Will this week go down as a low point for performance reviews?  Since The New York Times asked on one of its blogs on Monday if it's "Time to Review Workplace Reviews," workplace researchers and business leaders alike have jumped on the bandwagon of questioning their effectiveness, and even their place among other, common employee development strategies.

The main criticisms of performance reviews, as Palo Alto Software Founder and President Tim Berry echoes from the NYT article on Small Business Trends, are that:

• They add signficantly to employee stress, and
• They can be so subjective in some cases as to render them meaningless.

Winning Workplaces' own employee engagement research shows that, at least in small businesses (which is to say, most businesses), performance reviews are not only an integral part of the people practices strategy, but they're delivering results.  The term "performance review" showed up 71 times in the 497 company applications we received for our 2010 Top Small Company Workplaces award competition; 9 out of 10 of these firms are profitable, they've managed to stay in business for an average of 16 years, and they save on recruiting costs by filling 1 out of 5 of open positions from within (contributing to respectable average employee tenure of 4 years) (source).

So in playing devil's advocate and working under the assumption that performance reviews are a worthwhile investment for an organization, here are 10 ways to make them meaningful, for employees and especially for the company.  These tactics are drawn from reporting on our award-winning firms on our website, presentations leaders of some of these firms have given at our past annual conferences, and other posts on this blog.

1. A goal of the review should be to build a relationship between managers and subordinates.
2. SMART goals – especially the Measurable and Attainable attributes – help make managers' feedback more objective and less subjective.
3. If employees' expectations of a raise following a review are causing stress, separate the pay element from the review.  If you plan for and communicate regular, periodic (normally once a year) salary adjustments, the persistent question of "When will I get a raise?" will disappear.
4. The more closely an individual's goals can be connected to an organization's performance goals, the more significant they become to the employee.
5. Too many companies fall into the habit of having reviews be the main one-on-one, in-depth dialogue between managers and subordinates.  Ideally, managers should be having far more frequent conversations with subordinates that address progress toward key goals.  This makes the feedback in a review setting much more palatable and less surprising for the employee.
6. Along the lines of "no surprises" for the employee as mentioned above, if you do tie reviews to compensation and/or bonuses, using open-book management – in which employees see the company's financial statements and, in many cases, are trained to know what the numbers mean – delivers value come review time, insofar as employees will have a much better idea whether a pay increase or bonus is fair; and also why they're not getting one, if that's the case depending on company performance.
7. Put employees in the driver's seat: empower and train managers to task employees with setting their own individual goals at the end of a performance review, when planning ahead for the next one.  While the goals employees present to managers will probably not be good to go straight away, even if they're adjusted, the sense of self-empowerment employees feel from being actively involved in their role will not diminish, and in fact it can make them more committed and productive.
8. An alternative to the above tip that's also proven to work well is to use a mix of individual, deparment, and overall organizational goals.  At Illinois-based ShoreBank their "magic ratio" for this is 70%/20%/10%.
9. Another approach is to move from individual reviews to group-based reviews.  Our 2010 Top Small Company Workplaces award finalist Cargas Systems, based in Pennsylvania, does monthly "stop light" reviews, allowing groups to gauge areas in need of improvement and provide an outlet for all to share opinions and stay involved.  This can be particularly effective when combined with tip #3 above.
10. If your company core values emphasize the greater community in some way, try incorporating the related value(s) in a goal in your reviews.  You may find the extra productivity that comes with an employee seeing his employer as caring about him as a whole person, and not just as a business asset, produces more revenue than a more traditional, numbers-based goal.

How do you approach performance reviews as a means to create a more productive workplace culture?

Photo credit: Chief Happiness Officer blog