As general manager of Harrell Remodeling, in Mountain View, Calif., Ciro Giammona is responsible for the growth and productivity of more than 40 employees at the award-winning design/build company.

One of the most effective tools that Giammona uses to guide his team is an annual performance review. Many small-business owners avoid this common task due to the potential for disagreements or other conflicts, but Giammona and the Harrell management team embrace it because they know this face-to-face conversation is the most effective way to discuss the good, the bad, and the ugly, while developing a plan for ongoing improvement.

Giammona shares six guidelines that are essential to the process:

1. Ask for input from all others who work directly with the employee being evaluated. Harrell Remodeling uses a 360-degree review form. “This helps you get well-rounded input,” Giammona says. “I may not work directly with the employee, so I won't know enough about his or her performance. I need to get this in-depth information from the people he or she actually works with.”

2. Ask the employee to complete the review form as well. “When I see that the person in question is giving themselves grades that do not match the others, then I know there is a disconnect somewhere that needs to be discussed,” Giammona says.

3. Hold the review meeting offsite.

“We typically hold our meetings at lunch at a restaurant,” he says, “because we want to convey that this is a special time, a celebration. Plus, there are no interruptions. On the other hand, if it's going to be a tough interview and emotions may be running high, being in a public place can keep that in check.”

4. Start by putting the employee at ease with light conversation. And if there are no significantly tough issues to discuss, let the employee know at the beginning of the process. “Some people are terrified of the annual review, so if they only have minor areas for improvement, letting them know this right away takes away a lot of the tension.”

5. Prepare them for bad news, too. During the review process, Giammona shares all of the comments gathered through the 360s. “Some of them may not be terribly tactful, but the employee needs to know how the others feel,” he says. “So we prepare them up front for the tough stuff before I read those comments.

6. Create a plan for the next period with solid, measurable goals. “We write up a summary of our discussion as well as the goals, and the employee receives a copy of this document,” Giammona says, “then we use this summary as a starting point in our next review. It's a fantastic tool.” — Victoria Downing is president of Remodelers Advantage, a national consulting firm specializing in the challenges of running a remodeling company, and home of Remodelers Advantage Roundtables. 301.490.5620;