In the latest issue of The Wright Toolbox:

• Are You Getting the Most Out of Your Performance Reviews? – read now
• Mind Your State Registration – read now

Are You Getting the Most Out of Your Performance Reviews?

While for many the arrival of November means the beginning of the holiday season, for Human Resources professionals and management in many organizations, it means that performance review season has arrived.   Supervisors and managers are being sent forms to fill out for their subordinates with boxes to check rating them on a scale of one to ten, or one to five, or some range reflecting whether an employee is meeting, exceeding, or falling below expectations.  This process is so common as to be nearly universal and yet, it is nearly universally disliked and distrusted.  Nearly every study done over the past 15 years reflects that (1) managers and employees both distrust annual performance reviews and (2) annual performance reviews are not effective at improving employee performance.  How then, can companies improve their performance feedback process?

1. 1. Provide regular, timely feedback to employees.  One of the major drawbacks of the annual performance review is that it’s only done annually.  If an employee is under-performing all year round, why wait until the end of the year to say so?  Similarly, if an employee is doing a great job, providing regular feedback helps them stay motivated.
   2. Separate compensation reviews from performance reviews.  By separating compensation from the annual performance review, well-meaning supervisors are removed from the dilemma of over-rating an employee to ensure that they receive a compensation adjustment.  Allowing the supervisor to provide constructive feedback in a manner that focuses solely on the employee’s performance creates more honest feedback.
   3. Provide short-term and long-term goals for all employees.  When providing feedback, taking the time to prepare short- and long-term goals reinforces the purpose of performance reviews – improving employee performance.  For top performers, discussing advancement opportunities and the company’s plans for them reinforces that they have a future with the company.  For poor performers, providing concrete areas of improvement can assist you in either addressing issues or providing the support for later employment action.

If you have questions about how to effectively update your performance appraisal process, communicate changes to employees and ensure that they are being followed, please contact our Employment & Labor Law practice group.

Mind  Your State Registration

All companies that conduct business in Maryland, including corporations, limited liability companies, and non-profit organizations, must register their principal office location and the name and address of its Resident Agent with the Maryland State Department of Assessments and Taxation, commonly known as SDAT. The Resident Agent is authorized to accept service of a court summons on behalf of the company. The contact information must be promptly updated with SDAT if it changes at any time. This includes when a company relocates its principal office or if the Resident Agent retires, is no longer with the company, or is otherwise unable or unwilling to continue to serve as the Resident Agent in Maryland. If not updated, the information provided to SDAT will eventually go stale. Frequently, this occurs as the result of innocent oversights. Resident agents retire or move, or business ownership changes hands after the initial formation and subsequent owners or managers might not be aware of this requirement and inadvertently cause the registration information to become outdated. As a result, significant problems can arise for the company. In litigation, when the plaintiff names a business as a defendant, the plaintiff must serve the summons on the Resident Agent. If, however, the Resident Agent is no longer at the address registered with SDAT, then the plaintiff can serve process through alternative means. Similarly, if the principal office location is not correct, any papers mailed to the defendant would be sent to a stale address. A plaintiff would then be able to effectively serve a lawsuit on a corporate defendant, but the defendant may not even know of the lawsuit since it did not receive the summons directly. Ultimately, this puts the company at risk for a default judgment. A judgment entered by default is the most common result when the defendant does not take any action in response to a court summons. The court, in essence, awards the plaintiff money without the plaintiff having to put on evidence to prove its case. This means that the defendant lost the opportunity to offer evidence to challenge the plaintiff even in cases that lack merit. Default judgments are particularly problematic for a defendant when there might have been insurance available to pay the judgment. Most commercial general liability policies contain a provision that the insured must timely give notice of a claim and cooperate in the defense, so if a judgment is entered against the insured defendant by default, the insurer could potentially disclaim coverage because it did not receive notice of the claim. If you do not update your company’s principal office and Resident Agent’s name and address, you are putting your company at significant risk. To avoid this scenario, all companies that conduct business in Maryland, or are organized under Maryland law, should promptly review their contact information with SDAT at https://egov.maryland.gov/BusinessExpress/EntitySearch, and consult with corporate counsel to update their registration if any portion is in need of correction.

To browse past issues, visit The Wright Toolbox page.