When Valerie Gilani recently conducted a performance evaluation of a staff member, she found the employee’s self-evaluation disappointing. But not surprising.

The staffer had been doing a reasonably good job, but she had given herself excellent marks on virtually all aspects of her performance. That happens a lot, Gilani says, and it’s one reason performance evaluations can be tense, confrontational experiences.

“People tend to have a glorified opinion of themselves,” explains Gilani, the billing manager for New York University Medical Center’s orthopedic surgery group. “They typically rate themselves higher than I rate them, and then I have to bring them down to earth. People can become very defensive.”

The annual performance review process is an indispensable tool for managing any business, including medical practices. But it can also be the most dreaded aspect of a manager’s job — especially when the performance of the employee under review is not as good as it could or should be.

“It certainly is a chore that people find unpleasant to do,” says Kenneth Hertz, a senior consultant with the Medical Group Management Association and the former manager of a medical practice in Alexandria, La. “It’s a very unpleasant, unsavory sort of task — probably second only to terminating people.”

Jim Needham, CEO of Coastal Orthopedics & Sports Medicine of Southwest Florida, a Bradenton practice with 110 employees, says many medical practice managers are ill-equipped to conduct effective performance reviews due to their lack of managerial training. “It’s because so many managers in practices are individuals who have worked their way up the ladder. They’re untrained in this,” he says.

Needham says he too often sees employees overrating their performances. “I find the underachievers tend to overrate themselves, and the best employees underrate themselves,” he observes.

But while evaluations are rarely fun, they need not be torture. When you do them right, the process can actually be rewarding — for you and your staff. Here’s how to avoid some of the most common errors managers make when reviewing employees, along with some tips for making the process fair and valuable.

The big mistakes

Experts say employers often compound the unpleasantness of a performance review by being too vague, straying too far from the staffer’s job description, or evaluating one aspect of an employee’s performance to the exclusion of others.

Procrastination is another common mistake. “If the employee has to come to you and say, ‘Umm, weren’t you supposed to evaluate me?’ that’s wrong,” says Hertz.

James Neal Jr., an author and expert on performance appraisals who consults with large companies on developing effective employee-review programs, says he sees many managers who inflate employee ratings or pull their punches during reviews in an effort to avoid confrontation. Others make a general rule of giving everyone middle-of-the-road reviews. Still others, Neal says, are unfairly negative. All are methods managers use to make their own lives easier. In the long run, these approaches backfire, driving away their better employees and turning their offices into havens for underachievers.

To avoid these mistakes, Neal advises guarding against the common trap of allowing an employee’s personality to cloud your judgment of him. Managers can be overly negative about an employee who, for one reason or another, just rubs them the wrong way. Or, if they personally like an employee, they may inflate her evaluation. The latter is a common phenomenon in medical practices, and one that physicians in particular seem prone to.

That’s why practice management consultant Judy Capko advises physicians not to conduct the reviews of any nonclinical employee who doesn’t report directly to them. “Physicians tend to have their favorites,” says Capko, president of Capko & Co. in Thousand Oaks, Calif.

But the biggest mistake you can make with performance reviews is skipping them altogether.