This line from "Mikado" is good advice for performance review systems. One retailer had a ten-page appraisal focused on customer service. Ten pages!! What was going to be the reward to the employee? The difference between an extra ten cents or thirty cents an hour was the only thing to be determined. Probably more company resources were spent on doing the performance review than the effect on payroll for each individual.
If you need a mechanism for determining the change in a person's pay, and the effect is 1-4%, use a simple scale from one to ten; rate the person, determine the pay raise and be done with it. With such a small effect, even the employee recognizes that the reward is commensurate with the pay risk. If they balk, have them fill out a ten page report on why they think they deserved an extra 10 cents an hour or $200 per year. They'll realize that with so little to gain, it's not worth the effort.
The other cited main purpose of performance reviews is employee development. This is an entirely separate endeavor from determining pay. For this, you want careful thought and analysis and a lively dialogue with each employee. The benefits of developing an employee are far greater than $200 per year for the organization and for the employee's career path.
But don't combine the two. The rewards and efforts--the punishment and the crime--are two exclusive efforts.
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