Often both employees and business owners dread this yearly exercise and view it largely as something to get past so they can get back to “real work.” How unfortunate. With the right preparation, tone and follow-through, this annual undertaking could be the most important thing you do all year in terms of understanding what’s really going on at your small business.

Regardless of what you name it – “performance review,” “employee evaluation,” or even the name I favor – “check-in” – this process is typically about looking at the past year to make judgments about how well an employee performed. But, is that all?

In many small businesses, everyone is so busy performing day-to-day duties and meeting the needs of customers that little time is left to reflect on how well an individual employee currently fits into the organization and what, if anything, the business can do to support the employee’s – and by extension – the business’ future success.

Here are some tips to help you make this year’s round of reviews more successful:

• Be sure each employee has an up-to-date and inclusive job description that includes the essential duties of the role. Make clear the metrics you will be using to evaluate success. Ideally, this is something each employee gets when hired and is (at least annually) reviewed for accuracy.
• Based on that clear description of the role and in a transparent process that is the same for everyone, gather detailed information about how well those success metrics were met, and if appropriate, details to help explain poorer and better than expected performance. Ask employees to complete a self-evaluation using the same measures.
• In your check-in tool, include open-ended questions about what the company as well as the employee could do to improve overall performance. Frequently this may include education/training, access to improved technology and/or company information, or a change in duties or role.
• Once these preparations are underway, schedule a time and place to meet with each employee that is supportive of a frank and confidential conversation. Try to find a place away from day-to-day distractions like telephones, interruptions, and email; avoid places where the conversation could be overheard. Allow sufficient time for an unhurried talk; this conversation may exceed an hour, sometimes two. Don’t rush, there’s a lot to learn.
• Start the meeting with a review of why you are there – to come to a common understanding of how the past year has gone from the company’s and the employee’s perspective with an eye to agreeing about what the employee and the company can do to make the next year even better. Emphasize that this is a two-way conversation; invite feedback on how the company is doing in supporting the employee’s success.
• Following this introduction, provide the employee with the written results of the assessment you prepared earlier clearly marked “draft” and have the employee provide his/her self-evaluation. Use these to guide, but not to take the place of a genuine conversation. Remember that you want to encourage a two-way conversation.
• Be sure to spend as much time on the “good” stuff as the “bad” stuff; many people are initially uncomfortable being praised. Express your gratitude for the positive things the employee did to help your business succeed. Being valued for accomplishments makes it easier to hear about shortcomings.
• Actively and often ask how what you’re discussing is landing with the employee. Be sensitive to nonverbal cues. Before moving from one section to the next, ask if there is anything else the employee wants you to know and whether s/he is ready to move on. Take a break if either of you needs one. You may find that there are times that the employee may want to circle back to a previous section or topic. Great! You have something more to learn. Ensuring that the employee feels heard will help to open the door to them hearing what you want them to know.
• In this process, it’s helpful to set goals for the upcoming year and agree on what the company can do to better support the employee. Also, it’s a great time to chat about where the employee might want to be in the future and/or whether it’s time to consider taking on different roles or duties.
• In wrapping up, agree on next steps. Ideally this will include making any needed changes to the check-in document so that a signed, final copy can go into the employee’s personnel file. If you decide to provide additional training or some other support, be specific about who will initiate the next steps and what needs to happen. Set clear expectations with dates and make sure what you agree upon actually happens.
• Ask how the process was for the employee and how it might be made more valuable in the future.

If your company has not done this process – or not done it well – in the past, it will likely take at least a one-year cycle to get employees to believe you really mean what you say in terms of this being a two-way conversation that will result in changes. If it takes a couple of years to build that trust, OK. You’re planning on being in business for longer than that, right?

While I don’t have magical powers, I do have experience. If you do this, I predict that you will learn things you didn’t know about your culture, how employees interact with one another and many concrete, actionable things you can do to make your company even better.

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Since 1991, Laurie Breitner has assisted organizations with operational improvement, organizational development and strategic planning. Learn more at http://www.lauriebreitner.com.