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Few people look forward to annual employee reviews. The time and tension involved, the difficult conversations and the hard work of goal-setting can sap the strength of employees and management alike. Even so, individual performance must be measured — if for no other reason than to justify salaries, bonuses and opportunities for advancement.

The solution? Eliminate the annual review and develop a culture of performance management and personal development planning. Experts agree that the companies most successful at cultivating high-performing, highly motivated employees are those that:

• Establish clear performance goals that relate to the overall business objectives of the company and the interests of the employee.
• Create an environment where day-to-day feedback is expected, welcomed and documented.
• Carefully choose and train managers whose interpersonal skills are as strong as or stronger than their technical skills and expertise.

While a formal personal development planning process takes time to establish and execute, the most important thing is to communicate regularly and frankly. As one HR professional put it, you don’t even need a form — all you really need is a piece of paper and good rapport to get started.­­­­­­­

Aligning goals, strengths and interests

In any organization, it’s the executive’s responsibility to set the overall goals and to establish objectives in order to achieve those goals. It’s the responsibility of the management team to translate those goals into action — to engage individual employees and create an environment that fosters employee interest in the ultimate success of the organization. The most effective way to do so is to keep employees informed and empowered:

• Employee goals should be concrete, easy-to-measure and always in their line of sight. The performance of most CEOs is measured based on a few fairly straightforward numbers — that same bottom-line approach with your employees can help them keep their eyes on the prize.
• Key information — even the bad stuff — should be shared with all employees to foster trust, creativity and problem-solving. If employees are to be evaluated in the same fashion as managers and executives, they deserve to be in the loop.
• Individual effort should be encouraged, emphasized and rewarded, so that employees feel they are empowered and understand it’s in their best interest to do their best work.
• Personal development and professional development should not be at odds. Know your employees’ strengths, hopes and future plans, and put them to work for you.

In addition to boosting performance, these same tips can improve employee satisfaction and retention — and a content employee is less likely to be distracted from the task at hand.

Evaluate every day

You know the drill: it’s year-end, and your employees are anxious — about the numbers, about bonuses, about their annual reviews and salaries for the coming year. With multiple employees, your day-to-day workload and an entire year to look back on, you’ve got your work cut out for you.

According to author and internationally known management expert Aubrey C. Daniels, there is another way. Writing for Entrepreneur.com, she advises companies to eliminate the annual appraisal in favor of constant communication and daily feedback.

"The people who get them don’t like them. The people who give them don’t like them," she says. "Why would we do something that no one likes or thinks is effective?"

According to Daniels, research on performance appraisals has never shown they improve performance. Instead, they are viewed as a necessary step in the firing process, should dismissal become necessary.

"This practice is coming under increasing scrutiny. Class action lawsuits being brought against several large companies claim that appraisal systems are discriminatory," she says. "In most organizations, it would be almost impossible to show that there was a significant difference between the first person to be fired and the lowest-scoring person who was kept on the payroll."

Daniels and other experts agree that the best performance evaluations are conducted daily between managers and employees who have established rapport and are comfortable addressing small issues before they become big.

"Measurement allows you to see small changes in performance so that you can do things in a timely way to either correct performance or to provide positive reinforcement for improvement or for a job well-done," writes Daniels. "The best outcome for your company is to have all employees doing their best every day. Your success [in evaluating performance] should be measured by the percentage of employees that you make successful, not by the number that you fire."

Of course performance is not really measured if it’s not recorded over time. Day-to-day feedback demands day-to-day documentation — not necessarily a standard form or formal memo, but a dated reminder in the employee’s file or a brief e-mail recapping the conversation. Documenting even the day-to-day conversations over time not only helps you monitor performance, but also track which interactions worked best to motivate the employee.

Growing good managers

Perhaps the most important step in cultivating high-performing employees for the long term is finding the right managers to coach them. A good manager understands the responsibilities of his or her employees, the goals of the company and the relationship between the two. The best managers are selfless leaders who achieve satisfaction and success through the efforts of the people around them, and who can translate business objectives into personal goals for their teams.

Too often, managers are picked from the rank and file of a company based on their seniority and performance — their technical skills and know-how — rather than their communication skills and ability to relate to people. This can cause several serious problems within the organization:

• Grumbling and resentment. Employees can have difficulty adjusting to a colleague who is promoted to a supervisory position, particularly if that colleague lacks the basic interpersonal skills required of a good manager. People skills manifest themselves on a daily basis — so employees who are well-liked by their peers will likely be respected by their direct reports, as well. Technical skills alone, however, won’t win the respect and loyalty of co-workers who hold the same credentials as their new manager.
• Dissatisfaction and failure. A good engineer does not necessarily make a good engineering department head. Even so, the lure of a promotion and a salary increase can cause even the happiest specialist to consider accepting a management position and becoming a generalist. In many cases, the new manager has difficulty adjusting to the idea of delegating the more hands-on or creative work of the company to his or her employees and measuring personal success by their performance.
• Loss of focus and drift. A manager who knows how to do a job but doesn’t know how to relate to his or her employees will often have difficulty offering constructive criticism until it is absolutely necessary. By then it’s too late — a slip has become a slide, and goals have fallen by the wayside.

A manager needs the courage to have the tough conversations when they present themselves, and the tact to handle them in away that encourages the desired results. Due diligence when selecting management candidates is an important first step, including personality assessments; peer reviews; and observations of their interactions with team members, subordinates and superiors. And while many organizations take the"sink-or-swim" approach with rookie managers, trusting that the best and brightest will rise to the challenge, most experts agree that formal management training is key.

"Think about it," says leadership expert Keith Lamb, writing for Inc.com. "Managers are often promoted to that role because they were excellent individual contributors. However, when the manager was an employee, he or she may not have had much experience motivating and leading people. It’s the company’s responsibility to figure out how to find and grow great managers."

In addition to training, Lamb suggests that executives interested in growing strong managers employ a 360-degree feedback program in which employees evaluate the performance of their managers (and managers evaluate the executive leadership).

"It’s absolutely possible to evaluate managers based on their ability to motivate, communicate, and lead," Lamb says. "Your goal here is to dig into the detail of a manager’s unique strengths and position him or her in ways that showcase those strengths."