Mid-year performance review time is an important time for employees and employers. Some employees dread it, while others embrace it as an opportunity to (hopefully) be recognised for a year’s hard work. However, if performance reviews are inadequate or produce unexpected results, businesses can be at risk of legal action from dissatisfied employees. An employer’s failure to give honest feedback at review time, especially if an employee’s work does not meet expectations, can also cause legal issues down the track – especially if termination action is taken.
Why are performance reviews important?
Creating and implementing a satisfactory performance review process is important for employers and employees to understand how employees are performing in their particular employment role. From an employer’s perspective, planning, monitoring and conducting a continuous review process results in an authoritative ‘paper trail’ of documented evidence that it can use in relation to communicating with an employee about their effectiveness. Agreeing on clear ‘key performance indicators’ that are aligned with the business’s strategic direction and culture allows the employer to set out its expectations of the employee. Consequently, they can manage firstly, the employee’s understanding of their role and secondly, what objectives their performance will be assessed against at review time.
Providing regular feedback and keeping detailed notes is important for an employer. This will ensure that managers deal with performance problems when they arise and that there are no surprises during the performance assessment meeting. Having a ‘no surprises’ approach is important as it avoids an employee feeling ambushed and gives all parties an opportunity to discuss how the situation has been or will be addressed. From an employee’s perspective, the performance management process provides opportunities for open communication with managers and also professional development and training. And let’s not forget that performance reviews also reinforce the positives – letting an employee know what they are doing well so they continue doing it.
A well-managed performance review process will deliver benefits for all areas of the business.
Performance Management and Performance Reviews
Having a transparent and well-communicated employee review process can avoid employee resentment, or even legal proceedings for perceived grievances. In our last blog we wrote about a Fair Work Commission case about an employee’s failure to receive a bonus which did not amount to bullying. Arguably, the employer in question in that case could have managed the employee’s expectations better during the time leading up to the review and bonus discussions.
It is also important for employers to ensure that the performance review process and outcomes are documented and consistent with any likely performance management actions (read poor performance leading to termination). Typically, where an employee is not meeting an employer’s expectations, the performance review process is followed by a ‘performance management’ process. In the event that the performance management process is unsuccessful, an employer can terminate the employee’s employment in accordance with the terms of their employment contract. Such action is not likely to amount to unfair dismissal under the Fair Work Act 2009 (Cth) if it is done properly.
Personal issues and performance
Sometimes, an employee’s poor performance is linked to personal problems. Although an employer might be reluctant to delve into an employee’s personal situation if it becomes aware that they are experiencing difficulties at work (e.g. due to emotional or mental health issues caused by a death of a family member or marital problems) it is in their best interests to manage the employee’s performance appropriately as the personal circumstances might cause prolonged poor work performance. The importance of having honest and regular performance reviews on a ‘no surprises’ basis for employees becomes even more crucial if a performance management process is instigated in connection with a person’s personal circumstances. An employer must keep good records and communicate honestly to make good any defence against any subsequent legal proceedings. For example, where an employee believes that they’ve had adverse action taken against them on the basis of carer responsibilities, disability etc.
However, personal circumstances can’t be ‘scheduled’ around standard six month meeting intervals that currently define a traditional performance review model. If an employee is experiencing problems mid-way through the review cycle, a lack of formal communication opportunities might hinder their performance further. This poses the question – is the traditional performance review process outdated?
Changes to the performance review process
A lack of transparency or communication in the performance management process can be caused by the structure of the process itself. The traditional six month and yearly feedback and review sessions leave a lot of time – and a lot of stewing emotion – in between conversations. At this point in the new financial year, perhaps your company should also be considering how to implement change in this area.
A recent article in Forbes has questioned whether performance appraisals should be scrapped altogether. The article describes the key flaws with the current model of performance appraisals, including:
- employees need and want regular feedback (daily, weekly), so a once-a-year review is not only too late but it’s often a surprise. Regular coaching is the key to alignment and performance;
- managers cannot typically ‘judge’ an entire year of work from an individual at one time, so the annual review is awkward and uncomfortable for both manager and employee;
- when some employees are a poor fit and are likely to be poor performers, these issues should be addressed immediately, not at the end of the year;
- people are inspired and motivated by positive, constructive feedback – and the ‘appraisal’ process almost always works against this; and
- the most valuable part of an appraisal is the ‘development planning’ conversation – what one can do to improve performance and engagement – and this is often left to a small box on the review form.
Instead of relying on the familiar, but outdated process inherited from an HR department 100 years ago, consider implementing changes to address the problems listed above. Forbes suggests:
- Developing a ‘feedback-rich’ culture and set of tools (often online, sometimes formal, often informal) that encourages all employees to give each other feedback;
- Talking about performance regularly and letting employees create their own goals on a regular basis. Force managers to provide ongoing feedback and teach them how to have honest conversations;
- Set and reset goals frequently; and
- Force employees to self-assess more regularly to enable them to allow them to start the conversation about their progress.
An article by Deloitte provides an interesting comparative analysis of current and emerging trends in the performance management process in the ‘new world of work’. For example, the driving influences in the new world model come from the ‘bottom-up’ not ‘top-down’. Deloitte also provides a useful article on ‘2013 Human Capital Trends‘ which examines in more detail the challenges of managing talent. What Deloitte’s research reinforces is that one key objective in the performance review process has not changed over time – that is, the desire from all involved to be part of a ‘fair and valid’ assessment process.
At this critical point in the ‘review season’ it’s important that employers act in accordance with their business’s human resources and performance policies and procedures which should promote:
- transparency; and
Performance measurement objectives, especially those linked to bonus schemes, should be achievable, measurable and documented. In addition to keeping top talent, having a good performance review process will also help your business ensure that FY15 is beneficial for everyone. Is this your year to innovate and change your processes?