So the company shifted focus.

The Motley Fool, an Alexandria, Va.-based multimedia financial services firm, isn't a bad company to take advice from. The company, which employs more than 300 people, was named the "Best Medium-Sized Company to Work For in the US" by Glassdoor the past two years. (Its many employee perks — including unlimited vacation time and standing treadmill desks — no doubt helped with that ranking.)

"Your greatest expense and your greatest opportunity is people," McMahon stressed. Taking the time to talk with, understand and fully engage employees will ultimately give your company the best return on investment, he said.

McMahon explained his company's performance review process, and how he thinks it should be done, in five steps.

1. Focus on awesome people. "Three times a year [The Motley Fool] assesses people on performance and potential. Most companies spend their time … on the low-potential, low-performance people. People make HR policies and procedures for those people. And for some reason, those are the people they retain. You're getting a negative return on investment on those people. Don't spend 80% of your time on those people. Spend 80% of your time on the high-performing people."

2. Make engagement engaging. More than half of workers are not engaged at work, while another 18% are actively disengaged from work, McMahon said, citing an industry survey. He encouraged companies to find out just where their employees stand, and what can make them more engaged. "Do an engagement survey, and keep track of those statistics," he said. "That's important data for you."

3. Think "feedforward, not feedback." You don't need your employees to harp on the past, McMahon said. A performance review shouldn't be a "therapy session, it should be an active session."

To make it so, consider these steps:

• Change the language: "Focus on the positive. You can say, 'This is why you're awesome and this is how you can be more awesome.'"
• Have the employee pick their goal. What do they want to get better at?
• Leave managers out of it. A performance review shouldn't be about managers; it should be about the employees. "Most managers aren't equipped to handle [a] review. We have a team of coaches who are really good at the soft skills, employees will go out and pick who they want their feedback–and feedforward-from."

4. Data is not the devil. If you want to achieve success, it's important to monitor how to get there. McMahon encouraged HR professionals to put together a "talent portfolio" — what they're spending on talent (ie: employees' salary) and what they're getting out of it (by ranking workers as strong, good, low performance and as low or high potential). "It's just two data points," he said. "It's not that hard. I doesn't have to be overwhelming. But it's very helpful."