Use Employee Reviews to Drive Performance

Following is a guest column from the president and CEO of Travel Agency Management Solutions (TAMS).

A member of one of my TAMS travel agency groups recently posted a question on LinkedIn about how to handle employee performance reviews. It’s a great question, and a timely one as many travel agencies conduct employee reviews early in the new year.

Here’s the question (slightly edited):

We recently re-started annual formal employee reviews. We are not tying a cost-of-living adjustment to our current review process.

One of the employee comments that was passed along to me was, ‘Okay, I received my review and I’m doing a good job, but there’s no increase in wage. What’s the deal?’

I am interested in hearing how you are handling reviews and if you are providing any sort of cost-of-living adjustment tied to a review.

Here’s my answer.

Performance first
I strongly believe in employee performance reviews, but take exception to making them annual.

My experience is that employees view an annual performance review as nothing more than a compensation review.

Even if an attempt is made to discuss performance issues, most employees will tune that out, impatiently waiting for the compensation shoe to drop. (Read: “How much of an increase am I going to get?”)

This is why I recommend a minimum of two reviews annually.

Make a plan
Let’s assume the first review is in January. The purpose of this review, and this is made clear at the outset, is an evaluation of the employees’ performance during the most recent review period.

This review should:

1.    Compliment and reinforce areas of performance excellence.

2.    Identify areas where the employee needs to improve. The discussion should include mutual agreement on an action plan and how much the employee can expect to be compensated if s/he fulfills the plan.

3.    I like this to be formalized with a written commitment signed by both management and the employee. This performance commitment should specify measurable metrics and measurement dates.

Compensation review comes later
The second performance review comes later in the year, say in June.

Make it clear to the employee that the second review will include a compensation review based on their success with the mutually agreed-upon commitments.

While I have suggested two reviews, a mid-term update is not a bad idea.

Why it works
The benefits of this approach are obvious. If employees know the initial review is all about performance, and that the next review will focus on the mutually agreed-upon action plan, relating any changes in compensation to performance, they will listen far more carefully.

And you will have the best chance of their making actual efforts to improve.

Lastly, travel agencies are not businesses that can survive if you give increases in compensation simply because people grow older in your company.

When to pay more
If an employee’s improvement is ongoing, than a salary increase is acceptable.

If the performance improvement is limited to a specific time or circumstance, a bonus is the appropriate solution. If the employee wants the additional compensation again, they know how they earned it the first time.

To increase compensation for performance related to a short-lived situation or set of circumstances is akin to granting a permanent bonus for performance that may not be repeated.

Dr. Robert W. Joselyn, CTC. is president & CEO of Joselyn, Tepper & Associates Inc., a travel agency consulting firm, and of TAMS, LLC (Travel Agency Management Solutions).