Separate Merit Increases from Performance Reviews

by Sharlyn Lauby on December 17, 2013

As I continue to hear bashing of the performance appraisal process, I become more convinced that the reason everyone hates performance reviews is because the company hasn’t defined them properly. What is the purpose of a performance review in your organization?

  • Tied to my pay increase
  • Documents my performance over the past year
  • Discusses my future goals
  • Something else? 

Most often, I hear that performance reviews are the necessary evil in the merit increase process. I wonder how the performance review process would change if companies separated the review from merit increases. Yes, performance does play a big part in compensation. But it’s not mandatory to talk about performance and pay at the same time. Honestly, it’s not.

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And I know that managers might not want to admit this…but how many times has a manager “finessed” the performance review to align with the pay increase they want to give an employee? I know – it’s shocking! (Please note a small amount of sarcasm in my last sentence.)

Performance reviews should be focused on performance:

Past Actions – I believe this should be a small part of the review conversation. Why? Because it’s the past and both the employee and manager know what happened. If a manager is doing their job and providing regular feedback, spending an hour talking about what everyone already knows makes no sense.

Future Goals – This is where the manager and employee should spend the majority of time. What are the goals of the company and department? How does the employee fit into those goals? Identify the challenges and resources the employee might face. Agree upon what success looks like.

If done right, the company performance management process does not have to suck the life out of the business. That’s really not its intention. But in order for it to be successful, the company must clearly define what the performance process means and focus the time spent solely on accomplishing that mission.

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