(FORTUNE Magazine) – Let's be frank: Most managers hate conducting performance appraisals. If they think they can get away with it, they will skip such potential unpleasantness entirely. If compelled to go through the exercise, they tend to do so with bad grace, confusing the poor appraisee by mixing a kind of phony solicitousness with a candor that gives new meaning to the term ''brutal.'' So before even suggesting that there may be a better way, it behooves us to consider the reasons managers typically cite for giving appraisal short shrift. --''It takes too much time.'' Ah yes, particularly if you lump it all into one big everybody's-gotta-get-it-in-October wipeout to your already busy schedule. But suppose, just suppose, that someone could show you a system that would not only avoid the jam-up, but also save some of the many hours you now spend bitching to lunch companions or spouse about this or that subordinate? --''The form they make us fill out is no good.'' Nobody's form is all that good. Says Robert E. Lefton, president of Psychological Associates, a St. Louis consulting firm: ''We have the performance review forms of over 300 of the FORTUNE 500 companies, including GE, IBM, and 3M. We have yet to find the perfect form.'' --''Who am I to judge?'' You're the manager, that's who. Besides, when it comes time to hand out promotions or raises, your people will be judged anyway. Why not be aboveboard about it? --''Nobody does it to me.'' Don't you wish someone would? --''It's so painful. People get angry, or they cry.'' The way most managers conduct appraisals, of course it's painful, and not just for them. The managerial art consists of making a performance review something more than just giving and getting bad news. If you need further incentives, look at the downside, and the up. In these litigious times, the protection afforded by equal opportunity regulations extends to what is probably a surprising proportion of your subordinates. Namely, all the members of minority groups, all the women, and everyone over, say, 40. If you fire one of these protected people or promote someone else into a job he or she coveted, and if he or she then drags you into court alleging discrimination, you can find yourself in a mucho uncomfortable position if you have no written record of appraisals, or, worse yet, a record inconsistent with the action you have taken. On the upside: Enlightened bosses see in performance evaluations perhaps the best opportunity they have to communicate to a subordinate precisely what the organization wants him to do. Marty Jaecksch, who teaches the skills used in appraisal to his fellow Weyerhaeuser managers, puts the matter even more emphatically: ''If you want to talk about a point where a manager can exert leverage on an employee, this is it.'' To realize the full managerial potential, you may have to radically revise your notion of appraisal. For starters, the experts say, you should think of it not as an event, but as a process that goes on year-round. The process consists as much of coaching and counseling as it does of evaluation. And to work, it must be a two-way exercise, with you listening as much as you talk. The process begins with what the experts call goal-setting, a term tiresomely familiar to anyone who has ever brushed up against management by objectives. The two of you agree on what he should be working toward this year (his goals), the standards by which he will be measured (the yardstick), and what constitutes superior performance (where above and beyond the call of duty commences). To avoid beginning- or end-of-year pileup, consider timing this initial session to coincide more or less with the anniversary of his hiring date. Give him some time beforehand to think about what he hopes to get out of another year on the job, and you do your homework too. What will the organization require of him? Anything new or different? How did he do last year? What areas of performance does he particularly need to apply himself to? When the two of you sit down, briefly review the purpose of the session, and then find out what he has brought to the table. While it may take all your self-control, resist the managerial temptation to wade in after 20 seconds to give him the benefit of your views. Instead, draw him out with friendly nods and open-ended questions. Bonus revelation: Most people are interested in their careers, and in talking about those careers. Harness this energy to help you set the agenda for the session and for the year. GO OVER THE FORM, if any, that you will use to rate him. If your organization has had the bad sense to stick you with a so-called trait-rating scale -- you grade him on such qualities as initiative and judgment -- try to relate these murky measures to more concrete goals. Use numbers and dates to the extent that you can, but also leave room for evaluation of his behavior -- how he goes about the job, spelled out as concretely as possible. For example, does he scream at people? Make sure he understands what your appraisal will be used for: to help determine his pay, or to figure out who gets a promotion -- or the ax if the company cuts back. Finally, sketch out with him a rough plan for achieving his objectives, noting specifically what you and the company will provide him by way of help. Off he goes to climb every mountain. Your job now, this being a process and not an event, is to keep an eye on him, adjust his goals to fit unforeseen circumstances, and, most important, tell him how he's doing at key points along the way. What you need to be able to do is to see and describe your subordinate's behavior in an almost cinematic way, unclouded by emotion or interpretation. Not ''You showed a bad attitude,'' or even ''You got angry,'' but rather ''You threw down your papers, called me an S.O.B., and walked out of the meeting.'' Put that way, can he dispute your account of what happened? When you witness a critical incident, good or bad, raise it with your subordinate right then, or as soon as everybody calms down. Ask for his explanation. If necessary, gather information from others. When you two know enough to arrive at a version you can agree on, make clear to him how that ^ particular behavior helped or hurt his pursuit of his objectives. Be prepared to respond to the question: ''What should I do to improve?'' Then jot down a brief memo, maybe only a paragraph, summarizing your discussion. Give him a copy, and put one in the file you keep on his performance. THE EXPERTS STRESS one point here: Look for ways to catch your employee doing something right. Triumphs that you analyze together will probably do more to elicit exemplary behavior than any number of dings for screwing up. Karen Dowd of the University of Virginia's Darden School of Business suggests you may even want to have each subordinate keep a ''hero file''on himself, bringing to your attention achievements you might otherwise miss. Yes, keeping track of critical incidents does take more time than looking the other way. But it will save you time, and anguish, when the annual wrap-up comes around. In particular, it will spare you bitter, and justified, complaints along the lines of ''If you felt that way about it, why didn't you tell me so at the time, when it might have done more good?'' Best of all, your subordinate may actually learn to do his job better, which, among other benefits, may save everybody time and trouble, including your long-suffering lunch companions. If you have painted by the experts' numbers so far, the appraisal should entail no surprises. You both prepare by reviewing the critical incident file and his hero file. You then get together somewhere you can be sure of not being overheard. You review the purpose of the confab, then ask him how he thinks the year went in terms of the goals you set together. When he has laid it all out, you can proceed to identify areas of agreement or disagreement. But now you're dealing off his deck. This, and the presence on the table of all those critical incident memos that you have already agreed on, does wonders to forestall angry protests like ''I had no idea. . .'' or ''But it didn't happen that way.'' You do have to go over the points you disagree on. Don't try to hurry the discussion to a close by volunteering advice. The object is to get him to ask for your counsel. Talk with him to figure out steps he can take to improve. On this and all other highly charged issues, ask him to play back what he thinks he has heard. Though you may be dying to know, do not ask, ''Well, what do you think of us?'' As Professor Joseph Weintraub of Babson College warns, he just might tell you. Instead ask, ''How can we help you more?'' Toward the end of the session, review his appeal rights. He should have some, in the unlikely case that you are wildly biased or totally oblivious of what's really going on. Remind him that you will discuss his compensation another time. The experts agree that if you try to talk appraisal and dollars on the same occasion, all he will be able to think about is, ''What does this mean in terms of money?'' Then try to fix your respective gazes firmly on the year to come. Finally, as he prepares to leave, offer to shake his hand. If you have done the job right, he will take you up on it.