succession planning and rewards and recognition are dependent upon performance appraisal information.”

In addition to human capital development, the report suggests that the performance appraisal process is a key strategy for high performance achievement. It allows for companies to retain, develop, and promote productive employees that fit within the corporate culture. At the same time, weaker employees can be transitioned into more suitable positions, offered training and development, or let go.

The performance review also offers the opportunity to establish a goal-setting process for the employee. The employee and manager review goal achievement from a prior performance review and set goals for the future. It is the manager’s job to transform the employee’s personal and career goals into company results.

Benefits of the Employee Appraisal

There are numerous benefits to administering an employee performance appraisal. They include:

• Employee and Employer Feedback
• Identifying Employee Training and Development Requirements
• Basis for Personnel Decisions including wage increases, bonuses, promotions, and disciplinary actions
• Assists with Career Development
• Provides a Record of Employee Performance History
• Establishes Employee and Organizational Goals
• Helps Meet HR Legal Requirements
• Establishes Job Standards

Although there are many benefits to the employee performance review process, I believe the one that stands out is employee development. For a company to succeed, not just now but well into the future, it must develop its employees to the best of its ability. That’s how successful companies are built.

In Part II, we’re going discuss a couple of performance review methods and some ideas on how to achieve the best results from them. In Part III, we’re going to discuss performance review tips and strategies and Part IV will provide goal setting strategies and measurement.

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Putting guidelines in place is the best way to eliminate any misunderstandings that may arise between employees and management because of a lack of understanding of management expectations.

Clearly written policies will also go along way when addressing issues such as inappropriate behavior, or poor performance.

Employee policies do not need to be long or complicated tomes. A few clearly written sentences that highlight your expectations is all that you need.

Although there are many policies that may be part of a company’s employee manual, there are nine employee policies that are important policies for any small business:

1. Probationary Period
2. Confidentiality Policy
3. Time Away From Work
4. Use and Access of Company Property
5. Internet and Social Media Use in the Workplace
6. Telecommuting Policy
7. Workplace Behavior
8. Disciplinary Policy
9. Termination Policy

Over the next several weeks, I will highlight each of these policies in detail as part of my “Small Business Employee Policies” series.

Dianne Shaddock is the Founder of Easy Small Business HR.com, a website which provides “Quick and Simple Human Resources Strategies for Small Businesses, Non Profits, and Entrepreneurs. Go to EasySmallBusinessHR.com for more tips on how to hire and manage your staff more effectively.

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The Benefits of Hiring a Professional Employer Organization (PEO)

A PEO is an outsourcing service that takes on a company’s administrative tasks in regards to the human resource and payroll functions. Key tasks such as payroll, health insurance, and employee benefits are some of the functions of a professional employer organization. It is a cost-effective solution for management personnel in both time and money – an ideal service that adds to the bottom line.

9 Steps to Picking the Right PEO

1. Determine the services that you require for your business. Some companies are only interested in outsourcing payroll functions while others desire the whole package of human resource administration.

2. Be sure to meet personally with the operators of potential PEO organizations. You want them to be as interested in your success as you are.

3. Ask for and follow up on references. Ask pointed questions of other clients of the PEO as to how the service has benefited their business.

4. Look for professional employer organizations that belong to the National Association of Professional Employer Organizations. NAPEO is the largest national trade association for PEOs.

5. Find out who will be administering your services at each PEO. Are they qualified to handle your needs? Do they have the requisite education and training? You’re looking to make your business life easier not create another problem.

6. Understand how the employee benefits are tailored and how the employee benefits are funded. Determine if they fit the needs of you
and your employees. Is the PEO fully insured, self-funded or partially self-funded?

7. Get a detailed proposal on the full breadth of services offered before signing the contract.

8. Review the service contract carefully. Use the services of your lawyer if you feel more comfortable. Be sure that each party’s responsibilities and liabilities are clearly defined. Look for a guarantee on the PEO’s service as well as the termination/cancellation clauses.

9. Be sure that the PEO meets all requirements for the state it is operating in.

Choosing the right PEO for your business is no different than hiring personnel for your company. You want to make sure you get the right fit for your business and that it truly opens up more time for you to concentrate on opportunities. So, ask the important questions and consider the answers carefully. You’ll be glad you did.

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Don’t:

Leave the task to someone who does not have direct supervision of the worker being fired. If you are their direct supervisor, you have the ultimate responsibility to deliver the “bad news”.

Why? Not only does it put the person who does not supervise the employee in an unfair and uncomfortable position of being the messenger of your decision, but it makes the affected employee feel dismissed, angry and resentful. Sit with your employee and be clear with them as to why they are being fired. If you have been communicating with your worker prior to notifying that they will be let go, (and I hope that you have), the fact that you have reached the point where they will be fired should not be a surprise to them.

Don’t:

Fire an employee on the spot unless the actions are so egregious that it requires immediate removal from the workplace.

Why? It is critical to be consistent with how you determine what acts of employee conduct or misconduct rise to the level of firing an employee. All businesses no matter how small should have basic standards in place that highlight your expectations relating to employee conduct or behavior in the workplace and the consequences of violating these standards. Firing an employee without having company standards in place that show that you have specific expectations of employees and their behavior complicates situations where an employee feels that they have been treated unfairly.

You should always investigate all situations that are brought to your attention whenever possible. This means talking not only to the employee in question, but any other staff members, customers, or clients who may be able to provide details that will inform your decision to keep or fire the employee.

If you don’t have any standards or policies in place, the best approach for firings involving less complicated work violation situations may be to give the employee a warning that their actions are inappropriate and then clearly highlight your expectations moving forward. Let them know that any future violations will result in termination. Document the date that the employee received this information and place a note in their file.

Be proactive and summarize your expectations of all employees in writing including the consequences for misconduct. Give a written document to all of your employees that highlight your expectations. Employees deserve to know what is expected of them, as well as the consequences of certain actions or behaviors in the workplace.

Do:

Fire workers who have crossed the line of what is considered egregious inappropriate behavior if you are absolutely certain based on the facts that the employee is guilty of misconduct. Behaviors that might require immediate dismissal if proven are:

• Violence against others
• Sexual harassment
• Threats
• Bringing weapons to work

Remember to be proactive and have written standards in place that highlight the company’s position on employee conduct and behavior. Be careful to fully investigate any complaints before making the decision to fire a worker. If you are not sure if a worker is guilty of any violation and you need time to learn more in situations such as the ones described above, suspend the employee with pay until you are able to research the situation and talk to all of the individuals involved.

Do:

Respect the privacy and confidentiality of everyone involved by meeting with your employee(s) in a private area; (it’s o.k. to have a management person present if appropriate as a witness).

Do:

Tell your employee the reason for the termination. Have a letter prepared briefly summarizing the reason for their being fired, the date of the firing and when their benefits will end, (if applicable).

Give your employee their last paycheck if at all possible when you notify them that they are being fired. If this is not possible, let them know when they can expect to receive their last check and that it will be mailed to their home.

It is recommended that you consult with an employment law attorney if you do not have a dedicated human resources professional in place to help you through these more complicated situations.

Dianne Shaddock is the Founder of Easy Small Business HR.com, a website which provides “Quick and Simple Human Resources Strategies for Small Businesses, Non Profits, and Entrepreneurs.

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What can you do to tip the odds in your favor? The answer appears simple–satisfy more customers. But, if you want testimonials, referrals and repeat customers, don’t just satisfy them—you have to deliver knock-your-socks-off service!

In order to give your customers what they want, you must know what they want – assuming won’t guarantee out-of-this-world customer happiness.

Measure customer satisfaction
Here’s where a targeted client satisfaction survey comes in—it takes the pulse of where your clients are on the happiness scale.

Human Capital Strategies has been conducting a customer survey for the past two years. It is now part of their strategy to maintain clients and increase referrals. Jason Knight, Founder states, “We focus on fulfilling our company’s mission statement, which makes a promise to our customer about the quality of service we provide to them. It made sense to ask them how we were doing.”

Target areas to improve
Knight targets communication, problem solving, fulfilling client expectations and whether services were completed in a timely manner. The 2009 Survey shows a high percentage of customers were satisfied with:

• Communication with clients 95.83%
• Timeliness of service and problem solving 100.00%
• Meeting client expectations in value of service 94.66%
• Ease of doing business with 97.92%

Take action
Although the numbers look good the past two years, Knight challenged his staff to improve the quality of their services to their clients. It must be working, because Christine Nichols was a finalist in the 2009 Phoenix Human Resources Manager of the Year (http://www.prlog.org/10433384-human-capital-strategies-celebrates-christine-nichols-selection-as-hr-director-of-the-year-finalist.html), and Human Capital Strategies was named a finalist for the 2009 Sterling Awards (http://www.prlog.org/10404152-human-capital-strategies-named-sterling-award-finalist.html).

It’s clear that one of the best ways to ensure success for your company is to ask customers how they feel about your service. If you fall short of their expectations, then up your game. Take action and then next year, take another survey

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You might also recognize behaviors that you want repeated, such as out-of-the-box thinking, team work or even timeliness and attendance.

Or, perhaps you want your recognition program to create a positive work environment.

Recognition prized by employees

Even if revenue is down, you can create an effective recognition program that does not have to cost a lot of money. Here are some tips for making your valued employees feel like they really are valued.

Say, “Thank you.”

Think about how a sincere, genuine expression of gratitude feels to you. It feels pretty good, doesn’t it? It’s the simplest, and often the best way to tell your employees that they are appreciated.

Thank them for great performance on special projects—as well as doing a good job on their regular responsibilities. Everyone likes knowing that they are contributing.

Recognize individuals and teams publicly

Foster an environment of recognition by recognizing the good work of individuals and teams at staff meetings. This can help motivate your employees to consistently perform at high levels.

Nominate staff for professional awards

If employees are members of professional organizations, find out if they might be eligible for recognition from their organization. It will only cost you a little time in research and to fill out and submit applications and supportive information.

Pass on compliments from clients

If your clients express appreciation for a job well done, make sure your employees hear about it. It’s nice to know that your job makes a difference to customers.

Coach employees

Help your staff perform even better by coaching them on new responsibilities or their current responsibilities if you’d like improvements. Regular job performance reviews help your staff know what is expected of them and how they’re doing in meeting those expectations.

Human resources create formal program

Talk with your human resource director to establish effective, consistent ways to acknowledge employee excellence. A formal program will help you to establish an environment of recognition.

If you do not have a human resources department, there are professional human resources consultants who can help create a program that motivates, reinforces excellence and creates a work place that acknowledges outstanding performance.

(NOTE: Image courtesy of www.freedigitalphotos.net)

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An ASO is an organization that independently handles many of your employee needs. This includes payroll processing, paying medical benefits, as well as handling employee taxes. Another organization that is similar to an ASO is the professional employer organization or PEO.

The main difference between the two types of organizations is who is responsible for the employees. A PEO leases the employees to you for a percentage of their pay. An ASO has no claim on the employees and charges a straight fee for its services.

Here are some ways to find out if an ASO will reduce cost and increase productivity of your business.

Is your human resources department taking too much of the budget, or could you use less of a burden in your payroll processing? Often many staff members will be needed to do the said administrative work for the company. By utilizing an administrative services organization you will be reducing the workload on your current staff members and may be able to reduce the cost of payroll processing.

Does your company need help with medical benefits administration and support? If you are finding it difficult to provide the necessary health benefits to your employees, you could be setting yourself up for a difficult, perhaps even legal issue in the future. By enlisting the help of an ASO, you will be placing these detailed responsibilities upon another organization.

Does your company accurately understand all of the minute details about local, federal and state tax practices? Also does your company have the ability to stay informed in all of these areas and keep up with current practices? If you decide your company could stand to outsource these responsibilities, you could place these responsibilities on an administrative services organization.

Finally the real question is; has administrative work become a nightmare for your current staff employees? Has work become difficult to manage or prone to mistakes? Any mistake on payroll could cost a few hundred dollars or more, and when you add the IRS penalties you could incur, your company could stand to lose a great deal of money. ASO’s often employ the use of a human resource information system, or HRIS. An HRIS is an intelligent database system that tracks and manages your employees. With access to the HRIS, you could follow and manage your employees and ensure things are running smoothly.

Whether or not your company could use an administrative service organization is up to you. If you answered yes to any of the above questions, you may want to look for ASO’s in your area that can provide the services at a price you can afford. An administrative services organization provides payroll and employee benefit reliability. One thing is certain; an administrative services organization could make your business more manageable.

Visit ASO & Human Resource Services for assistance with your ASO questions.

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