By Julie Sloane

(FORTUNE Small Business) – Positive Feedback

Employees and managers may have different levels of experience, but they worry about the same thing: "How can I do a better job?" To help you help them, we turned to Kathryn Lemaire, vice president at the Hay Group, a consultancy that helps organizations manage people. Performance reviews, she says, should not be a single, dreaded day at the end of the year, but an ongoing dialogue incorporated into the company's culture. Her advice:

--Employees constantly want to know where they stand in the company, and good managers should clue them in regularly. If someone is doing a good job, give him immediate, specific feedback that is genuine, rewarding, and motivating. If there is room to improve what he is currently doing, point out how to change and get better. Consistent and honest feedback in small doses throughout the year can alleviate the need for a highly charged annual review.

--Employers usually think they clearly articulate their goals to employees when, in fact, most don't. Sharing your targets and ambitions--and reinforcing those with regular meetings and dialogue--stacks the deck in favor of your employees' living up to expectations. Employees want to do the right thing, but can do so only if they know what the right thing is.

--Empathy is crucial when delivering not-so-pleasant feedback. People who feel forced to defend their self-esteem are less receptive. Focus on specific behavior and remember the goal is to reset direction, not to point out inadequacies.

--Set clear incentives for a job well done. It makes sense that stars should get significantly more than poor performers, but rarely does that actually happen.

Making Your Stars Shine Brighter

Searching for ways to help your top performers become stars? How to nurture your best and brightest.

1 Work the crowd Keep your "A" players stimulated and close to the action by rotating them through your most mission-critical departments. Jeffrey Fox, author of How to Become a Great Boss (Hyperion, $16.95), offers an example: "If sales is the heart and lung machine of the company, make sure your star earns his stripes in sales or he will never have credibility with that part of the organization." When top jobs open up, the stars will have a broad base of knowledge--and admirers.

2 Give them a stage Vijay Govindarajan of Dartmouth's Tuck School of Business suggests giving junior execs a pool of capital for small-scale experimentation. By handing over scarce funds, you're telling your future stars that you respect their ideas. Even if those ideas fail, you gain a window into how they think.

3 No surprises Find out if your stars even want a top job. CEOs often don't communicate their long-term goals for fear of creating overly inflated egos. That's not necessarily smart, says William C. Byham, consultant and co-author of Grow Your Own Leaders (Financial Times Prentice Hall, $29). If your protege's aspirations lie elsewhere, you could lose him unexpectedly. Honesty puts you both on the same page and tells the employee that you want to help him succeed on his terms. --Julie Sloane

insite Rewarding sites for your employees Reward a job well done with certificates to any of several hundred stores, restaurants, and hotels. Hundreds of free articles on a variety of personnel topics, including training and development, reward programs, and performance reviews. The American Society for Training and Development site has a buyers' guide to training products and consultants, and discussion communities on HR issues.