Posted 04-14-2010

For many managers, the annual performance review is, like death and taxes, dreaded and inevitable. But it doesn’t have to be that way. While you may not be able to do anything about death or the April 15 deadline, you can do a lot to make the performance evaluation process a positive experience for your managers, your company and all the people being evaluated.

Part of a continuous improvement process, designed to increase productivity and rewards for all, performance management and review is not only about helping poor performers but also about recognizing and motivating employees whose performance meets and exceeds expectations. Performance management is all about effective communication and discovery:

  • Workers discover how they are doing in achieving goals and objectives and they become aware of what they need to do to earn career opportunities and promotion.
  • Managers discover what motivates the people who work for them and use that insight to communicate strategies for improvement, so that all team members can see the results in their performance ratings and compensation.

And, because it’s about communication, things can get complicated. “Getting it right” means having a process that both effectively improves business results and protects your company from employee claims of wrong doing. Because federal, state and local laws on equal employment opportunity and other labor issues all apply to your organization’s performance management policies and practices, having your managers trained in effective communication and the legal pitfalls in performance management is extremely important.

Training your managers on effective communication in performance management can protect your company from employee lawsuits that allege discrimination based on a protected characteristic such as age, race, sexual orientation, disability, etc. In court, the company will be expected to prove that any adverse decisions made about an employee (termination, denial of promotion, etc), were made for legitimate, non-discriminatory business reasons, based on objective, verifiable facts. Trained managers know that having proper documentation and clear communication with employees about performance is imperative.

The costs of poor performance management can be immense. In addition to squandering time and talent, managers who have not been trained on how to do performance management can cause huge liabilities. For instance, a company lost a 2008 discrimination case because it allowed its managers to use subjective criteria when deciding on assignments, evaluations, promotions, training opportunities, and bid eligibility. The company was ordered to pay the workers more than $3.2 million in back wages, and in 2009, after an unsuccessful appeal to the Supreme Court, the company was ordered to pay the employees’ attorneys more than $4.7 million in fees, plus nearly $1.1 million in litigation costs and expenses. McClain v. Lufkin Industries.

Information here is correct at the time it is posted. Case decisions cited here may be reversed. Please do not rely on this information without consulting an attorney first.