Performance reviews are one of the major ways that company officials determine whether or not employees receive an increase in their annual compensation . . . and how much they’ll receive.

As with many aspects of your career (and life in general, for that matter), the key is preparation. You do not want to walk into your review cold. You should treat your review almost like a mini-interview.

You’re not interviewing for the purpose of being hired, but you are interviewing for the purpose of receiving more compensation. True, actions speak louder than words, specifically your actions during the past six months or year, but how you conduct yourself in the review is also extremely important.

Make sure you give adequate attention to each of the seven steps below.

Review yourself first. Before you step into that room, make sure that you’ve already conducted a self-audit and self-inventory. It is extremely important, of course, that you remain as impartial as possible when evaluating your performance. It might be a good idea to make a few lists – one of the goals that you’ve achieved since your last review, one of your strengths, and one of your weaknesses. When listing your weaknesses, also list ways in which to improve in those areas.
Follow company procedure. Perhaps your company has specific forms that are distributed beforehand. Be sure to complete any forms that are mandatory for the review. There may also be forms passed out that are optional. If possible, fill out these forms, as well, and make copies of all completed forms for your own records.
Discuss your goals in the review. This refers to both your professional and personal goals. Your manager should realize that you won’t be truly happy in your job if your personal life is suffering as a result of it. Discussing your personal life in a performance review shouldn’t be taboo. In fact, it’s something that should be done. If you aren’t free to do so, perhaps you should consider employment at another company.
Prepare a list of questions that you want to ask. The interview process is a two-way street, and so is your performance review. You may have pertinent questions to ask about the company’s goals, the direction it wants to take, and how you fit into the overall picture. Asking these questions will indicate that you’ve thought about your role in the future success of the company.
Be professional at all times. You may hear some things in your review that you don’t agree with or that you don’t understand. Remember to stay calm. Also remember that this review is about you, so don’t make reference to a co-worker’s performance (or in your opinion, their lack of one).
Offer solutions, not excuses. Be prepared to discuss any problems that may have occurred during the past year. If there are certain things you feel that you need in order to do your job in a better fashion (a new software program, a training course), bring this up. You’ll impress your manager more by devising solutions to past problems than by saying “It was all Bob’s fault.” Even if it was Bob’s fault.
Come to a consensus and keep an open mind. Communication is always important, but especially so during your performance review. Make sure that when the review is winding down that you and your manager are on the same page. Once you’ve done that, keep an open mind about the merit increase you do receive. If it’s smaller than what you had anticipated, perhaps the company could afford only to give out smaller increases to its employees. Don’t express anger with what you’ve received (or didn’t receive). Instead, ask what specific steps you need to take in order to secure a larger increase at your next review.