December arrived, and you are still expected to overcome a few challenges before you can call it a year. The deadlines, the company dinner, the crowded streets, the carols at the mall… and the annual performance review meeting.
If that one-on-one review meeting with your direct manager is a bitter moment, you should know they feel exactly the same way. It is poor consolation, but it’s good that you are aware. Very few managers enjoy that meeting or feel they are handling it well. And that is a pity, because it should be a highlight of leadership and collaboration. A space where both parties sit down, free from daily pressure, to exchange views, acknowledge and celebrate progress, and look for ideas that support continuous improvement.
Why doesn’t it work that way? What are we doing wrong?
I have hundreds of year-end review meetings on my shoulders – sometimes in the evaluator’s chair and other times from the evaluated person’s. This has given me the opportunity to make many mistakes and suffer many more. Inevitably, I learned some lessons.
The most frequent errors I observed have to do with:
- A lack of respectful communication
- The absence of clear, agreed goals for the year
- The element of surprise
As middle managers, we can improve how we conduct this process to minimise these errors. But let’s be realistic: the most important error is not in middle management’s hands. The main mistake is
- the link between performance evaluation and salary review.
This may not be something you can change… but someone needs to tell the HR Director. Merit-based salary reviews do not work. In the final part of this article, we will get radical and tackle this point. Before that, a more pragmatic question: what can we improve already, this year?
Respectful communication
The performance review process should not be a display of power, but a constructive, fruitful dialogue grounded in non-violent communication.
A key element of this communication model is allowing time for listening—and ensuring that listening is genuine. It is important to be open to adjusting conclusions considering what is heard. And if there is no agreement, both parties need to be able to “agree to disagree” and document that. Some companies handle this by asking for a prior self-assessment, so that the meeting can start with areas of disagreement already identified and use the time to resolve them or at least understand them better. It is a practical solution.
We don’t evaluate the person; we evaluate their work. To make this clear and visible, the verb “to be” needs to disappear from the conversation. Whatever the other person “is” is not up for discussion. Their being belongs only to them; the conversation is about their doing. For example, instead of saying “you are very unpunctual,” one might say “you arrived late to nine out of the ten client meetings we held.” The second statement refers to a fact; the first is a value judgment. Building on observable facts allows to construct an assertive dialogue that leads to agreement.
In his essay Games People Play, Eric Berne described the different states that all of us can adopt in a conversation. His theory is known as transactional analysis. Put very simply, each of us carries within a child, an adult, and a parent, and any of these roles can emerge in our interactions. Some combinations of roles are productive; others are not. There is no need to go into detail here to imagine which combinations are disastrous in a professional environment. Letbus simply aim to make the appraisal meeting a conversation between two adults.
Objectives
Without well-established objectives, it is impossible to evaluate work. It is shocking t osee how many teams show some of these patterns:
- People do not remember their objectives or even say they do not know them.
- Objectives are overambitious, so all hope of reaching them was lost on day one.
- An objective was agreed, but there is no system in place to measure whether it is achieved.
- Objectives were made to satisfy a system requirement, not to guide day-to-day work, so they are not connected with the priorities of the team or organisation.
A well-formulated set of objectives should follow the well-known SMART acronym: specific, measurable, achievable, relevant, and time bound.
Defining only the final target is not enough. You need intermediate milestones to indicate whether progress is being made. Using a sales focused example, it is not enugh to state that the goal is to convert 10 clients in a year. It is also necessary to know how many opportunities must be identified each month to make that annual target possible, and how many contacts must be made each week to generate those opportunities. Different schools interpret these intermediate milestones in different ways and give them different names: key results (OKRs), KPIs, intermediate or secondary objectives, key activities within an action plan, and so on.
In fact, the methodological differences are minor. What matters is having a reference point to look at during the year. The team cannot wait until the final day to discover whether they have reached the goal.
No surprises
There should be no surprises in the year-end meeting.
People cannot be left on their own throughout the year. Evaluation must be continuous; feedback, immediate; cooperation, ongoing. The aiming is to correct errors or debate disagreements in real time. If an employee finds out only at the year-end review that they have been doing their job all wrong, their manager has not done theirs.
Staying alert to indicators, holding frequent one-to-one conversations, sounding the alarm when something goes wrong, advising or giving instructions when errors are being made… all of this is demanding. It requires time and dedication and often pulls managers out of their comfort zone. But this is precisely a manager’s job. That, and nothing else.
If, you have consented an error during the year due to lack of time or courage, December is far too late to correct it. But you can start planning so that it does not happen again next year. The best way to achieve this is to schedule regular one-to-one progress review meetings with each team member. These meetings are not courtesy calls; they need content. A simple agenda might include discussion of completed and planned activities, review of KPIs (those milestones linked to objectives), and feedback. Two of these sections are prepared and led by the team member, and one by the manager. A reasonable burden, for a big impact.
With respectful communication, clear objectives and absolutely no surprise factor, performance review meetings can become less frustrating and more productive. But it is time to face the underlying issue. What is the real purpose of these meetings?
A meeting focused on improvement and continuous growth is not a salary negotiation meeting. The mindset and preparation are completely different. Trying to do both at the same time is self-deception.
Performance evaluation and salary review
In an ideal world, every employee would start from an appropriate salary level, with no internal inequities or gaps relative to the external market. Objectives would be equally challenging yet attainable for everyone. Middle managers would enjoy enough freedom to determine how many employees belong to that special group who significantly exceed their objectives and deserve a reward. The company, in that ideal world, would have enough budget to fund differential increases that create real motivation within that group, through clearly noticeable differences. Excellence would be encouraged, while acceptable conditions would be guaranteed for all.
Many CEOs believe their company resembles that ideal world, but the reality is often quite different:
- There are unjustified internal pay inequities needing urgent correction, so middle managers prioritise improving the situation of the lowest-paid employees, sometimes stretching evaluations to present them as excellent when they are not.
- Objectives across different functions can be incomparable, making objective achievement alone an unfair criteria for remuneration.
- The budget for salary reviews is extremely limited, allowing only differences of one or two percentage points. This is not enough to motivate those who receive the “reward,” but it is more than enough to irritate those who do not get it.
- And often senior management still imposes the forced distribution system inherited from Jack Welch’s GE. This system follows a bell curve according to which 10% of employees are “poor performers,” and no more than 20% can be “excellent.” Statistically, this may have some logic if applied to an entire large corporation. Not when it is forced on the small universe of each department, as so often happens. In that context, it ends up providing middle managers with an excuse for poor evaluation decisions. This practice, already abandoned in some leading companies, creates a gazelle herd culture. Rather than pursuing improvement or excellence, each person focuses on not being the slowest gazelle in the herd, in order not to be eaten by the lion. Those on the left-hand side of the bell curve—the slower gazelles—appear as candidates for eventual layoff. This threat has little credibility, because in fact layoffs are unfortunately made on economic grounds, disconnected from performance evaluations. However, it has a strong demotivating effect. The model is not only ruthlessly individualistic, but also ineffective.
In this real world, a salary review system based on performance appraisals becomes a source of demotivation. Those who are rewarded receive an insignificant premium, those penalised see it as unfair, and middle managers do not stand behind the system.
How can these drawbacks be overcome?
By decoupling salary increases from a single year’s performance.
There are already multiple ways to pay for performance: bonuses, commissions, variable pay, awards, incentives, and, in due time, promotions. All of these tools make it possible to manage salaries and their adjustments in an objective, transparent way, with reference to both the internal and external market.
When middle managers don’t have to discuss money in the appraisal, they can focus on helping people identify their areas for improvement and their areas of excellence. That dialogue will create far more value and growth—for both the organisation and its people. At that point, the appraisal can truly become one of the year’s real moments of truth.
References for more insights on this topic:
https://www.emerald.com/irjms/article/2/2/143/182327/New-approaches-to-dealing-with-performance