IN THESE topsy-turvy times, you might be inclined to skip your company’s midyear review, dismissing performances as invalidated or skewed by the volatile economic climate. But doing so would ignore valuable information about your staff and could set your firm back even further.

Gauging your company’s performance and recognizing employee achievements on a regular basis is always vital, says Bhaskar Chakravorti, a partner at management consulting firm McKinsey & Company in Boston. “Ideally, what you would want to do is have some kind of standing review process,” says Chakravorti, who is also a senior lecturer of business administration at the Harvard Business School. But when managers and owners get distracted by company woes, finding time to conduct such a review can be difficult, he says.

Still, “putting off a workplace process that could keep people engaged and motivated -- especially during a recession -- is a mistake,” says Kathryn Kerge, the president of Kerge Consulting, a human resources strategy firm in New York.

Here’s how to approach a midyear review during a downturn:

Share company assessments

With the unemployment rate hovering near 10%, it’s not surprising that many employees are worried about their jobs, says Jeanie Adkins, a principal at Mercer, a human resources consulting firm in New York. To allay employees’ fears, talk with them honestly about what is going on with the business, she says.

Also, provide a realistic assessment of the market in which you’re operating, Chakravorti says. Through an internal review and speaking with customers, identify opportunities to pursue new projects and cut off those that aren’t panning out, he says. Although it’s OK to offer plans for countering weaknesses, don’t sugar-coat your situation. Communicate your findings (good and bad) in a matter-of-fact way so that employees know you’re being forthright and honest, Chakravorti says.

Acknowledge achievements

While you’re in the mood for sharing, take some time to point out employee performances, as well, says Kerge, the HR consultant in New York. For employees who receive stellar reviews, reward them with bonuses or paid time off. However, if cash is tight now but you’re expecting that to change in the near future, consider deferring bonuses or profit-sharing programs, she says.

If this year has been particularly damaging to your company’s bottom line, it’s important at least to acknowledge employees’ hard work, Kerge says. Provide small-dollar gift certificates, allow improved access to company leaders or reshuffle work assignments so that the top performers take on more active or preferred roles. In addition, highlight the work of those top performers, says Adkins. “Focusing on how they did what they did, gives others an idea of what to do better,” she says.

Offer feedback

In addition to lavishing praise on top employees, workers who are underperforming deserve to know how they missed the mark, says Burton Goldfield, CEO of TriNet, a human resources outsourcing firm in San Leandro, Calif. “You owe them a conversation to say: ‘Look we’re in a tough economy, and I need you to push harder,’” he says.

Offer advice on how these employees can better help the company achieve its goals. Keep in mind that such critiques should account for potential job changes, Adkins says. “Employers have been giving workers greater responsibilities, all while raising the bar on performance,” she says. “When you are expecting more from employees it’s even more important to give them feedback on what they are doing and what they can do better.”

Ask for help

While you’re reviewing employees, don’t forget to tap them for advice as well, says Christopher J. Collins, an associate professor of human-resource studies at Cornell University in Ithaca, N.Y. Unlike managers and owners who tend to have a higher-level view of the company’s operations, employees often maintain a more intimate knowledge of specific areas of the business. If there’s waste or slack in the system, they typically know where it is, Collins says. They can also offer suggestions on how to tighten up, he says.

Wendy Goldstein, the founder and president of Costume Specialists, a custom-design costume shop in Columbus, Ohio, recently found out firsthand that taking tips from employees can be helpful. After learning that the company needed $40,000 to stay in business, Goldstein sat down with her company’s managers who each discussed wasteful spending with the firm’s other employees. “As it turned out, some workers wanted to work part time,” she says. In addition, the company moved to a four-day work week, renegotiated its shipping and credit card contracts and eliminated its policy of paying for employee parking. “I’m trying to stay ahead of the eight ball,” she says.

--Write to Diana Ransom at dransom@smartmoney.com

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