Why That Yearly Performance Review Isn't Working

Stop driving your business by looking in a rearview mirror. Instead, provide your employees guidelines to help them succeed.

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By Dan S. Kennedy

Opinions expressed by Entrepreneur contributors are their own.

In his book No B.S. Ruthless Management of People & Profits, business coach and consultant Dan S. Kennedy presents a straightforward assessment of the real relationship between employers and their employees, and dares you to take action. In this edited excerpt, guest author Keith Lee reveals why you'll improve employee performance faster by conducting personal development interviews.

Whether you've ever been the parent of a teenager or not, ask yourself: Do you think you could get the behavior you want from a teenager if you had a performance review with him once a year? Every six months? Quarterly?

Of course, your employees aren't teenagers, but we're all human. Self-knowledge tells you that only stopping to contemplate your own thinking, actions and progress once a year is too little, too late. Still, many companies stick with these belated performance reviews. It's even possible you operate without any formal performance reviews because you know they're useless but you don't know what else to do.

So what's the answer? You need to replace performance reviews with personal development interviews.

Traditional management focuses on catching people doing things wrong. If every time an employee does something wrong and the boss catches them but he doesn't catch them when they do things right, their creativity is stymied and they'll stop using their creativity and stop helping the organization grow.

Conversely, when you start catching people doing things right, you encourage empowerment. People start to do things in the organization. Productivity improves on an ongoing basis. And improvement doesn't just come from management but from the whole organization interacting with each other and picking each other up. This is a motivating environment.

Another benefit of this type of management is you create a learning organization. Researchers tell us that people are going to stay with organizations where they have an opportunity to grow and learn. There are going to be many more skilled positions than there are people to fill them. And if there are a lot of skilled positions and not enough people to fill them, money isn't going to make the difference. Money is going to be a given. You have to pay in the competitive market to get good people. But they want to work in a place where they can grow, where they can enjoy themselves, where they can use their creativity to help the organization grow, and that happens in a learning organization.

In short, you want your team displaying initiative, improvement, and self-development, so they can be relied on more and can rely on each other more and depend on you less. That can only happen with an effective performance management system.

The personal development interview

Personal Development Interviews (PDIs) need to be regularly scheduled and held weekly, every other week or—at the very least—monthly. In areas where you want to see a lot of change, a lot of improvement, have a lot of opportunity or have challenges, you'll have them more often. In other areas that are under control, you'll have them less often.

Typically the lower the job function, the shorter the meeting. When an interview is running properly, you or your managers will be talking about 20 percent and the subordinate will be talking 80 percent. This is the time you'll want to catch people doing things right. Your job is to encourage them, keep them excited about their job, and discuss corrective action. When you're discussing corrective action, it's critical that you frame it properly. When you frame it properly and sandwich the corrective action between positive reinforcement and catching them doing things right, you'll see improvement.

Here's an example: Let's assume you're having a PDI and the subordinate comes up with an idea you don't like. It's important to "frame" your response here. If your response is "That won't work," they're going to close their mind. What if you responded with "Well, you know, that could possibly work, but what will you do if ..." and then introduce the reason you know it won't work.

Maybe they've thought about your objection and found a way around it. Now two people have grown. If they haven't found a way around it, then they'll come back with "Yeah, I hadn't thought of that, OK." Now it's time for you to ask "How do you think you'll solve that problem?" The responsibility for finding solutions lies with the interviewee, not the interviewer. This is the way people grow in the organization.

Another key to effective PDIs is that the person being interviewed should leave pumped up, ready to go after every interview. Your job, as the interviewer, is to make sure they are pumped up, ready to go, and achieve their objectives. The only time they should leave a Personal Development Interview disappointed is if you're ready to fire them.

Dan S. Kennedy

Author, Strategic Advisor, Consultant, and Business Coach

DAN S. KENNEDY is a strategic advisor, consultant, business coach, and author of the popular No B.S. book series. He directly influences more than one million business owners annually. 

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