Taking stock: employee evaluations can help employers and employees alike.

Employee evaluations can be extremely effective and motivating, benefiting your business as much as your employees. The keys to a successful payoff are clear communication of your business' goals and carefully and consistently charting employee growth.

For your business, evaluations offer a tool to help achieve your goals by optimizing staff performance and identifying your organization's strengths and weaknesses, one employee at a time. For your employees, evaluations can provide guidance on how best to perform their jobs and help define their career path.

"In my opinion, the No. 1 motivator for professionals is not money, but feedback," says James Gellas, human resources manager for the Beverly Hills office of CPA firm Rothstein, Kass & Company. "Evaluations can be cumbersome and time-consuming, but they're the best way to develop your staff and help them grow."

While employee evaluation processes and frequency vary depending on an individual business' needs, there are some common practices to follow.

CLARIFY EXPECTATIONS

You must first define expectations before you can determine whether or not they are being met. "A business has to ask itself: what is the behavior we want to reward? What are our objectives and how are we going to meet them?" says Mary Richardson, a human resources consultant with Herrerias and Associates, a Novato-based executive search firm.

Those expectations are communicated through job descriptions, which need to remain up to date. "Sometimes, employers don't keep job descriptions current or they're not representative of the nature of the job," says Rebecca Hastings, information center manager for the Society of Human Resource Management. "The more detailed and the more often job descriptions are updated, the better."

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For Elena Sweda-Neff, human resources manager with UHY Advisors in Los Angeles, aligning job expectations with performance evaluations presented challenges. Her firm had grown through acquisition, with five independent firms gradually becoming one. Each of UHY's 12 locations had its own evaluation process.

To develop a unified approach, UHY defined five categories for business success: knowledge capital; client service and engagement management; practice development; people management and professional leadership; and policy compliance.

"So now, everything in the evaluation process is tied to these five categories, beginning with job descriptions," Sweda-Neff says.

The job of more closely aligning expectations with job descriptions also recently fell on Richard Laveroni, human resources director for the Oakland office of RINA Accountancy Corp. and a member of the CalCPA Human Resources Committee. When some of RINA's staff communicated a desire for more specific feedback during their evaluations, Laveroni started at the beginning of the process.

"In the past, the evaluation didn't exactly jibe with the job description," Laveroni says. "But we've now made the job description areas part of the evaluation word-for-word."

SET GOALS

Many human resource professionals recommend employees write a goal-setting document at the beginning of an evaluation cycle. The manager, supervisor or human resources representative should review the goals to ensure consistency with the company's evaluation process.

"Goal setting documents are a great tool because when the manager and employee sit down with it, you've already made a contract for performance," Richardson says.

The document should be unique to each employee, even if two or more have the same title or similar duties. "Two people doing a similar job by title may have very different projects and expectations," Hastings says. "You want to make sure each employee is coached and counseled on what is expected of them."

To help ensure consistency and fairness, Richardson advises to keep goal-setting "SMART"--specific, measurable, achievable, relevant and timely.

At RINA, employees state their goals for the upcoming six months. Progress on those goals is then one aspect of the employees' twice-yearly evaluation.

At Rothstein Kass, employees write a self-review toward the end of the evaluation cycle that "helps us see what an employee's perceptions are and how that aligns with management's views and perceptions," Gellas says. "Self-reviews also provide a forum for the employee to inform the manager of some achievement or performance that maybe the manager wasn't aware of."

For Sweda-Neff, the goal-setting process is meant to be a confirmation of performance expectations. "It's a dialogue really. It's important that an individual's career goals are recognized within the firm's business strategy," she says. "You can express your expectations as much as you want, but unless it's relevant to what the employee wants, you're not going to get very far."

DEFINE METRICS 

There are many ways to evaluate employees, from ranking them on a scale to detailed narratives. Many companies use a combination, though both approaches present challenges.

While a narrative approach would seem to give a more complete assessment of an employee's performance, "words can be expressed better by some than by others, and they can be interpreted differently," Hastings says.

"When you need to compare people against one another to decide things like promotions or layoff choice, it can be useful to have a numerical score, or a letter grade, or a word--anything that expresses who the outstanding performers are."

But not every performance appraisal category needs to carry the same weight. Of the five success categories used at UHY, "policy compliance accounts for the least, constituting 12 percent. Knowledge capital, client service, practice development and people management splits out the remaining to make 100 percent," says Sweda-Neff.

But some believe that any attempt to rank employees is flawed. "I think one to five scales are demeaning," Richardson says. "If you're in the business of stack-ranking your employees, understand that it's a shark pool you don't want to get into. If you want a culture of collegiality though, you're going to use a more skill-based narrative."

HOW OFTEN?

While most employers conduct annual reviews, many professionals recommend more constant contact with employees.

"A quarterly plan really is the best," says Richardson. "That's when you roll up the company's performance, so why not use it as the time to roll up the individual's performance?"

RINA Accountancy performs written performance evaluations after every engagement of 25 hours or more.

"Part of the financial engagement checklist is making sure the evaluations have been done," Laveroni says. They also perform abbreviated versions of the financial statement performance review for tax work. Those evaluations are summarized in a twice-yearly review.

Sweda-Neff performs performance reviews after every engagement of 40 hours or more, as well as a "busy season review" conducted after April 15. And then there are mid-year reviews--a brief overview of performance from the prior six months, with a status check on goals achievement--and annual reviews in November/December.

The key to success for your business and your employees is in staying on top of the process. "You don't want to just sit down at the end of the year and say, 'You failed,'" Richardson says. "It's like running a budget; you can't just say at year-end, 'We're out of money.' You have to monitor performance throughout the year."

BAD REVIEWS

The most difficult evaluations are negative ones. First and foremost, timely documentation is key. Performance or disciplinary problems should be documented and dealt with when they occur, not left until the employee's evaluation. "Document any proceeding conversation regarding the issue and have the employee sign off on it," Gellas says.

He adds that if you are delivering feedback that won't be well received, "It helps to have a third-party, such as a member of senior staff, who may have witnessed the behavior in question to reinforce the criticism in writing."

In dealing with staffers who fall short of expectations, honesty is the best policy, Laveroni says.

"It comes down to being able to review frankly, candidly and accurately," he says. "You have to give constructive criticism. If you can't tell a person that they're not doing a good job, and how they can improve, then you're not helping anybody," Laveroni says.

For managers who are conflict adverse, don't partake in denial, ask for help from your human resources team or perhaps a senior management team member.

COMMON MISTAKES

According to Hastings, the most common mistake employers make in the evaluation process is underestimating the length of the process and failing to plan for the appraisal time. "You really can't wait until the last minute and try to think back over a year what a person did," she says. "The performance appraisal should never be a surprise."

According to Richardson, one of the most common mistakes is using the evaluation process as a substitute for talking to people. "An evaluation should be the summary of a conversation, not the beginning of one," she says.

But overall, the emphasis should be on success, not failure, Richardson says. "To be a really good evaluation system, it needs to reward people for success, not punish them for failure."

And ultimately, the biggest mistake--for your business and employees--would be to not engage in the process at all.

Jerry Ascierto is CalCPA's managing editor. You can reach him at [e-mail].