Performance reviews have recently become a hot topic for leaders. Are they helping or hurting? Detractors might argue that performance reviews are often biased and lead to more anxiety and performative work than real progress. But the Harvard Business Review recently reported that 87% of people they surveyed on the topic were in support of keeping performance reviews in some capacity.1
"Leaders at Facebook think it’s more constructive to mitigate the risks by building a culture that recognizes and rewards growth." - Harvard Business Review
Performance reviews can be an excellent tool for both your business and your employees. It’s a chance for both parties to share feedback and for employees and management to identify potential areas of growth. When done well, performance reviews can prove to be very effective in developing your employees and strengthening your business.
What is an employee performance review?
A performance review is simply a "formal assessment of an employee’s work in a given time period."2
Performance reviews have historically been held annually. However, in recent years, companies have moved toward more frequent reviews, which could be biannual or even quarterly.
During a performance review, managers should evaluate the overall performance of their team members, including identifying strengths and weaknesses. It’s a chance to offer feedback that will help employees meet their goals and inform new ones.
But it’s not just a one-way street. Performance reviews should also be an opportunity for employees to openly share feedback and ask questions of their manager. You can consider including a self-assessment component that checks whether employee and manager are aligned on important aspects of their performance. 2
Why are employee reviews important?
Performance reviews can aid in retention of your employees — and the improvement of your business. You can use them to gauge the contributions of your employees and determine whether each employee is being utilized to their best capacity. Reviews can help you align with employees on expectations and provide the opportunity to course correct on any potential issues.2
They’re also an important motivation tool. Employees want to be recognized for their achievements. A fair and transparent review system gives the company the opportunity to reward employees with development opportunities and keep them engaged in their growth with the company.3 This is especially relevant in markets where retaining employees has become a more persistent challenge.
Conducting regular performance reviews with consistent metrics lets you analyze the trajectory of individual employees over the course of their career.
Steps in the employee appraisal process
Write the performance review
The first step in conducting a performance review is to write it. In a concise document, compare the employee’s performance to pre-determined goals and expectations, list out their key accomplishments during the time period, discuss their strengths and opportunities for improvement and include any direction you can provide for the upcoming time period. There are many formats and methodologies for writing performance reviews. Whatever direction or template you choose, some things should always be consistent:
- Feedback should be unbiased and actionable
- Language should be clear and concise
- Celebrate successes along with addressing areas for improvement
- Cite specific examples and avoid vague statements
- Focus on measurable performance and use a consistent metric over time and across employees
Remember that the performance review should be centered around how to further an employee’s success.4
Prepare for the performance review discussion
Performance reviews should be scheduled well in advance of the conversation to give both the manager and the employee time to prepare to have a productive and engaged conversation.
Ahead of the review, you should have all your feedback organized and practiced. Make a checklist to ensure that you can hit all the relevant points and still keep the meeting on track.5
Holding the performance review conversation
During the performance review, focus on positivity and motivation. Sometimes the conversation will be difficult, but it should be through the lens of improvement and constructive problem-solving.7 Ideally hold your review in person to continue fostering a good connection. If that isn’t possible, turn your cameras on to help both parties stay engaged - and to make sure your employee feels that your attention is wholly theirs during the review.
Start by reviewing the employee’s established goals from the review period. Discuss the employee’s progress on each pre-established goal, touching on any major accomplishments as well as any opportunities to learn from the experience.
Then, begin planning for the next period. Decide if any goals need to be adjusted or updated. Recommend if new goals should be set. Provide simple, actionable feedback for your employee’s growth.
Always be sure to leave time for your employee to provide you with feedback of their own or to ask questions. Throughout the review, prioritize transparency and honesty.4
After the performance review
Upon completion of the performance review, document any notes from the conversation. Send a recap to your employee, and ask them to certify that they agree that the recap is accurate.
Set aside time for yourself to digest the meeting. Just as your employee should emerge from the meeting with action items, so should you. Make a plan to follow up on any questions your employee had and determine how you can best support their completion of their goals.4
Other tips for managing employees
Managing employees can be complicated, but performance reviews are a key way you can improve their performance and contribute to their growth. It’s in your company’s best interest in the long term to develop your employees. Their success directly contributes to your business’s success.
Interested in more tools to help your small business succeed? Nationwide’s Business Solutions Center is full of resources and tips for growing in all aspects of your business.