Q: Workplace literature tells me that feedback on performance is important to employees. Managers in my company hate to do performance reviews because most employees expect a raise afterwards. How do you get around this?

A: Your question draws attention to one of the most powerful and often misunderstood levers that a leader has to influence business outcomes: giving employees feedback on their performance so that they can improve, grow in their roles and become more valuable to your business. The problem you pose is a complex issue that has at least three related elements embedded in it: the compensation system and employees’ understanding of how it works; conversations with employees around their performance and results in their current job; and discussions focused on assessment, feedback and employee development. At the core, however, is the fact that employees need an understanding of how they are doing on their jobs.

In terms of communication and assumptions, the most straightforward piece of the puzzle is how you handle the concern about raises. If you plan for and communicate regular, periodic (normally once a year) salary adjustments, the persistent question of “When will I get a raise?” will disappear. The more openly you communicate how the compensation system works, the less employees are apt to question its fairness, and the more likely all parties that administer it will understand it and work within the desired framework. For example, if employees expect a cost of living increase at a set percentage or range of their current salary, there are few surprises in the salary review process.

This review is commonly accompanied by a performance review that focuses on individual goals, outcomes and results. If individual performance goals are established at the beginning of the performance period, the review becomes a discussion of whether and to what degree the employee achieved the established goals. Many companies have found that through incentive compensation they can reward employees who have achieved their performance goals. Further, the more closely an individual’s goals can be connected to an organization’s performance goals, the more significant they become to the employee. The most important message, however, is how the employee is doing in relation to goals and expectations. This conversation is an important part of the communication flow that creates a relationship between the employee and the employer.

The third element, an ongoing focus on employee development, is the untapped opportunity that many organizations fail to realize. If year-end salary reviews are to be valuable in achieving desired business outcomes, they should hold no surprises. Ideally these meetings are supported by regular informal conversations between employees and those who supervise their work. These discussions would be wide ranging, including how things are going with current assignments, individual strengths and developmental needs, interests and goals, opportunities for new challenges and learning, and long-term career goals and how to achieve them.

This reflects the powerful and changing role of those who manage the work of others: they have become facilitators supporting the success of those who report to them rather than overseers demanding adherence to performance standards. To achieve the kinds of results that today’s businesses require, the manager needs the tools to tap into the discretionary effort that each employee brings to work daily, and creating a good performance feedback loop is one of the most powerful.