WORKPLACE LAW -
Legal and Effective Performance Reviews

Question:

Our company is scheduled to give its annual performance reviews in January 2011. We try to motivate our employees by giving reviews that accentuate the positive, and we probably fall into the trap of giving inflated reviews. Recently, a friend of mine described the negative impact that a performance review had during a wrongful termination lawsuit. Do you have any tips for giving legal, effective reviews?

Answer:

Your question reveals the challenges inherent in the performance appraisal process. For managers, reviewing employee performance is a daunting yet critical function of their jobs. The review process impacts growth, productivity, and employee morale and retention, as well as a company’s legal position in the event of future employment litigation. Fortunately, there are some basic criteria for establishing a legal, effective performance appraisal system.

Before sitting down to write an appraisal, supervisors must be aware of two fallacies surrounding the performance review process:

Reviews_are_“given”_to_employees. The expressions “my boss gave me a bad review,” or “I am giving my employee reviews today” reveal how deeply this misconception runs for both employees and supervisors. The fact is, employees write their own reviews every working day - each time they arrive promptly or late for a shift, volunteer for or avoid additional assignments, meet or fall short of department quality and productivity standards. From this standpoint, the supervisor is merely a journalist, documenting the workplace behavior of staff members. It is the employee who “gives” daily information to be used in the review.

Reviews_are_an_annual_event. Although companies with formal appraisal systems most often structure them on an annual or semi-annual basis, the review should be seen by both supervisors and employees as a year-long, ongoing process. Periodic one-on-one meetings between management and staff ensure that the employees know what they are doing well and when improvement is needed. These meetings help to keep the employee on track and eliminate any element of surprise from the annual appraisal.

Effective performance reviews can help strengthen a company’s legal position in the event that an employee brings a wrongful termination or discrimination lawsuit. Providing an inadequate evaluation, or no evaluation at all, can backfire because juries may punish employers who have not given an employee a chance to improve performance. Employees with good performance reviews, who suddenly find themselves terminated for cause, are understandably shocked and may be more likely to sue for wrongful termination.

The best practice is to provide fair and accurate reviews that demonstrate your company’s pattern of careful documentation and counseling with all its employees. Here are 5 tips for effective reviews:

  • Carefully document how all employees are performing. Employers are sometimes tempted to document only problem employees’ performance. A better practice is to keep performance records on all employees. This means carefully recording your observations, praise, counseling, and warnings – in writing – in clear, objective language.
  • Back up your statements with facts. Use production records, disciplinary reports, attendance records, and examples of work quality when evaluating an employee, and be clear about how you arrived at your conclusions.
  • Do not mention age, gender, race or other protected categories. Reviews should cite specific, well-documented examples of behaviors (pro and con). Reviews should not contain vague terms, such as “bad attitude” or “lazy.” Here are excerpts from actual federal government employee reviews that use humorous, but legally explosive, language:

    “She has delusions of adequacy.”
    “He would argue with a signpost.”
    “When his IQ reaches 50, he should sell.”
    “He brings a lot of joy when he leaves the room.”

  • Do not give raises to marginal performers. Some employers give poor performers a raise in the hope that it will motivate them to improve. Without counseling an employee about his or her inadequate performance, however, this strategy may fail. In addition, if the employee is terminated and sues, the individual can point to the history of pay raises to show that he or she was doing a good job.
  • Do not inflate, but be candid and explicit. Although many supervisors are uncomfortable with this, it is important to be frank. Do not use euphemisms or avoid giving an employee strong but necessary constructive criticism. Be specific about what has gone wrong, and offer concrete steps for improvement. It is unfair and unrealistic to expect an employee to improve unless he or she knows exactly what must be corrected.

Developing a performance evaluation program that meets the above criteria does more than protect your company from discrimination lawsuits. It also improves employee morale and ensures managerial support for the system, because everyone knows it is designed to help him or her achieve personal as well as corporate goals.
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