If you want to motivate your employees, you give them a raise, right? Wrong. In fact, sometimes a raise can even de-motivate an employee.

One of the best ways to address these employee concerns is through a formal performance review. Carlson says dealers should keep these rules in mind when it comes to motivation and employee performance:“We all like to make money, but it is not the ‘be all and end all.’ If an employee doesn’t feel they have a good work environment, they can’t advance, or their ideas are not appreciated, then giving them a raise is not going to make them a better employee,” says Kathryn Carlson, director for KPA, a software and consulting company for automotive, truck and equipment dealerships and service companies.

• Accurate performance review + pay increase=motivation
• Accurate performance review + no pay increase=motivation

“If you’re in a stringent budget mode and can’t give a pay increase, don’t let that stop you from doing a performance review. It’s one of the best ways to let employees know what they do matters and that you value them,” she says.

The other issue related to performance reviews is that dealers hate doing them.

“As a manager, you’re not looking forward to it because you are judging people and that’s an uncomfortable place to be,” Carlson says. “None of us look forward to the meeting. Both managers and employees go in with apprehension, but if you plan and set an agenda, that’s going to reduce a lot of anxiety.”

Kathryn Carlson is HR management products director for KPA, a software and consulting company for automotive, truck and equipment dealerships and service companies.

Define and Prepare

Carlson says dealers should follow these steps to encourage better employee performance and to set the groundwork for an accurate performance review: Define, prepare — and prepare some more. First, define the job.

“If you don’t have a clear job description, it’s almost impossible to effectively evaluate someone because it becomes subjective, not objective.”

Carlson says a good job description has these components:

• The purpose for the job is defined.
• Goals for the job are set, with measurable outcomes.
• Priorities are set for each responsibility and goal.
• Performance standards are set for each responsibility.

Carlson says to think of job descriptions as living documents. They evolve as the employee’s skills evolve. However, they do help define how you expect them to complete the job on a daily basis and sets overall levels of competency, whether it’s in the service department, in the administration office or on the sales floor.

The next step, the preparation phase, involves ongoing discussions with employees. Carlson says dealers should plan to hold quarterly performance meetings. These can be more informal than the annual meeting, but should address how the employee is completing tasks and working toward goals. This is a time for both praise and recommendations for improvement.

Carlson says if an employee is not performing the way they should, then it’s up to the manager to help them improve. “In my 27 years of working with managers, I’ve never seen an employee issue spontaneously resolve itself.”Carlson’s advice regarding praise: “Praise is helpful if it’s specific. Walking through the shop floor and saying ‘good job’ is not that the same as saying ‘You did a great job with that particular customer’ or ‘That was a wonderful way to think about how to manage workflow.’ Receiving non-specific praise doesn’t increase engagement. In the same way, throwing a 3% raise at somebody makes them feel like ‘You gave me the raise because that was what you were supposed to do.’”

She also offers this advice: “Praise can be public. Criticism should be private.”

Dealers should keep notes from these meetings as well as from all performance-related conversations. Even a “sticky note” kept in the person’s file can help capture details managers will need later.

Finally, dealers should do more comprehensive planning once a year for the official performance review. The performance review form doesn’t have to be complicated. It can be a one-line sentence about the goal, the measurement and comments. For measurement, Carlson advises something like a 5-tier rating system, with level 1 indicating the employee failed to meet the goal and level 5 meaning the employee exceeded the goal. The comment section should include a space for the employee to include their comments as well.

Consider asking employees to do a self-evaluation ahead of the meeting. Have them list two or three things they’ve done well and another two or three things they need to improve upon. This evaluation helps the manager and the employee set goals for the coming year. The goals should be short-term, such as two things that can be accomplished in the next 90 days and two goals that should be accomplished by year’s end.

Don’t be afraid to document if the employee’s performance is not what it should be.

“Turn it into a learning experience. If the employee had a poor performance, establish an improvement plan, set measureable goals for turning things around and state consequences if those goals aren’t met.

“A well-done performance appraisal and appropriate disciplinary actions protects the employer. It’s also ethical and fair,” she says.

Don’t make the meeting all about forms and measurements. Carlson says a good way to kick off the meeting is to let the employee talk first.

“Let them set the tone of the meeting. Let the employee state up front what their goals are. It’s a discussion, but you are still controlling the conversation,” she says. “Employees should walk out of the meeting with clear expectations for success at your company. You, as a manager, should walk out of the meeting with a clear idea of the employee’s goals as well as their improvement areas, so you can help them achieve those goals,” says Carlson.

Keep Focus on Performance

Carlson says it’s best if the review does not happen in the manager’s office. Choose a neutral space in the office or a quiet place to talk outside the office. If the performance review form is long, you may want to let them see the performance document a day before the meeting.

Carlson also recommends that merit raise discussions happen separately from the performance review.

“If the employee knows that the appraisal will end with a merit increase, they tend to focus less on the performance review because everyone wants to get to that number. Some say to give the raise at the start of the review, but then you have employees spending the rest of the review figuring out what the raise means to their net paycheck,” Carson says. “Separate the discussion by a week, month or longer so the person is focused on what areas of performance  they need to improve on instead of what their raise is going to be.”

Worth Your Time

Carlson says dealers or managers should plan to spend about 2 ½ hours per quarter and another 2 ½ hours on the annual review per employee. The returns are well worth your time investment.

“What else can you do in 2 ½ hours that will improve your bottom line more than helping each employee be more productive?”