LISTEN TO EPISODE 73

SCOTT DOW:

"People dread performance reviews. They're the most stressful conversation of every year. Most companies follow the same review process, and they tie performance evaluations and merit increases together. They ask you to rate each employee into a category, and that category determines the merit increase you can give.

There are two common disconnects you can anticipate.

1. You give a very positive review, but can only give a modest pay increase.
2. Or you have to give a really good employee a 'meets expectations' rating.

We call them 'disconnects' because the employee is caught off guard. They're disappointed because they expected something more.

Here's the challenge: Inflation is approaching 9%, and the average bonus payout for most companies is going to be about 3%. You might be able to give your top performers a 4%-5% increase, and that's going to be disappointing.

When you tell someone who's been getting good feedback that they're 'meeting expectations', they're going to be disappointed too, because they've worked really hard and they interpret a 'meet expectations' rating as being 'average', 'acceptable', or just good enough.

Now the only way to avoid this is to manage expectations upfront and you want to do it in a team setting. If the average merit increase is going to be 3% to 4%, everyone needs to hear it at the same time. Now you can expect the group to be disappointed, so let them vent and process that news together. You need to empathize and acknowledge the group's concern. You're not asking the group to celebrate the news, and don't try to sell it as good news. When bad news applies to a group, let the group cope together and let them cope proactively. Bad news always gets delivered, and when it trickles out, people cope reactively and emotionally, and you just prolong the pain.

If most of your people are going to fall in the 'meets expectations' category, you've got to frame that rating in a more positive way than just being good enough. Acknowledge how hard people have worked and how appreciative you are, and the value you place on people that meet your high expectations. When you manage these expectations up front, people can prepare, and when you meet one-on-one, you're going to have much more productive discussions.

Now, one last point. When you schedule all your reviews, start with your high performers first. Start with the people getting the higher end of the merit increases first.

People are going to talk, and you want your top performers talking first. They're the standards you want the rest of the group to shoot for, and you want them influencing those top performers. You want them influencing the post review narrative. Remember, manage expectations upfront, limit the disconnects, and start with your high performers."

Outro

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