We judge ourselves by what we feel capable of doing, while others judge us by what we have already done.

Henry Wadsworth Longfellow

nnual reviews, or any performance appraisal, can be painful and nerve wracking for both the supervisor and employee. But, they don't have to be. They can be valuable tools for both parties and the company as a whole.

Reviews, when conducted correctly, create a more efficient business and make for happier and more productive workers. They can even foster a healthy supervisor/employee relationship of mutual trust and respect.

But, successful reviews don't simply happen. They require preparation beforehand and active listening and clear communication during. They also require trust, a mutual understanding of expectations and clearly defined and communicated goals. Following are seven tips to help both supervisors and employees make the most of employee reviews:

1. Be prepared

Both parties should arrive at the meeting prepared, have examples of accomplishments written down, be very clear about what was a success during the review period and areas that need improvement.

They then can compare lists to see if they are on the same page. This will help define objectives for the future and determine if they clearly understand the organization's goals and agree on how to achieve those goals.

2. Create a dialogue

Typically, employee reviews are rather one-sided. Many times they consist of a supervisor telling an employee what he thinks of his performance while the employee listens and offers little, if any, feedback.

In order for reviews to be more constructive and effective, both parties must actively participate. This could mean that both come with written questions or comments or that both complete a questionnaire prior to the meeting.

However you choose to proceed, it is imperative that both the supervisor and the employee have the opportunity to raise issues, present ideas and share views on past performance, including accomplishments and shortcomings. Both should ask questions.

This is the only way supervisors will learn what is happening in their employee's work and the only way employees will learn what they need to do to improve their performance.

3. Listen

Step two's "Create a dialogue," won't be very effective unless both parties listen. This means no interruptions from phone calls or other employees. Send calls to voice mail and turn off pagers. Make it obvious to the other party that you are actively listening by using your body language to show interest and nodding when appropriate.

4. Be open-minded

Reviews can be scary for both parties. Anytime someone is judging or being judged, the possibility of things becoming personal or someone becoming defensive is high. Keep an open mind. Be open to being wrong, or at least to understanding another perspective. Trust yourself, trust the other party and most importantly, trust the process.

5. Be specific

Again, performance reviews have a high risk of becoming personal. There is always the danger of a review being perceived as a personal attack or for subordinates to shut down because they feel attacked. It is extremely important to be specific. Focus on numbers, times, dates, sales figures, etc. so it is very clear whether an objective has been met, and there is no room for misinterpretation.

For example, rather than say, "You've made errors," cite specific dates and instances of mistakes. Instead of stating, "You do a good job," try to be more specific and list concrete tasks that were accomplished successfully and why they were deemed a success. Be sure to include instances when expectations were exceeded.

6. Stay on topic

Since this is a performance review, discuss only performance. Do not discuss salary raises or compensation until another meeting, as it can be distracting and diminish the review's success.

For example, if the superior indicates that he will inform the employee if he will receive a raise, the employee will be tempted to provide short answers, refrain from asking questions and agree with whatever is stated in an effort to keep the meeting as short as possible and learn whether he is receiving a raise. On the other hand, if employees learn at the beginning of the meeting that they are receiving a 3% raise, they may tune out the rest of the review because that is all they wanted to hear.

Therefore, before the meeting, preferably days before, make sure both parties understand that the meeting is for a performance review and not for offering any rewards or compensation changes.

7. Create a plan

End the meeting with a plan for the future, which includes specific, measurable objectives of what needs to be done, by whom and within what deadlines. If a plan is in place, when it is time for another review, both parties will be clear about what was expected. This preparation will hopefully make all future performance reviews easier; it will simply be a matter of measuring accomplishments against already communicated objectives.

Performance reviews don't have to be a painful drudgery conducted only because "you have to." If both parties are clear about the purpose and process, they can be excellent sources of motivation, support and brainstorming. During your next review ask questions and listen. Be open-minded and specific. You will reap more benefits from the process.