Few things make supervisors and managers as squeamish as performance reviews. But like them or not, organizations that don’t take them seriously miss out on a valuable tool that can enhance employee development, achieve organizational goals and boost morale, not to mention avoid lawsuits.

“Organizations that don’t do performance reviews are overlooking the cheapest and most effective way to develop employees,” says Linda Henman, consultant in strategic planning, talent development and succession planning. “Boss-to-direct-report mentoring is the steadiest and most effective method of employee development.”

By mapping out achievable and measurable goals with employees that dovetail with bigger-picture goals, managers can get all their team members on the same page, and achieve better results. In addition, giving everyone thorough evaluations boosts morale, because employees have the sense that raises and promotions are based on merit, not favoritism. “Reviews build in a sense of fair play,” Henman notes.

Organizations that provide reviews also reduce their legal exposure: It’s hard for an employee to sue for wrongful termination if a paper trail clearly shows how an employee’s performance dropped off or lagged behind that of other team members.

What not to do

After years of consulting and observing how organizations handle reviews, Henman cites four common mistakes:

1. Doing no reviews at all. “I’m always astonished at the number of people, even at the upper echelons of organizations, who say they haven’t had a performance review for years,” Henman notes. “This happens at all levels. Most people don’t like to do them, or no one makes them do it.”

2. Making reviews too complicated. Too many job review forms are so long and complex that a manager charged with reviewing each of 10 direct reports, for example, finds it daunting. Badly designed forms are “instruments of the devil,” Henman says.

“If it’s 10 pages long and you have 10 reviews to do, that’s 100 pages to fill out and write comments on,” she says. “The forms should never be more than two pages long. Filling out forms doesn’t change performance or behavior; it just tests whether managers can fill out forms. It’s not a constructive use of their time.”

3. Once-a-year mentality. Too many organizations do reviews only once per year, and so the review is nothing more than a post-mortem on mistakes an employee may have made six months ago. “If an employee’s productivity fell off in August, it should have been dealt with at that time, not at the end of the year,” Henman says. “Ideally, performance reviews should contain no surprises.”

4. Lack of planning. In many organizations, managers aren’t trained to perform effective reviews. Knowing the process makes reviews much less intimidating.

Constructing a good review

So you realize your department doesn’t place much value on reviews, and you want to change that. Where do you start? By developing job descriptions for every position. “You need to determine each position’s behavioral competencies,” Henman says. “In other words, what does it take to succeed at this particular job?”

To figure it out, break down each job into four categories. First, determine how to measure the job’s critical tasks. Then examine what kind of relationship building the position requires — either external with vendors or internal with colleagues, or both.

Next, develop a way to measure the employee’s decision-making skills. “At the most basic level, this could include things such as learning from mistakes or learning skills quickly,” Henman says. “For a department head, it might be how he or she sets strategy for the team.”

Last, examine the job’s leadership requirements. That’s not necessary for entry-level positions with no direct reports, but those jobs still require skills such as self-regulation and meeting deadlines, Henman.

Establish criteria

The next move is setting criteria for grading performance. Some organizations use just three ratings: doesn’t meet expectations, meets expectations, and exceeds expectations. Henman prefers five more specific rankings:

1. At risk of losing job.

2. Often doesn’t meet expectations.

3. Meets expectations.

4. Frequently exceeds expectations.

5. Consistently exceeds expectations.

“A more finite measurement gives a supervisor more opportu-nities to show adjustments in improvement or deterioration of performance,” Henman says.

It’s essential for supervisors to provide honest, objective feedback. “One problem in many organizations is inflated reviews,” Henman says. “If everyone is great, how can you ever justify firing someone? Someone’s lawyer is going to eat your lunch in court.”

Organizations also must decide how often to review employees. Henman recommends four reviews per year, providing ample opportunities to correct problems. At the beginning of the year, supervisors should sit down with each employee and set out expectations and goals. The next two reviews should focus on performance and how the employee is meeting those goals.

“Then the fourth meeting becomes a job review, and a money discussion linked to whether or not the employee met expectations,” Henman says. “But by the third review, the employee should know what’s coming.”

Goals are critical

After a review system is established, managers must hold that all-important first meeting and set goals with each employee. “This becomes your working document that you’ll use for each of the next three discussions,” Henman says. “It’s a fluid document that you can adjust with each subsequent conversation. Managers need to ask themselves what’s important to them.”

To make constructive suggestions for improving an employee’s performance, supervisors should stick to observable behavior. They should be very specific about what they observe and should remain calm and unemotional.

“It’s insufficient to tell an employee that you think their attitude is bad,” Henman says. “You need to tell your direct reports what you want them to stop doing, start doing or do differently. And if you concentrate on that which can be observed by everybody, you’re on solid ground.”

Motivating employees to make even small changes can yield big improvements. “It’s the rule of 70: If you improve just 1 percent every day, you’ll be twice as good in 70 days,” Henman says. “In an organizational sense, small, incremental changes can yield big results.”

By following these basic steps, managers will find reviews are not to be feared. “It’s not science, exactly, but it’s pretty predictable,” Henman says. “If you follow all of these steps, it’s the closest guarantee there is to improving employees’ performance and the performance appraisals.”

Linda Henman runs Henman Perfor-mance Group and is the author of The Magnetic Boss: How to Become the Leader No One Wants to Leave. More information is at www.henman performancegroup.com.