If there’s one thing that binds business owners and their employees together, it’s a mutual disdain for the employee performance evaluation. Though they may have different reasons for disliking this annual rite of professional life, it’s unlikely anyone would be upset if it were to suddenly go away.

Employees tend to approach the process with skepticism or, worse, a sense of dread.  For managers, it can be a bureaucratic, burdensome head-ache of questionable value to morale and productivity.

We all understand, of course, that assessing employee performance is important, but are there alternative ways of sizing up performance in a way that supports both the development of employees and the goals of the company? Yes.

Four questions

Recognizing the need for an overhaul, a number of businesses – from start-ups to Fortune 500 companies – are rolling out new performance assessment tools designed to simplify the process and make it a more meaningful exercise.  One approach, being tested by Deloitte Services, boils the process down to four questions, two of which can be answered with a “Yes” or “No”.

Ashley Goodall, Deloitte’s director of leader development, had this to say in an article he wrote about the company’s four-question performance reviews for Harvard Business Review.

“Like many other companies, we realize that our current process for evaluating the work of our people – and then training them, promoting them, and paying them accordingly – is increasingly out of step with our objectives,” wrote Goodall, who co-authored the article with business consultant and author Marcus Buckingham.

In a recent survey conducted by Deloitte, more than half of its executives (58 percent) said the company’s current performance management approach drives neither employee engagement nor high performance. “They, and we, are in need of something nimbler, real-time, and more individualized – something squarely focused on fueling performance in the future rather than assessing it in the past,” Goodall wrote.

What Deloitte came up with, and began piloting to 10 percent of its employees in August, does away with “cascading objectives”, a top-down technique meant to keep goals consistent throughout the organization. Also gone: Once-a-year reviews and 360-degree feedback tools, a clunky, time-consuming process in which everyone from managers to coworkers to subordinates weigh in on a single person’s performance.

In its place, the company introduced a system that assesses performance at the end of every project or quarter, if the employee has a long-term assignment. Managers answer four simple questions. For the first two, they choose answers on a five-point scale, from “strongly agree” to “strongly disagree”. The other two can be answered with a “yes” or “no”.

Here are the questions:

  1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus.
  2. Given what I know of this person’s performance, I would always want him or her on my team.
  3. This person is at risk of low performance.
  4. This person is ready for a promotion today.

Conversations about year-end ratings are generally less valuable than conversations conducted in the moment about actual performance, according to Goodall. And talk about time-consuming: a tally of the number of hours the organization was spending on performance management – completing forms, holding meetings, and creating ratings – showed the old system consumed close to 2 million hours a year.

Deloitte hasn’t decided how it will share data with employees, but the new system is a big shift away from asking managers to evaluate people on a string of skills or grade them for long-forgotten accomplishments over the past year, according to an article in the Washington Post.

Five words    

Paul English, co-founder of Kayak, has taken the simplification process a step further by distilling it down to just five words. English said his dislike of some of the performance reviews he’d received as an employee spurred him to do something about it as a boss.

“If you know someone really well, you can pretty quickly distill their issues,” he told Fast Company. “I want to combine what’s good about someone with what’s not working, so I always do two or three positives and two or three negatives.”

Instead of filling out forms, English said he finds a crinkled piece of coffee-stained paper on his desk and writes down the five words. He then meets with the employee outside of the office, where they are likely to feel more comfortable, usually over lunch. When he hands the piece of paper to the employee, he gets instant feedback, he said. They spend about an hour talking things over. He’ll give examples and together, he and the employee see if they’re interpreting things in the same way.

Although the approach has gotten him a few bewildered looks, no one has yet burst into tears or thrown a plate at him, English said. He leaves it to the employee to decide what to do with the feedback.

“Each person is in charge of his or her own career,” said English. “They decide for themselves whether to agree with me.”

English’s other advice: Never put anything in writing that hasn’t been communicated verbally.

What five-word performance evaluation would he give himself?

1. Prolific.

2. Thoughtful.

3. Forgetful.

4. Disorganized.

5. Creative.

Feedback, dialogue and development   

Although they may differ in approach, these simpler employee evaluation tools share some common characteristics. The first is that performance management has to be a year-round process with no end, like an infinity scarf,  as talent management consultant, Teala Wilson, put it. And instead of focusing on ratings, performance reviews should be used as a catalyst for meaningful dialogue between managers and employees. Third, the focus of the evaluation needs to be on employee development. That gives employees who want to remain with the organization a chance to grow and be challenged and those who want to pursue a higher level position not available within the organization the skills and experience they need to go after their dream job elsewhere.

To keep the dialogue going with her employees, Sherry Finkle Murphy, a sales coach and business unit executive at IBM, asks her employees to send her emails anytime anything goes right.

“Managers should understand performance evaluations are not just about HR compliance and paperwork,” Murphy told the BBC. “It’s about paying attention to the employee and putting time into their career development.”

Getting started

So, if you’re a small business owner looking to revamp your employee evaluation process, where do you start? The examples above may be a little simpler than what you want or may not be a good fit for the culture of your workplace. As you develop a performance review strategy, keep in mind what an employee evaluation is supposed to do:

  • Offer praise and encouragement to employees in areas where they do their jobs well
  • Address any shortcomings or problem areas that need improvement
  • Offer employees a means for addressing any problems that keep them from performing their job successfully

If you haven’t done so already, you should also establish performance metrics, which provide benchmarks against which you can measure employee performance. An explanation of three basic metrics useful to small business owners can be found in The Hartford’s Business Owner’s Playbook.

Here are some additional tips that can help guide you through this process:

  • Be constructive in your criticism. The best way to prevent evaluations from being awkward and unpleasant is to keep them positive, according to Small Business Bonfire. Instead of making them about all of the things an employee has done wrong, focus on the job and work together to find solutions.
  • Listen more, talk less. This can help you figure out how much feedback each employee needs. Giving an employee time to talk can also provide you with a better understanding of poor performance, including issues with your current systems and procedures.
  • Be flexible. If your evaluation forms aren’t working, change them up or toss them out entirely and start over. Ask business owners in your network for ideas. They may be able to suggest other forms or ways for improving your entire evaluation process.

Next Steps:  Are you looking to manage your employees more effectively but don’t have time to keep up with the latest research and trends in talent management? We’ve got you covered with the weekly Small Biz Ahead Newsletter. Sign up today and start receiving the weekly newsletter chock full of the latest tools and resources to help you run a successful business.

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