Six Keys to Effective Performance Evaluations (2/11)

Formal performance evaluations have come under fire in recent years, but they can produce sound employment decisions and serve as a strong defense against discrimination claims if implemented properly.  Find out six key areas your program should address to ensure success.

Performance appraisal systems have fallen out of favor over the years, thanks to resistance to annual evaluations by both managers and employees and a few vocal HR management gurus questioning the effectiveness of these evaluations. However, while the timing and frequency of evaluations is worthy of debate, most employers find that an effective performance appraisal system has many benefits.  For example, a formal system can help you identify and correct performance problems, plan employee career development, assess readiness for transfer or promotion, determine compensation, and improve productivity.        Just as importantly, a performance evaluation program can help protect you from discrimination claims since it should show that you use fair procedures and objective criteria when disciplining or terminating employees.  Courts routinely dismiss discrimination claims when employers can demonstrate they counseled employees on performance-related problems and documented the reasons for any adverse decisions.        Of course, evaluations also can be used against you.   Poorly conducted appraisals, or ones that are falsely enthusiastic, can be used as evidence of discrimination if the employee is later fired.  Recent court decisions discussed below provide examples of how your appraisal system can protect against liability.  In addition, you will find out the six elements of a successful performance evaluation program. Established Criteria, Fairness Key in Court Decisions Generally, employers fare best in court when they conduct evaluations regularly, have a structured approach, and document performance problems.  For example, in Riley v. Lance, Inc., 518 F.3d 996 (8th Cir. 2008), the court upheld the termination of an employee based on his failure to improve his performance.  There was sufficient evidence that the employer terminated him because he did not meet the terms of his performance development program since he was deficient in three out of four categories he was supposed to improve in.  As a result, the court ruled the termination was not age discrimination.  Similarly, in Sprenger v. Fed. Home Loan Bank, 253 F.3d 1106 (8th Cir. 2001), the court determined that the employee’s negative performance evaluations were sufficient to defeat the employee’s claim that his employer’s failure to award him a raise for three consecutive years was motivated by age and disability discrimination.  The evaluations were conducted regularly in accordance with the company’s policy using its approved form and established criteria.      In contrast, courts generally do not like subjective appraisal methods and will often question employment decisions based on them.  For example, in Garrett v. Hewlett-Packard Co., 305 F.3d 1210 (10th Cir. 2002), the employer’s evaluation system appeared to be subjective.  The employer could not demonstrate that its low rankings and negative evaluations of an over-40 African-American employee were based on objective criteria.  Accordingly, the court allowed the employee to pursue his claim that the appraisals were merely a pretext for race and age discrimination.  Evaluations Provide Evidence of Discrimination  Of course, just as a good evaluation system will help your position in a lawsuit, one that is poorly implemented can actually support a claim of discrimination.  For example, when an employee is discharged for performance reasons but has good ratings, it is easier for the employee to claim that the termination was based on unlawful discrimination.       Evaluations also can show that an employee in a protected class has been treated improperly or held to higher standards than coworkers.  For example, in Bellaver v. Quanex Corp., 200 F.3d 485 (7th Cir. 2000), the court allowed a terminated female executive to pursue her sex discrimination claim.  Her evaluations showed that the employer may have relied on impermissible stereotypes of how women should behave.  Further, the only negative remarks in her evaluations related to her interpersonal skills, although the same qualities seemed to be tolerated in male employees.        In addition, the lack of an appraisal system can provide evidence that the employee did not receive adequate warning to improve performance.  Thus, in Yates v. Rexton, Inc., 267 F.3d 793 (8th Cir. 2001), the court allowed a terminated employee to pursue his age discrimination claim after discharge for poor performance.  He had not had a performance evaluation for 15 years, and his supervisor had told him there were no issues with his performance.  Six Keys to Evaluation Success  As the above cases show, a good performance evaluation system helps protect your organization from discrimination claims.  For an appraisal program to work, the system must be designed to give employees clear goals and to rate their progress objectively.  The most successful programs typically combine six elements:   1.     Regular, informal feedback from supervisors.  Once-a-year evaluations are not enough.  Employees need regular input from their supervisors.  These discussions typically focus on day-to-day performance objectives rather than on the employee’s past mistakes or failures.  This approach requires supervisors to observe and evaluate their employees regularly and to work closely with individual employees as needed.  In addition, it helps prevent “surprises” for employees about performance problems.  A once-a-year evaluation is not the time for an employee to first learn about performance shortfalls. 2.     Performance goals set by employees and supervisors.  Goals may be both short-term and long-term and can cover a wide variety of objectives, depending on the employee’s current job responsibilities and future aspirations.  Supervisors should identify core competencies and then use them to determine future performance goals.  Goals should be specific and quantifiable where possible, such as the completion of a specific project within a set period of time.  To help employees meet their goals, supervisors should offer additional training or other necessary support.  New performance goals should be recorded, reviewed regularly, and modified as needed. 3.     Action plans to address performance or disciplinary issues.  Action plans can be helpful when an employee is experiencing performance problems.  The supervisor should identify and discuss the issues with the employee as they occur and suggest a course of action for improvement.  The plan should detail the nature of the problem, the steps that both the employee and the supervisor will take to help solve it, and the time period within which the plan will be implemented.  The employee should provide input and suggest changes to the plan.  Once agreed upon, the plan should be reviewed regularly to make sure the employee is able to implement it successfully. 4.     Formal reviews that accurately document the “big picture.”  Ideally, these formal reviews should be done several times a year.  But if you conduct informal meetings regularly, a semi-annual or even annual review may be sufficient.  However, reviews should not be used to deal with ongoing performance problems.  The employee should have been alerted to these during the informal discussions and should be following an action plan to correct them.  Instead, the purpose of these meetings is to assess whether goals and any action plan have been met and to determine if the employee is following the right path for career development. 5.     Consistency in the appraisal process.  Make sure that standards are applied consistently, particularly among similarly-situated employees.  Employees that do similar jobs should be held to the same performance standards.  Courts often consider how similarly-situated employees are treated in their performance appraisals when weighing whether an employee has experienced discrimination.   6.     Reviews of your reviews.  The department head or another senior management employee should review each appraisal before the evaluation is shared with the employee.  This preliminary review can identify problems in evaluations, such as rating all employees around the midpoint of the scale or according to the “halo effect,” or even possible discrimination.  This extra step can guide the manager to correct errors before the employee receives an inaccurate, unfair, or even discriminatory review.  Supervisory Training Also Important As a final point, supervisors should be trained to perform consistent, appropriate reviews so that evaluations provide both maximum feedback and solid liability protection.  Frequently, this training includes instruction in effective listening and conflict management to teach the supervisor not to be argumentative if an employee objects to part of the evaluation.  This training is particularly important because careless comments, or those that are unrelated to performance, may be interpreted as showing the supervisor’s personal bias.  These comments can be very difficult to explain or defend if challenged in subsequent litigation.        Written guidelines also should be given to the supervisor before each round of appraisals to provide a reminder of appropriate behaviors and comments.  This disciplined approach will help eliminate the natural barriers to effective evaluations and provide extra protection against potential discrimination claims.