Transform the (dreaded) annual performance review

If you are an employee and don’t perform as well as you can, perhaps you lack the proper tools or training. Maybe you don’t feel appreciated and, as a result, are not as involved as you might be.

In the 1929 movie, The Cocoanuts, the hotel employees of a mustachioed Groucho Marx chased him from the lobby and up a flight of stairs.

“We want our money,” they yelled.

“What do you mean?”

“We want our money,” they repeated.

“I don’t understand. You want whose money?” Groucho shouted back.

“You haven’t paid us. We want to be paid!”

“Oh,” says Groucho, pointing directly at them. “You want my money,” with emphasis on the “my.”

I digress, which is not uncommon for me when I am faced with a situation I find uncomfortable. Let’s remove 'dreaded' from the annual performance review and look at this a bit differently.

Reviving the Dreaded Annual Performance Review

First, why should we think of the employee performance review as being about the employee? Don’t both the employee and employer want the best possible performance?

If you are an employee and don’t perform as well as you can, perhaps you lack the proper tools or training. Maybe you don’t feel appreciated and, as a result, are not as involved as you might be.

I regard tools, employee training, and the expression of appreciation as the responsibility of the employer, not the employee.

Second, why shouldn’t I want to encourage the best performance possible, and pay fairly for that performance? If all of my 45 or so employees felt unfairly treated and failed to show up Monday morning, my business would instantly disappear.

Each of them is excellent at what they do and could easily find a position somewhere else. But how could I reconstruct, entirely by myself, the outstanding team which we have built together over the past 45 years?

I now regard the (not dreaded) employee performance review as a review of my own performance, not theirs. I think of my employees as co-workers. We work in the same building, write e-mails to outsiders and to each other, talk on the telephone and enjoy lunch in early afternoon.

Every one of us is a crew member on the same ship, headed in the same direction. (At Disneyland you would be called a “Cast Member,” which sounds nice but, to me seems more like acting rather than interacting with customers and each other).

Today my ideal procedure on the annual employee review is:

1) Keep my co-workers up to date on how they are doing during the year. I offer approval to encourage them, though not as often as I should. I suggest course corrections to help them focus on what needs to be changed.

When your flight lands in San Francisco it’s too late to remember that you should have boarded the flight for Chicago. In the old days I would say to an employee after his or her first day on the job, “I’ve decided to renew your option. You can come back tomorrow.” Today I cringe at the thought of how I would feel if my new boss of one day said that to me.

Two weeks ago I hired Joy to help with the marketing and promotion of People Tools. At the end of her first week I asked, “Are all of us providing proper information and support so that you can do your best work?” If you have properly helped your co-workers during the year there will be no bad surprises for either of you at the annual review.

2) When it’s time for the annual review, I make sure to conduct it within a week or two of the anniversary date. It’s not fair to my coworkers to delay information which is important to them and keep them walking on eggshells, waiting for “the knife to drop.” And I don’t want to skulk about the office hiding from someone.

3) Ask each person being reviewed to evaluate him or herself, to write down their accomplishments of the past year and goals for the coming year. Not only does this help your employees learn the valuable skill of self-assessment, it also shows how much you respect and appreciate their opinions.

4) Ask the reviewees what salary they think they deserve. I use recommendation as a guide. Years ago Gert, who worked with me for almost 25 years, always asked for a ten or fifteen percent raise, which was far too high. But at least I knew what she was thinking. One year Cathy, my vice president and general manager, asked for a raise which was far too small. I increased her salary by three times the amount she had requested.

5) During the review I ask how I, or other managers, can better assist our co-worker to perform better. “Replace my seven year old computer,” was one answer. I was embarrassed. I had allowed a valued member of my accounting staff to struggle for two years with entirely outdated equipment.

6) Consider awarding a member of your team a one-time bonus if they've made an outstanding contribution to the company that saves time and money, increases profits and productivity, or improves the working conditions in the office.

This way, the annual review can be just as much about rewarding employee performance as it is about offering constructive suggestions on how to improve. Why shouldn’t you want to encourage the best performance possible, and pay fairly for that performance?

If all of your employees felt unfairly compensated and failed to show up Monday morning, your business would instantly disappear. Each of them is there because they are good at what they do, and they could always find a position somewhere else.

7) If my goal is to retain my team member for another full year, I sometimes pay part of their increased salary as a bonus at their next anniversary date. We all like something “extra,” and often a $2,000 bonus looms larger than $166.67 a month, before payroll taxes.

8) Be prepared at an annual review to be flexible about hours of work. Some people prefer to begin their work day at 6:00 am and time away from the office for personal matters. One of the biggest perks I enjoy myself, as an entrepreneur and business owner, is that I can set my own hours. I can take off Thursday afternoon and come in on Saturday morning if I like.

So I refuse to be a prison warden for my staff. They work with me to accomplish a mission, not to lose their freedom to visit a doctor when they need to, or watch their daughter’s soccer finals.

When I improve as a manager, my co-workers improve at their positions. That is why I no longer dread reviewing them, because, in reality, we are helping each other.

Let’s take the word “Dreaded” out of the annual performance review.

This article is adapted with permission from the publisher, SelectBooks, from PEOPLE TOOLS FOR BUSINESS: 50 Strategies for Building Success, Creating Wealth, and Finding Happiness by Alan C. Fox. Copyright © 2014.

Author Bio:

Alan Fox is the president of ACF Property Management, Inc, and author of The New York Times bestseller PEOPLE TOOLS: 54 Strategies for Building Relationships, Creating Joy, and Embracing Prosperity. He has university degrees in accounting, law, education, and professional writing.

Fox was employed as a tax supervisor for a national CPA firm, established his own law firm, then founded a commercial real estate company in 1968 that now owns over one billion dollars in real estate. He is the founder, editor, and publisher of Rattle, one of the most respected literary magazines in the United States, and he sits on the board of directors of several non-profit foundations. Visit


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