The Corporate Annual Review

As an operations manager for over 10 years, I have had first hand insight into how to large companies assess and promote their employees.  This post dives right into the annual review process.

My intent here is to show as much behind the scenes as possible. Even though your employer may operate differently, there’s likely some process they follow to assess their employees. Hopefully this post opens your eyes into learning how to figure out this process and navigate your company bureaucracy to unlock more potential in your career. 

Reasons for Annual Reviews

On the surface the annual review is done so a company can formally assess how an employee is performing, if they are deserving of a raise or promotion, or how they compare to other staff at the same or nearby level. HR can run reports comparing how employees are performing within a single office or across broad geographies. Of course it can also be used by the employee to showcase their skills, demonstrate they are ready or deserving of raises, promotions, bonuses, and so on.

One of the real reasons HR folks like annual reviews is because the annual review may be the only time a manager formally documents underperforming staff.  If I’ve heard one consistent complaint from HR it’s that managers either do not document bad performance or they do so poorly. This in turn puts a company at legal risk. Poor performance can snowball out of control and create a situation where the manager runs to HR to fire someone but there is no paper trail of documentation of the bad performance.  If the employee is terminated without that documentation, then there’s a chance they file a lawsuit against that employer for wrongful termination. 

Imagine if you took the annual review seriously and got consistent high rankings. If you were terminated without much or any documentation for cause then you have those reviews as possible ammunition against your company.   

Language Skills 

Chances are if your company has a formal annual review process then it has a lame name with a bunch of lame acronyms. 

Every profession and even every company seems to have its own language. Usually a mix of technical terms and acronyms turned into words.  Your profession likely has its own language and mastery of this language is essential to your corporate survival. 

Here’s an example:

• The company’s system is called: the employee performance and review process (EPRP), pronounced eeparp.
• The early year goal setting process called: early year goal setting (EYGS), pronounced eggs.
• Lastly there is the annual salary setting process (ASSP), pronounced asp.

Then the language part. People turn these acronyms into words and the conversation goes something like:

• Manager – you need to take the eeparp seriously, do your eggs on time so you can get the best possible outcome from the asp.
• Employee – yessir Mr. manager sir.

If you go home and speak this language to your spouse and they flash you a sideways glance like you just insulted their ancestors, then congratulations, you have successfully mastered this unique language. The important part is you learn it because it is the first step to getting what you want at your company. 

How Annual Evaluations Take place

I’m going to focus on the more involved, formal review process that I have experienced. For the people that work for companies that don’t have a formal process…make your own. Set up periodic calendar reminders to meet with your manager and assess where you are relative to your goals. When you’re done with this meeting, document it with an email. Write specifically about what was discussed, the actions, the outcomes, be as detailed as you can without being akward. 

A formal review process typically involves three phases that I’ll refer to as:

• Early Year – goal setting, observer or mentor identification
• Mid-Year – check-in meetings, brief assessment of performance relative to goals
• End of Year – annual performance relative to goals, performance ranking, salary and bonus considerations.

Reviews are typically custom designed by the company and sometimes involve a custom online platform where people can go in and fill out their review. Then there’s off the shelf tools like Taleo, an Oracle-based platform, that seems pretty common for big companies. 

Smaller companies may not even have a virtual office, and may just have regular sit down meetings or check-ins. For the rest of this post, I am going to go through the more formal steps that I have experienced.

Early Year

The early year part of the process is where you set the stage for the subsequent mid and end of year reviews.  This is where you establish goals and identify observers or mentors. If you’re looking at a career milestone at some point during the year, like a big raise, bonus or promotion, then this is a good time to makes sure your manager knows what you want.

Goals

When goal setting, the folks just getting started in their careers should have fewer, less complex goals than more experienced people.  For newer folks, start with no more than five goals. Pick three that pertain to you personally, one that is tied to your management and one that is company specific.  

Your personal goals should be specific, easily quantifiable and actionable.  One way to make sure you have a good, well worded goal, is to imagine yourself accomplishing that goal and write about it.  So in other words, assume one of your goals is to manage a project worth over $100,000. Imagine you accomplished this goal and then write about how you accomplished it. Make sure to be specific, describe why it was important. If you struggle with this write up, go back and reword your goal or come up with something else entirely.  If you cannot visualize in advance how you will accomplish that goal, then you will have a real hard time with your end of year review and it probably won’t give you the rating you desire.

For the manager goal, ask your manager what their goals are and shape one of your goals relative to those. Your job is to do good work, earn money, be successful. Here you are demonstrating to your manager that you take yours and their success seriously enough to write it down and take action. 

For the company goal, look at what your company holds most dear.  If it’s a manufacturing goal, and quality assurance/quality control are tops, then make a quality goal. If it’s a construction company and safety is a top concern, then have a safety goal.  For banks or financial institutions (not my background so I’m guessing here…) perhaps a goal around target margins or revenue. 

Tip: In my professional career I kept a Word document filled with pages of goals. As years went by, it became easier and easier to set a goal and write what I did against it.  

Observers and Mentors

Observers and mentors could and should be used to your advantage.  Observers can be folks at your same level, or above or below. They are people you work with regularly and can “vouch” for your performance in an end of year review. 

Mentors are typically people more advanced in their careers that can give crucial one on one advice.  Pick and choose your observers and mentors carefully.  Make sure they have a strong reputation and are someone with whom your manager will respect their opinion.  When it comes to observers and mentors, watch out for folks that always provide bad or good reviews, look for the ones that provide real objective reviews. These peoples opinions will garner more trust and respect.

Even if your company does not have a formal system for identifying observers or mentors. Find them anyway.  Managers get tired of people writing flowery reviews about themselves so you can imagine when someone with a solid reputation speaks well of your performance. It tends to go much farther in your favor than the self-written flowery review.

Big Milestones

If you’re gunning for a promotion, then this is the time to make it known. Chances are your company will be deciding promotions well in advance of when you have your annual review. If you wait until that sit down discussion with your manager, it’s too late, you’ll probably have to wait until next year. Play the long game.

Mid-Year Review

Often times mid-year reviews are optional. I have often sent out an email to my staff offering up my time for a mid-year review, even a free lunch at restaurant of your choosing.  It was rare people would take me up on the offer.  The ones that did were high performers. They took every advantage they could to make sure they were viewed as a high performer.

If your company has a process like this or similar, my recommendation would be to set calendar reminders throughout the year to update goals, have check-in meetings, make sure it is known that you are seeking a raise, promotion, whatever the case may be.  In other words, play the long game and take things into your own hands.

End of Year Review

The end of year review is usually the one that management pushes on the most. That is, often times people will not take the early year goal setting or mid-year reviews seriously. But the end of year review is the one the company wants documented, if for no other reason than the reasons I wrote about above. 

My end of year review process would typically involve me taking review documentation from the employee, their observers and/or mentors, assessing everything written and then making my own final review.  My review would end with placing the employee into a qualitative category. 

Review Categories

Categories are these qualitative terms for how well you did. Over the years I’ve seen the names and number of categories fluctuate. Some years it’s three categories, or four, or even five. Here are some examples I’ve come across:

Here is an example of a five category system:

• Outstanding
• High performer
• Performs
• Satisfactory
• Underperforms 

Here’s an example of a three category system:

• Outstanding
• Performs
• Underperforms

Once I was done with this part, senior management would take a look at the percentage distribution of categories.  The idea here is that the amount of money allocated for raises will be weighted so that people in the higher performing categories get more money than people that don’t perform as well.  

This is when the unfortunate task of “forced ranking” begins. As you would expect, a lot of managers may rank their people as all top performers.  Some may do the opposite.  With forced ranking, the senior management would have a percentage range where they would want to see each category. Again, this range may change year to year, but  it’s there nonetheless.   Here’s an example of what I mean:

• Outstanding (10%)
• High performer (15%)
• Performs (45%)
• Satisfactory (25%)
• Underperforms (5%)

• Outstanding (10%)
• Performs (85%)
• Underperforms (5%)

So as you can see, the company would want to make sure they place their people within these ranges. The topic of forced rankings can easily turn into a heated conversation on whether or not it is fair.  You can also argue it from a statistics perspective.  Either way, this is how it is done, even though it’s overly simplified and sometimes down right insulting to the employee. 

So how do we get from where we originally ranked staff to their forced ranking?  That would happen a number of different ways. For the large firms spread out nationally or internationally there were lots of people within a given job code. So you would have accountant level 1 in New York, Chicago, Dallas, and Los Angeles. So you would end up with lots of different job codes with multiple employees in each one. As a manager, how do I know that my accountants in Dallas are performing better or worse than the ones in other geographies?

How Managers Rank their Staff

The best and most fair way to force rank each employee was when managers would convene in person. We would lump employees into like job codes (Accountant 1, Accountant 2, and so on). Put their names on sticky pads. We would usually be in a large conference room with a big white board. The white board was divided up onto each of the three or five categories.  Each manager would place the sticky note with their employees name on the board where they thought they placed. It’d go on for about 5 or 10 minutes then everyone would sit down and look where folks landed. It was pretty rare that the distribution was within the percentage ranges. Therefore, senior managers acting as mediators, would go through each employee in the highest performing category and put the onus on the manager of that employee to defend why they put them there.

It would result in lots of debate and argument.  So for example, I put a mid-level engineer in the outstanding category because she managed 5 projects and dealt well with all the complexities thrown at her. Then another manager would talk about their employee, maybe they managed 3 projects that were pretty easy.  Then another manager, their employee managed 7 projects and got an extra one million in revenue by finding a unique technical solution. This is called calibration. The idea was that only the manager of a given employee could move the sticky note, by going through this process the managers that had employees that didn’t measure up would have to sheepishly go to the board and move their employee down.

Even though I don’t really care for forced rankings. If it had to be done, this was the best way to go about it. Not only did you accurately compare employees, but you also got a good idea of what the high performers were doing. You could then take that back to your employee and let them down more easily on why they didn’t get the higher ranking.  If they are truly a high performer, they’ll understand and endeavor to do better.  Often times though, it was so tough on someone’s conscious that they ended up leaving. 

On the flip side, this process isn’t very fair if the manager is a bad public speaker or just an asshole.  There would be mangers that always put their employees in the middle of the board so they didn’t have to stand up and talk. Or they were just pricks that didn’t want to do good for their people.  

Virtual Calibration

Calibration would be done in other ways, by virtual meetings, passing around a big spreadsheet. These other ways were less fair to employees. I saw that it often favored managers that were good at writing  glowing reviews, in other words hacking the system to favor their people. 

One of the things were told as mangers was to make sure employees didn’t look at these as though they were report card grades. So in other words, an Outstanding is not an A and a Performs is not a C grade.  The company line is that you are expected to perform, and in doing so it’s probably more like a B+.  

How to make the most of this process

Here is how myself and other strong performers have made the most of this process.  If your manager has a lot of people to review then they have their normal workload plus all this HR type stuff and it can be daunting.  In my experience people would do just the minimum requirement or would go off the rails with pages of text and flowery language describing their accomplishments. This latter category of people is typically where the high performers reside but, by writing long prose they shoot themselves in the foot because the manager likely doesn’t have time to go through it all.  The other thing that is needed for a calibrated forced ranking is details.  Things like “did a great job” or “pleasant to work with” are horrible pieces of fluff. 

Think more quantitative. Think numbers, money, etc.  

• Wrote 5 technical papers that were each over 100 pages, and received minimal senior review or editorial comments.
• Delivered three technical presentations in a very narrow specialty field to a group of experts. 
• Managed five complex projects ranging from $1,000,000 to $5,000,000 in revenue. 
• Exceeded gross margin target of 33 percent on each project.

This should help you get the idea.  Take these things and put them in bullets at the top of your review.  Make it so your manager can easily extract this info and use it in a situation when they are comparing you to your peers across the country or globe. If you still feel the need to write lots of text, go ahead and do so. Just take the extra step of extracting the essence, the numbers of your performance and put that in a brief and succinct way, your manager will appreciate that.

Most folks in my experience, even high performers, do not take the review process very seriously. It is an extra add on when you have all this other work to do that seems so important.  By taking the annual review seriously you can actually out perform a high performer (on paper that is) just by going through this exercise when others do not. 

Who cares about the dang review anyway…

If you’re not that career driven and don’t really care about making the biggest raise possible, you may find it easy to rest on your laurels here and just show up and get through work. However, where everything changes is when the company decides to lay people off. 

Lay off’s, reductions in force (RIFs), mass firings, however it’s worded it is something big companies do all the time.  The catalyst for a layoff can come in the form of an economic recession, one or more bad financial quarters, loss of a major client or project, or market shift (everyone starts drinking Coke instead of Pepsi).  HR departments can be quick to respond to such a catalyst by looking at that most recent employee reviews and cutting low performing staff.  Management and HR at some level are in alignment on where various staff rank.

Some companies have annual layoffs where they just cut their workforce by say 5 or 10 percent. These are typically companies with numbers in the tens of thousands or hundreds of thousands of employees.  When you get this big, it is probably statistically impossible to not have some dead weight, poor performing employees hanging around, and you’re probably hiring hundreds of people every year anyway.  

If you are going to work in this environment then my recommendation would be to take the annual review seriously. People that end up in the underperforming category typically get a written letter from HR after this ranking. The message will carry terms like “written up” or “memorandum of understanding”.  These were typically stern letters that are essentially the first step to firing the employee.

Folks that are in Satisfactory or Performs. These are the two biggest populations of people and can encompass between 40 and 80 percent of the employee population at a large company.  Make no mistake about it though, management knows there are more layers within these average sounding categories.  There are people that are almost outstanding or high performer but not quite high enough, then there are folks on the bottom end of that spectrum close to the underperforming category, and many places in-between.  

People that land in the highest performing category or categories are in the best place. This ranking gives documentation that they are highly regarded by the company, are a high performer, and worthy of a higher percentage raise.

Parting Thoughts

I’ve given specific examples of review processes I’ve encountered. Chances are your company has the same or a similar process but they call it by different names and acronyms. 

• Reasons for Reviews -Mandatory annual reviews are done for good reason. Beyond just figuring out if an employee is doing their job, they do these formal reviews to document performance in the event they need documentation to terminate a poor performer. 
• Language – Your industry and probably even your specific company has its own language.  Learn it, master it, and find out how you can use it to your advantage.  Please don’t torture your spouse by speaking this language at home…
• Evaluation method – The bigger the company the more likely they have an intricate and well established annual review process. It’s usually a drag, but learn it and respect it if you want to ensure the best possible outcome in your career or just weathering a bad economy. 
• Master the process – Ask questions, read the employee manual, talk to former managers or employees of that company, read every page of your company’s virtual office. Do as much as you can to learn the process.
• Goals – Write good goals, write then for yourself, your manager or boss, and your company. Make sure you listen what your managers and company folks are calling out as important. Could be a metric, quality standard, revenue target. Whatever the case figure it out and tie a goal to it.
• No evaluation method – if there is no formal system in place, make your own and document it with a detailed email.
• Your review write up – for your own personal review, make sure you make it easy for the manager to go to bat for you. Pull out specifics, numbers, quantity, make sure they can quickly get that info from your review without reading through pages of text. Just imagine you had 30 employees to review on top of your regular job. Twenty-nine of them write 10+ pages of text and one of them does that plus they give you a sort of bulleted executive summary.  Be that one person. 
• Career milestones – If you’re gunning for a promotion, make sure the people who need to know are aware as early as possible. Better yet, if you think you may be up for a promo in say 2 years, start the process then. 

As a manager for over 10 years I would say only 5 or 10 percent of my staff at any given time would actually take the initiative to take their career in their own hands. Most people do nothing all year long, have an average or bad review, and complain. As a result they get exactly what they deserve. Don’t be this way.  There’s a good chance that in your quest to financial freedom you find yourself working for a big company, maybe for years or decades.  We all do what we think we need to do, working for a big company is like playing a game, you need to learn the rules, speak the language, and figure out what rules you break, ones you can bend and ones that must be adhered to at all costs.