Performance Appraisals

PERFORMANCE APPRAISALS

Thursday, July 12, 2001

You can read the complete transcript of this workshop.

The Association of Accounting Administration hosted the third of many AAAnswers.now Live sessions on Thursday, July 12, 2001. The session was held in the AccountingWEB Workshop room and was open to the public.

The topic was Performance Appraisals. You've asked the question, "What's the Purpose of a Performance Appraisal?" and probably received a dozen or so different replies. This session touched on the when, how often, and who conducts concepts but will spend the majority of time on the process of performance appraisals.

Mike Chapman, Director of Administration for Wolf Etter & Co. in Mankato, MN has been involved with management and human resources management since 1969 including more than a dozen years with a CPA firm. His definition of a performance appraisal is a tool to enable each person to more fully understand his or her strengths and weaknesses as evidenced in past reporting periods. To further capitalize on the strengths and set goals to correct areas of weakness and/or technical insufficiency.

Getting advice from others who have been there and worked through the process is invaluable. Also, checklists, communications and planning are critical factors for the professional administrator in this process. Using these tools to implement and/or enhance current systems will streamline your process and add to its effectiveness.

Mike carries a B.S. and MBA in Business and has spoken to dozens of local and national audiences on this topic. His role as a past president and a founder of the Minn-Dak Chapter of AAA and responsibilities on the National Board of AAA for the past six years have enabled networking and sharing of information on this topic among many. Mike currently serves as Immediate Past President of AAA.

Joining Mike was nationally recognized consultant, Don Scholl of D.B. Scholl, Inc. Don brings over thirty-four years of experience to AAA and serves the association as an Advisory Board Member. He has designed many development programs for CPAs including Management For Results (MFR), Discussion Leader Workshop and Strategic Planning for CPA Firms. Over the years he has served the AICPA, state societies, firm associations and many local, regional, and national firms as discussion leader, lecturer and advisor. Don is co-founder and past president of the Association for Accounting Administration and was named one of the "The 100 Most Influential People in Accounting" by Accounting Today magazine.

Workshop Transcript

Gail Perry: Welcome, and thanks for joining us today! Mike Chapman and Don Scholl are going to discuss performance appraisals. Mike Chapman is Director of Administration for Wolf Etter & Co. in Mankato, MN and has been involved with management and human resources management since 1969 including more than a dozen years with a CPA firm

Don Scholl is a nationally recognized consultant with the firm of D. B. Scholl, Inc.

Welcome gentlemen!

Donald B. Scholl: Good afternoon, ladies and gentleman

Mike Chapman: The main emphasis of the workshop will be on what is the process of the performance appraisal. We will touch on these very briefly: purpose of performance appraisal, when do they start, how often are they conducted and who is to conduct them. The purpose of a performance appraisal is to enable each person to more fully understand his or her own strengths and weaknesses as evidenced in the past reporting period. It is also to further capitalize on the strengths and set goals in motion to correct areas of weakness or technical insufficiency. The actual performance appraisal process should start immediately following the incumbent's last performance review.

As far as timing, there is no perfect answer. Each company, and ideally, each supervisor therein, should establish time parameters which will most closely respond to the needed internal situation. No review should go beyond a year; but there are many who feel that evaluations should be conducted following each engagement. The real merits lie in the process and the communication.

Who should conduct them? Ideally, the person who is accountable for the person's assignments, follow-up and work direction. But only after having sought out documentation and/or feedback by any other supervisory level staff that may be also directing work to the person.

Donald B. Scholl: I'd suggest that there are two different types of evaluation, Annual appraisals and engagement reviews. Both are important in providing guidance to staff members

Mike Chapman: Let's get into the actual process. As Don indicated, there are several types of performance reviews. For now, let's initially concentrate on the annual performance evaluation.

Mike Chapman: Process. As stated earlier, the process should actually have its beginning at the conclusion of the last performance appraisal wherein there should be appropriate documentation for the employee as to his or her goals and objectives that are being set forth for the next reporting period. So as you begin the process, you should have last year's goals and objectives in front of you as well as having had an opportunity to discuss the incumbent's performance with any other supervisory level person who may or may not have had a chance to direct work to this individual. This will enable you, the supervisor, to gain a more realistic analysis of that individual's performance, especially if you can see it through the eyes of several other people. In so doing, you will have a more objective set of factors to relay to the individual employee.

Once done, it is your responsibility to set the time and the place for the performance evaluation to be conducted. The employee has a right to know what is expected of him/her as well as having time to prepare themselves for this evaluation session. It has been my experience and practice to set the wheels in motion at the performance review by having the employee share his or her own experiences as to how they felt that their performance had actually been over the past several months and year. Depending on the discourse, it behooves me to steer it toward the actual goals and objectives that were set up during the last evaluation meeting. This sets the tone for the employee to know from whence you are coming and what indeed you are holding them accountable for. Hopefully those objectives and goals have been well documented and set out so that they can be in most cases quantifiable. However, we all know that there are areas that will be qualitative/subjective in nature and this will

Without a clear cut road map from which the employee would have had his or her marching orders from the last review, the evaluation process leaves much room for differences of opinion as to exactly what the individual's job expectations were over the past reporting period. Likewise, as you proceed through this evaluation program process and identifying the goals and timetables and objectives that were set at the last evaluation session, it behooves you to then take the position of documenting in a very clear and concise manner what the anticipated areas of growth potential are for the next reporting period. These goals should highlight these areas where the employee has been deficient in the last reporting period as well as areas that you are expecting this person to undertake as new ventures and areas of growth. Objectives and goals need not be negative in nature in fact should be quite the contrary quite positive to show your faith and support and commitment to that employee.

Should there be areas of negative discourse, it is wise to always leave the performance appraisal process on a positive note sharing with them the confidence that you have in them to overcome these areas and become that team player for the department and/or organization.

Don, how about if we open it for questions to the many members that are joining us.

Donald B. Scholl: You MUST separate these issues. The review discussion should have some bearing on your compensation decision and if the dollars are going to be discussed then, then not much else gets listened to! The employee help set expectations at the start of the year.

Laura Bardey: How do you feel about separating the performance review from the discussion about salary?

Mike Chapman: To add to Don's comment, I would highly suggest also that these be separated. The majority of your performance review ought to be discussing past performance and future objectives and goals. It would be inappropriate at the time of an open dialogue as you discuss performance over the last 12 months and are attempting to get the employee's point of view to have a pre-determined salary figure. The salary discussion ought to take place once you have had an opportunity to mutually agree on past performance as well as now being able to discuss that salary in relation to both your internal equity position as well as external competitiveness.

Mike Heines: How is it possible to guide individuals who are submitting evaluation data to think about giving thought to areas of growth for the individual as well as goals that can be mutually determined?

Donald B. Scholl: If you get into a MBO style evaluation system you will need to have

Mike Chapman: 6. The best form of performance review in my experience is built around management by objectives (MBO). In this type of system, the employee and his/her superior agree on responsibilities and targets at the start of the annual cycle and then measure performance against those expectations. There is little room for surprise when they sit down for the final review meeting at the end of the year.

Don, are you aware of any sources that our participants can go to for help as far as forms and the like.

Donald B. Scholl: Linda, please give them my first cut and paste reference

Mike Chapman: Source: AICPA MAP Handbook, Section 307. Good material including forms, on annual performance review and engagement reviews. Of particular interest is the Knowledge and Skill Form on page 35 which provides a vehicle for discussing the "soft skills".

Donald B. Scholl: Now, please give them my fifth item

Mike Chapman: I am willing to mail you a sample set of materials of the MBO approach to performance evaluation and review if you will send me a request with your mailing address.

Mike Heines: Great!! What's your e-mail address?

Laura Bardey: What are the most common mistakes you see CPA firms commit regarding performance evaluations?

Donald B. Scholl: Laura: Too often the evaluation is a white-wash of the employees real performance. We need to tell them the truth so they know where they really stand in their career.

Mike Chapman: Laura, too often we rely too much on the most recent past in doing a performance evaluation. We must rely on the fact that these are annual evaluations taking into consideration the entire 12 month period. It is also mandatory to evaluate the performance on a set of goals and objectives as both Don and I alluded to earlier so that these do not become, as Don points out, a white-wash. The employees need to hear the truth if they are to grow and if you have any intention of seeing them succeed.

Donald B. Scholl: Mike: My e-mail address is DON@DBSCHOLL.COM

Mike Heines: Thank You!!

Donald B. Scholl: Engagement evaluations are the method for advising staff about the successes and shortcomings they accomplished in the SHORT term while the performance appraisal looks at overall career progress and future potentials.
Mike Chapman: Don, I am going to have available all of our documents that we use for performance evaluations should any of the participants wish a copy. If so, I would ask that they please e-mail me at mchapman@wolfetter.com

Mike Heines: All too often, during the evaluation process, I see comments such as "reliable & cooperative", "show more initiative", which in the end leaves for a very unimaginative review. What materials are available to retrain individual evaluators as to what should be considered during an annual review?

Mike Chapman: Mike, it is my opinion that the evaluators need to be trained in unison within your organization so that all members are coming at the process from the same vantage point. If as Don pointed out earlier you use an objective setting that is more objective than subjective, you should be able to avoid the nebulous responses and keep the discussion going in a very positive and directed way.

Donald B. Scholl: evaluation and review information must be in writing. a copy goes to the employee and a copy goes into their personnel file. We are building a record of their progress and ability to meet management's expectations. - Mike H. Evaluators should be carefully chosen for their skill in handling this type of communication. No all owners and managers are so equipped. Then you should have specific training for those chosen few so they handle this critical process in the most productive fashion.

Mike Chapman: Relative to performance and career goals, I have developed a manpower planning and career assessment document that I would be more than willing to share with the participants. It highlights human resource development strategies, how to develop individual-specific programs to meet their needs, a flow chart, as well as the need to implement the process.

Dave: A number of our employees continue to narrow the responsibilities they wish to assume. To limit their work to issues with which they are comfortable. They aren't expecting to be owners in the Firm, they just want to work a comfortable day. If we are not desiring to let them go, do you have suggestions for us to show them that they are creating pressure in the Firm for others to assume responsibilities they are unwilling to expand in to?

Mike Heines: I know I'm gonna hate myself in the morning because I'm going to review the transcript with the MP. But you've just opened a door that really has to be handled in a tactful manner, since all partners, managers and firm administrator are required to submit evals.

Donald B. Scholl: Mike H. Good luck! Call me if you need help in explaining your way out of trouble (610) 431-1301

Donald B. Scholl: Mike C.: At what point during the year does your firm do it's annual evaluations?

Mike Chapman: Don, we start our performance process in May with all of the shareholders getting together to have what we term "a staff analysis". At this time, we evaluate all staff itemizing the strengths, weaknesses, anticipated goals and suggested CPE. This process allows all the shareholders to give input into how they have perceived and/or shared in the employees work performance over the past year. It is only after this meeting and I have gotten a summary out to all shareholders that they then in turn conduct the actual performance evaluation with the employee. This actual performance evaluation is done in latter May.

Mike Heines: Thanks!! :)

Mike Chapman: Mike H. Relative to your staff not wanting to work all of the areas that are traditionally seen in the accounting world, I believe it behooves us to look at the generation x's and generation y's in a different light. These are all good staff with good technical skills to bring to our firm. We have to take the position of evaluating exactly what competencies they do have and see how we can work them into our organization. I believe we need to be flexible and be somewhat accommodating as long as we do the same with all employees and don't "dump" on the older staff that are used to doing everything.

Mike Heines: Is your "staff analysis" a face to face or the summary of written documentation?

Mike Chapman: The staff analysis is the shareholders meeting in a room with me at the flip chart. The employee is not there at this time. It is from this meeting that the shareholder has the initial materials for which to sit down with the employee. Remember, there is also last year's goals and objectives as well as a self-evaluation which the employee may be completing.

Donald B. Scholl: Are there any other questions?

Roberta Salas: I would like to see a copy of the form you use for the employee self-evaluation. Could I get a copy?

Mike Chapman: Yes, please send me your e-mail address.

Donald B. Scholl: Roberta: You will also find self evaluation forms in the MAP Handbook, Section 307

Mike Heines: So, Employee first fills out self eval, group gets together in a face-to-face, with prior year goals and the self eval and as a group determine suggestions as to direction and goals that the employees will be encouraged to take?
Mike Chapman: Yes. But remember Mike H., these evaluations should be a "dialogue" and a comfortable two-way discussion not cramming something down their throats.

Laura Bardey: Mike, how many shareholders and total staff do you have in your firm?

Mike Chapman: At the present time, we have 15 shareholders and approximately 100 staff.

Mike Heines: I agree. Our attitude is that if a person does not want to do something, no amount of pressure is going to make it happen.

Laura Bardey: During the staff analysis, do you talk about every staff person?
Mike Chapman: Laura, basically we discuss all non-admin staff.

Donald B. Scholl: Mike H. Correct. Therefore, the goal setting must be a cooperative venture and the two parties must agree on the appropriateness of the responsibilities and targets being set for the next year.

Mike Heines: Which goes back to the beginning and establishing MBO.

Mike Chapman: Yes, that's correct.

Donald B. Scholl: Mike H. Yes, the expectations are set at the start of the annual cycle and results are measured against those statements at the end of the year.

Mike Heines: Great, now all I have to do is convince the partners!

Mike Chapman: Relative to MBO's, these can be expanded into "incentive compensation plans" and a more realistic tracking and ultimate compensation determination can be made if done properly. However, this is a new "territory" for CPA firms and is very difficult to "sell".

Gail Perry: Our time is up - are there any other quick questions before we disband?

Mike Chapman: Thanks to all the participants and let me know if you have any particular questions. My e-mail has been stated above.

Gail Perry: FYI, the transcript of this workshop will be available on the AccountingWEB site on Friday morning, and it will also be available on the AAA site next Monday.

Mike Chapman: Thanks, Gail.

Mike Heines: Thanks Don & Mike very informative!!

Gail Perry: Our pleasure!

Donald B. Scholl: I appreciate you all attending this session. I might even attempt this again.


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