Performance management is an integral component in a company's success. However, inconsistent standards in performance reviews result in unbalanced and subjective conclusions. Two-thirds of companies use performance reviews to determine pay increases, and almost half use them to calculate bonuses, according to a recent study by Hewitt Associates. Yet, few companies measure how well performance reviews are being carried out. Employees are also concerned about the ease of use and quality of performance measures, and they have a lot to lose.

Companies are now employing various methods to improve the process. One method is to administer "milestone" performance reviews, such as goal setting at the beginning of the year, evaluations at mid-year, and interview appraisals conducted at the end of the year. Review forms should have uniformity and thoroughness, and should also include a simple, standard scoring method, as opposed to a narrative form.

Experts also encourage checks and balances among senior management, human resources and employees. Senior management has the most impact in ensuring performance reviews are conducted correctly. Some managers are encouraged to compare each other's reviews for consistency. This enables managers to see glaring inconsistencies in their rating systems. Another useful form of performance evaluation is an upward evaluation, in which employees give feedback on their managers.

For managers to learn to give thorough and consistent evaluations, they must be trained on how to communicate their expectations to employees and how to apply the same standards to all subordinates. When communicating performance results to employees, managers need to be clear on terminology, ratings, goal setting, feedback, recordkeeping, and examples of employee performance.