The Nitty Gritty on Raises & Performance Reviews

May 09 2019

Do you dread performance reviews? Your employees may dread them too, but also really want to know where they stand with you. “How” to handle them is the topic of great debate for business leaders and HR professionals alike. Should you lump performance and raise discussions? How often do you have to do an evaluation? And what format should you use? Our advice is to simplify, simplify, simplify…

How often should I be giving performance reviews to employees?
In a perfect world, your employees would have feedback on at least a weekly basis, coupled with periodic discussions where you synthesize that “on the spot” feedback into a handful of themes. However, we live in a practical world. So, the important thing is to decide what you can commit to and communicate that clearly. If the reality is that you’re not going to do a regular review, simply acknowledge that and know that employees will be disappointed but won’t have false hopes. If you can commit to an annual “sit down,” let them know.

When is the most common time to give a performance review?
Most reviews fall under one of five categories: quarterly, bi-annually, annually, “you’ll know it in your pay,” or “I’ll let you know if you screw up.” Various leaders are steadfast advocates for one or the other for different reasons.

Quarterly reviews offer employees the ability to receive and incorporate feedback fast, especially in nimble organizations that have to change quickly.

Bi-annual reviews can be a happy medium, especially at larger companies when raises are often part of an annual review process. This approach helps manage accountability and expectations and allows for course corrections prior to a salary or bonus.

Annual reviews are most common in larger organizations where performance is measured against yearly goals and metrics—and there is a mature HR function managing the process.

While a bit tongue in cheek, the “you’ll know it in your pay” review is very common in founder-led companies where feedback is informal, and employees work side-by-side with the owner/CEO. It’s not great, but it’s certainly common. If you find this is your approach, you can get more bang for your (salary) buck if you combine a raise with a lunch or coffee meeting to explain your thinking about the pay change you’ve slipped into the employee’s check.

And finally, the “I’ll let you know if you screw up” model, which is more typical than you’d think and tends to show up in very early stage companies; the downside is that it can promote a culture of fear. This is probably the biggest clash of generations as we have Silent Generation owners who were born before 1945 working with Millennials or GenZ employees who are accustomed to regular praise and encouragement.

If I don’t give formal reviews and an employee asks for one, what do I do?
If you have a clear understanding of the five possible review models, you can rely on that communication to respond. It’s also a good idea to understand why you’re getting the request—is the employee feeling insecure? Does she want a raise? Did something happen recently that has not been discussed? If you muster the courage to give a review, make it informal, but keep notes or send a recap email. Think carefully about the precedent you want to set. If you give one person a review and not others, you potentially create some risk if you later terminate an employee who says he/she was not given feedback while others were.

How much of a raise is “typical” in most cases?
Regardless of the review model you adopt, pay increases in 2018 averaged about 3%. The labor market has tightened, however, and raises are creeping up as competition for great talent heats up. We strongly encourage you to spend your raise dollars on your best performers and avoid the temptation to give everyone the same raise. Your best people have choices.

Ask us your performance review and raise/salary questions using the chat function in the lower left-hand corner of your screen. We love helping companies grow and keep their people happy, and we’re always happy to share what we know.


Show Results for



Loading Icon