Viewpoint January 8, 2010, 2:51PM EST

Performance Reviews: It's about 'How,' Not 'Why'

Doing a performance review that will benefit both the employee and the company requires a deep level of enquiry rather than mere feedback

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Although dissatisfaction with annual performance reviews is widespread, such reviews can't simply be done away with. In these testing times, when every dollar counts, performance should be optimized. You could argue that managers owe it to owners and employees to do the review, and they should therefore do it in a way most likely to lead to better performance.

Unfortunately, most companies provide managers with traditional "strength and weakness" templates designed to provide an audit trail for decisions about raises and bonuses and to deal with employee-performance issues. The trouble with such reviews—and with similar instruments, such as 360-degree feedback or balanced scorecards—is they tell you only how the person performed, not why. In our desire to follow process, we forget to look at the bigger picture around a person's performance. The answer to unlocking potential and raising the bar requires more than simply watching an employee at work; it lies in more sophisticated enquiry.

To help facilitate such work, companies need to do more than provide simplistic tools and checklists. They should teach managers how to have a conversation with the employee that gets to the real person behind the performance. Think of it as "peeling the onion"—engaging the employee at deeper and deeper levels, moving from observable behavior and performance to the deepest layer of the individual's personality.

Conducting a productive conversation requires that the manager understand each of the levels and know how to ask questions that really open up the issues. Here's a look at how the various layers of the "onion" relate to reviews.

• Performance is the place where too many reviews end. Performance is too often viewed merely in the context of data, whether hard sales figures or evidence from a 360 that the employee is regarded by direct reports as poor at collaboration, for example. Data are important, but they're hardly exhaustive. You can get behind the data by asking the employee to talk about a time when his performance excelled or to talk about some recent results. Ideally you will arrive at a deep mutual understanding of what constitutes good performance, and both you and the employee will be able to place the data in that context.

• Situation refers to the circumstances and conditions in which the employee works. Ask if the employee feels more confident in some situations, and if so, which ones. Probing along these lines should yield valuable insights that can help you create conditions in which the employee can excel.

• Motivation is often assumed to be difficult to discuss, but the right questions can tell you what drives or inhibits the employee: What do you like to do/not like to do? How do you set goals for yourself? How do you respond to setbacks?

• Skills are surprisingly more difficult to probe than motivation. Despite the assumptions and inferences that accompany "strength and weakness" reviews, it's far easier for people to say they don't like something than to say they can't do something. Make it clear you understand that strengths and weaknesses depend on context. A strength—decisiveness, for example—might be seen as a weakness in a context calling for collegiality. Instead of confronting someone on "weaknesses," pursue the topic in those relative terms and in specific contexts.

• Experience should not be restricted to employee's current job but should include anything he or she might have done.

Ask such questions as: "Tell me about the most challenging or satisfying project on which you have worked in your entire career," or "What do you consider to be your top three career achievements?" The answers will not only speak volumes about the employee's values and accomplishments but might also offer opportunity for capitalizing on strengths that might not otherwise have come to light.