Employee performance reviews are important for every business, but their effectiveness depends on how they are conducted. They can empower your employees to reach new heights – or they could drive them away from your company.
A great review helps your employees identify growth opportunities and potential areas of improvement without damaging employee-manager relations, but writing a strong review isn't easy. Managers often don't receive enough guidance on what an effective and comprehensive review looks like.
Compounding the problem, small businesses frequently struggle with limited resources. For a company with 1,000 employees to conduct accurate and helpful performance reviews, a full-time HR staff of 14 is ideal. Even a company with 100 employees needs a full-time individual who compiles performance data from managers, who should spend an average of three hours on each employee review.
What is an employee performance review?
An employee performance review, also known as a performance evaluation or performance appraisal, is a formal assessment of an employee's work in a given time period. In an employee performance review, managers evaluate that individual's overall performance, identify their strengths and weaknesses, offer feedback, and help them set goals.
Employees typically have the opportunity to ask questions and share feedback with their manager as well. They may also fill out a self-evaluation as part of the performance review process.
While performance evaluations have traditionally been annual reviews, more companies are moving toward quarterly, monthly or even weekly feedback. Some organizations have fully eliminated the formal performance review process, replacing it with regular, casual one-on-one check-ins with management.
Regardless of how frequently or in what manner your company conducts performance reviews, these meetings should benefit employees and managers alike. Workers gain a better understanding of what they are doing well and where they can improve, and they can ask questions or provide feedback to their managers. In turn, managers have the opportunity to communicate expectations with their team, identify their highest performers, correct issues before they escalate, and increase engagement and motivation.
What to include in an employee performance review
Regardless of industry, most employee reviews include assessment of these skills:
- Communication
- Collaboration and teamwork
- Problem-solving
- Quality and accuracy of work
- Attendance, punctuality and reliability
- The ability to accomplish goals and meet deadlines
A review should also include any company-specific or position-specific competencies, as well as the employee's accomplishments and contributions to their role or organization.
After addressing the key areas of assessment, you'll need to evaluate and weigh each to get a picture of the employee's overall performance. The way you format and organize this information is up to you as well as your company's needs. Some organizations use a grading system of A through F, numerical scoring or percentages, or written descriptions (e.g., "most of the time," "some of the time"). Whichever system you use, make sure that it is objective and easy to understand.
Once you finish the grading process, set up a time to discuss your findings with each employee. It can be helpful to have a written copy of the evaluation to reference and keep your meeting on track. Be sure to deliver transparent feedback, with examples where appropriate, and allot enough time for the employee to ask questions or deliver feedback.
How performance management software can help
To reduce the financial burden on your small business, you might consider integrating performance management software into your annual review process. Companies such as Insperity, Namely and ADP Workforce Now are HR platforms that help small and midsize businesses provide effective employee feedback.
A quality performance management system delivers real-time reports and enhances collaboration between employees and managers. The platform helps you complete the process and stores the results for later review. But even with such a program, you still need to know what to say and how to say it if you want your review process to result in greater employee engagement and retention.
1. Provide regular, informal feedback.
While performance reviews typically happen once or twice a year, feedback should not be limited to those short review periods. You should offer consistent assessments throughout the year so there aren't any surprises come review time.
"Don't catch your people off guard in a performance review," said Erika Rasure, assistant professor of business and financial services at Maryville University. "This should not be the first time that they are hearing from you that they are not performing as expected. Be clear in writing [and] sending calendar invites, and setting expectations and the tone for the meetings."
You should also take constant notes on employee performance – especially when there are no performance reviews on the horizon.
"Employees deserve a robust assessment of their work for the entire period being covered," said Gary Schneeberger, founder and president of ROAR. "Far too many performance reviews are based only on what the manager can remember from the last few weeks before the evaluations are due to HR. Managers have to be intentional about taking and filing notes."
Don't neglect your top performers. If you're only addressing issues or focusing on the employees who aren't performing as well as others, you're missing an opportunity to express gratitude to those who shape the innovation, creativity and culture within your company. Though they may not need as much guidance as other employees, these individuals could lose their passion or motivation if they are not occasionally recognized.
"Highly valuable employees who do their job and do it well are often not the priority of concern in performance review cycles, resulting in missed opportunities to communicate how much the organization values the drive and the results of the top performers," said Rasure. "An unexpected 'keep up the great work' email [or] a quick phone call or text sends a consistent signal to your employee that you are paying attention and value what they do."
2. Be honest.
No worker is perfect, and there will always be room for improvement. Decide what is worth addressing, and don't hesitate to bring it up. If you know an issue is affecting your team, tiptoeing around the subject won't get you anywhere.
James R. Bailey, professor of leadership at the George Washington University School of Business, encourages being honest with workers, but not brutally. Deliver feedback in a way that you would want to receive it. The discussion is unavoidable, so choose an appropriate approach and stick with it.
"If someone is a poor performer and you don't squarely address it, know that everyone else in the office knows that the person is a poor performer, and [employees] will brand you as weak or cowardly for not addressing the situation," Bailey said.
Managers should also demonstrate and expect clarity, said Leon Rbibo, president of Laguna Pearl. "There needs to be crystal-clear clarity on both sides of the table, both in what the manager expects from the employee moving forward and in what the employee needs from the manager."
Without clarity, Rbibo said, nothing you discuss during the evaluation will help the situation, and you'll find yourself discussing the same topics at the next performance review. So be clear, be honest, and remember that nothing will change if it is not addressed.
3. Do it face to face.
The written review should be a brief but direct overview of discussion points, making for a more nuanced face-to-face conversation. You might want to schedule a meeting in a coffee shop or out-of-office location to provide a comfortable atmosphere. If you're reviewing remote workers, schedule a video chat so you're still having a live conversation. This approach leaves room for discussion and feedback on their end and prevents miscommunication.
"The only way to deliver performance reviews is face to face, with ample time to present and process, listen and respond," said Bailey. "It's just too important to relegate to email or telephone. Doing so would send a signal that you didn't care enough about the subject to even take the time to meet."
After outlining any shortcomings or mistakes, discuss resolutions to those problems, and push employees to comment on the issues you raised.
4. Use tangible, pertinent examples.
When discussing areas for improvement or things an employee has done well, make sure you have clear examples to reference. (This is why it's important to take notes over a long period of time.)
"If you've got nothing to refer to, then you're speaking anecdotally," said Rbibo. "This prevents clarity and understanding. If an employee is falling behind in certain key performance areas, point to one or two specific examples, and address how you'd like those handled differently in the future."
Having examples proves to the employee that you are paying attention and adds credit to your expectations.
5. End on a positive note.
Don't leave the review without mutual understanding and respect, and don't let any employee feel like they're in the dark going forward.
"Use the review process as an opportunity to set attainable goals specific to addressing the expectations the employee isn't meeting, but which also makes the employee feel like they have a clear, reasonable plan of action that can get them back on track," said Rasure.
Encouraging your employees and expressing your appreciation gives an added boost to a primarily good review or lifts your employee's spirits after a somewhat negative evaluation. Positive reinforcement and constructive feedback can go a long way in giving workers the confidence and drive they need to perform better.
6. Choose your words with care.
Pay close attention to how you phrase your evaluations. Meaningful and action-oriented words have a far greater impact than more standard phrases such as "good" or "satisfactory".
Here are five words and expressions that will help you effectively highlight an employee's contributions, based on James E. Neal's Effective Phrases for Performance Appraisals (Neal Publications, 2009).
- Achievement: Incorporate this into a phrase, such as "achieves optimal levels of performance with/for ... "
- Communication skills: Phrases like "effectively communicates expectations" or "excels in facilitating group discussions" go a long way with an employee.
- Creativity: Appreciating employees' creative side can make for happier, more motivated staff. In a performance evaluation, try phrases like "seeks creative alternatives," followed by specific examples and results.
- Improvement: Employees like hearing that they are improving and that it's being noticed. "Continues to grow and improve" and "is continuously planning for improvement" are two constructive phrases to use in a performance review.
- Management ability: Leadership skills and the ability to manage others are key to employee success. Phrases such as "provides support during periods of organizational change" carry weight with your employee.
Richard Grote, author of How to Be Good at Performance Appraisals (Harvard Business Review Press, 2011), said that instead of using terms like "good" or "excellent" in a review, employers should opt for more measurement-oriented language. In an interview with Hcareers, Grote noted that action words like "excels," "exhibits," "demonstrates," "grasps," "generates," "manages," "possesses," "communicates," "monitors," "directs" and "achieves" are more meaningful.
How to implement performance management software
Mastering your language and approach are your first steps. The true cost of performance reviews to your organization is the time managers and HR staff spend gathering and writing the material that serves as the foundation for each review. That's where performance management software can help.
Depending on your HR requirements, you can incorporate an open API system or outsource the entire process to a third party. Companies like Namely offer an open API platform that allows you to customize the software to fit the size and scope of your HR requirements.
This type of system allows managers and HR staff to set and monitor goals and to create custom reviews. It automatically solicits responses from managers, employees and peers for the review cycle. It also creates a process for an employee-centered review known as a "360 review." Employees can use the custom-built API platform to self-serve many of their HR needs, which can save your team hours each week.
Another cost-saving system is a professional employer organization (PEO) like Insperity or ADP Workforce Now. Ideal for small and midsize companies looking to reduce their HR expenditures, this option allows you to outsource performance reviews and other HR tasks through a co-employment arrangement – a contractual agreement where the provider assumes responsibility for assigned tasks.
Using the PEO company's apps, managers and employees have real-time access to payroll, time and benefits. PEOs also provide the full range of professional HR benefits, including compliance with the latest employment regulations.
Good and bad real-life performance reviews
Good: Responsibility as a coach
Schneeberger remembered an intern who refused to accept her review because the ratings were not all "exceeds standards."
"Her reason for the protest was that she tried really hard," he said. Knowing her boyfriend was a basketball player, Schneeberger asked the intern if his working hard at every practice automatically meant he should start, and she was quiet.
"I pointed out that my job was the same as his coach – to help her get better so she could figuratively get off the bench and into the game as she embarked on her career. I needed to teach her how to get better – and I couldn't do that if she was already perfect."
Bad: Lunchtime evaluation
Sergei Brovkin, founder and principal of Collectiver, recalled a manager who held very informal, unhelpful evaluations. "[He] would do it once a year, during his lunch, while working on emails. That was one of the reasons I left the company."
Bad: False positivity
Mike Cox, president of Cox Innovations, spoke of a time when he was serving as an HR leader and had a colleague come to him with the decision to terminate an employee. Upon reviewing the employee's performance evaluations, Cox could not see any evidence of poor performance or mistakes.
"I was told that the employee was performing poorly at the time of the review but was considered very important to an ongoing project, so [they were given] an inaccurately positive review to avoid demotivating [the employee during] a critical period in the project."
Cox advised against terminating the employee until a fair evaluation was given. The employee was terminated anyway and wound up suing for wrongful termination, leading to a costly settlement for the business.
Performance review examples and templates
The entire performance review process can be a difficult time for both managers and employees, especially when they don't have an established framework to guide the conversation. A review template is necessary to ensure successful interactions throughout your organization.
If you're struggling to write a template for companywide use, consider these four performance review templates to get you started:
- Smartsheet: Annual employee review template
- Workforce: Three-month performance review
- GroSum: Quarterly performance review
- SHRM: Self performance review
Sammi Caramela and Kiely Kuligowski contributed to the reporting and writing in this article. Some source interviews were conducted for a previous version of this article.