Evaluating the performance of employees is something every responsible shop owner or manager is doing all the time. Whether walking through the shop or looking at the latest numbers, good managers are constantly considering how employees are contributing to the company's bottom line, and what actions they might take in making each worker's contribution a more positive one.

Such ongoing evaluation is a good thing, to be sure. But how managers decide to put their assessments to use can have a direct influence on a company's success. As with most other facets of running a business, managers tend to apply one of three approaches in evaluating employee performance: proactive, passive or non-existent.

Although each has its pitfalls, the last is the most lethal. Executive-level managers in larger companies take note: If your key supervisors are not actively following a regular, reliable system through which employee performance is evaluated, preferably in a proactive way, maybe it's time you did some evaluations of your own - to find out just what the heck those supervisors are doing that is more important.

And if you are running the show at a smaller operation and not assessing employee performance, what's your (crummy) excuse?

Put simply, nothing is more important than working with your workers. In case you don't realize it, the moment you decide that a one-man shop is not the way to go and hire your first employee, you have made a commitment to that employee and all future employees: that you will be sure they understand what is expected of them and give them the information and resources they need to meet those expectations.

"But," you counter, "shouldn't employees just know what's expected of them and expect the rewards for their performance to reflect my satisfaction with it?" Maybe.

Employees "should" know a lot of things. How much they "should" know depends on what manager you ask. But when really pressed, almost any manager will admit that, just as sure as it is his or her job to place new hires in appropriate positions, it is also his or her job to make clear what that position entails, along with what constitutes acceptable work and what doesn't.

If we are really serious about our companies' success, we can't fall into the trap of believing employees "just know" anything. If we do, our "management" is non-existent. Instead, we have to let employees know, in very specific ways, what is expected, and then encourage them to exceed our expectations. So, having eliminated "non-existent" management as a viable option, we are left with two other approaches: passive and proactive.

Passive managers evaluate performance, but seldom share their thoughts and observations with their employees. When they do, it is almost always negative criticism, delivered at an inappropriate time, and often in an inappropriate manner. The reason is simple: passive managers tend to let things build up until they simply can't be quiet about them anymore.

Passive managers and those whose evaluation strategy is non-existent have a lot in common. Both generally believe that employees should "just know" what is expected. The difference is that passive managers care enough to take action, even if that action is taken too late, in an inappropriate manner and at the worst possible time. Forgetting all those negatives for a moment, though, the good news is that bit about caring.

Passive managers tend to reward good work with decent (seldom great, but decent) pay increases, on a predictable (usually annual) basis. By doing this, they can tell themselves that they have a "system" in place for evaluating employee performance. Nothing could be further from the truth, of course, but at least it makes them feel good.

By now, you have probably guessed that I favor the proactive approach. Passive managers may resist, thinking this approach involves a lot more work than their current one. In fact, it is a whole lot easier in many ways (not the least of which is being easier on their blood pressure). It does mean getting organized. It also means talking to people about sub-par work at the first hint of it, rather than waiting until all those hints have "morphed" into a disaster which is about to be loaded onto a truck for delivery.

So, if you really want to get the most from your employees, there are several steps you must follow, and each requires being a proactive manager.

* Qualifying the Employee - It is difficult to overstate the importance of this crucial step. Would you hire someone with no prior experience to do high-volume spray finishing? Of course not. Spray finishing is a very delicate, difficult-to-master specialty. But for some reason, many of us are disappointed when an unskilled worker can't just "pick up" assembly, for example, with little or no training.

This is not to suggest that we shouldn't hire those with little experience. In the current tight job market, we often have little choice. But our eyes had best be wide open, and we should fully expect to train such neophytes before making any production demands of them. "Qualifying the employee" is just another way of saying "being realistic."

Interviewing a prospective employee is as much about the employee wanting to work for you as it is about you offering him a job. The sooner you accept this and ask the tough questions that can help determine your prospect's real wants, needs and personal goals, the quicker your turnover will drop.

* Goal/Reward Setting - Once you have hired an employee and are confident of his or her ability to perform certain tasks, it is time to set some goals and offer incentives for meeting them. The key word, again, is "realistic." If you set goals that are unattainable, you do more harm than good. Productive employees are developed with patience, by gradually increasing their workloads. And don't forget the "reward" part. If you don't attach some real value to employees' accomplishments, it won't take long before they wonder why they are striving towards goals in the first place.

* Interim Assessment - After an employee has had some time to get acclimated, regardless of his or her overall performance, it is time to provide some honest feedback. Are they reaching the goals you have set? If not, why? (Ask them to answer that question; don't answer it for them).

Listen carefully, take some notes and reach a consensus about what steps will be taken, and over how long a period of time, to improve things. Commit the employee to making progress, and check in with him weekly to be sure progress is being made. If it isn't, you now have the basis for becoming more demanding, i.e., the agreement you made together, backed up with your meeting notes.

If the employee continues to fall short of your mutually agreed-to goals (be they for production, behavior, supervision/ training or any combination of these), it is time to begin issuing warnings and, if necessary, to terminate the relationship. And don't dawdle. Few things pose as severe a threat to employee morale and overall shop productivity as a slacker who goes unpunished.

Conversely, if the employee is making the progress you hoped for, you also have the basis (and an obligation) to let him or her know you have noticed, that you value dedicated employees, and that persistent performance of this quality will be rewarded.

* Informal Evaluation - Six months or so into the relationship, it is time to sit down again with the employee and review his progress, set some new goals and provide an interim pay increase. Yes, that's right, more money.

After six months, it is obvious that you want this relationship to continue. If six months have passed and you don't want it to continue, it is nobody's fault but yours that it has. (You are in charge, remember?) So provide a nice interim increase and let the employee know that, if his performance continues to be good, he can expect another in six more months at his annual review. Also, reaffirm your pleasure with his work and inform him of any shortcomings or areas in need of improvement.

* Formal Evaluation - This is the first of what should become an annual event, and it is here that you and the employee must decide what his current position, and his performance in it, means to the company. Both of you should record in writing your assessments of the employee's performance in specific areas, ranging from work quality to attendance, to interpersonal skills with coworkers, to career development objectives. Develop an evaluation form with a 1-to-5 scale for each category ("one" being poor, "five" being exceptional) and leave plenty of room for comments and constructive criticism.

Fill out the forms out separately, and set a date to trade them and discuss what each of you has come up with. Do this every year, and make it clear that nothing an employee writes on his evaluation will be held against him in any way. You want the truth - don't forget that, and don't punish people for providing it.

Following the foregoing steps, as well as doing plenty of "interim assessments," will open the lines of communication with your employees in ways you have only dreamed of, and there will be communication in both directions, which is the best part of all.

The question is: Do you care enough to put the system into practice?

We will look at a different facet of employee development, namely, establishing employee competency ratings, next month.