Not everyone is a big fan of performance reviews. Managers and employees dread it alike. And studies show that most leaders find it a sheer waste of resources.
But then, why does every other organization conduct employee performance reviews?
The answer lies in understanding its importance. Employee performance review, or performance evaluation, isn’t just a process of identifying the most talented employees and rewarding them; it is about creating a performance-driven, data-backed, and employee-centered culture that helps employees and organizations accomplish bigger goals.
Research has shown that organizations that conduct effective performance reviews are 1.4 times more likely to meet their financial goals, have a more engaged workforce (2.7 times), and are 4 times more likely to encourage appropriate risk taking.
Effective performance reviews help employees and teams improve their performance and lead organizations to better business outcomes. In this article, we will understand the intricacies of employee performance reviews and discuss the following:
An employee performance review, or performance evaluation, is an assessment conducted by a manager to review the overall performance of an employee during a particular time period. The review provides managers with an opportunity to discuss the employee’s strengths, weaknesses, and opportunities.
It is a two-way conversation that generally involves asking questions, offering feedback, setting goals and expectations, and making a rational and empirical analysis of an employee’s overall contributions.
A performance review is meant to leverage the talent by offering them guidance, appreciating their efforts, motivating them to perform better, and discussing the learning and development opportunities to enhance their skills.
It is a process that helps managers identify the potential of their employees and offers a constructive approach to guide them on the path of their highest potential.
Performance evaluations serve multiple functions in organizations, but the most rudimentary among them are:
Ensuring effective communication and providing feedback to employees
Help change or alter the behavior of employees so as to make them more productive and aligned towards organizational goals
Planning for future assignments and projects based on the data gathered during the employee review process
Companies like Google, Adobe, Microsoft, and Accenture have completely replaced their traditional review systems with a more frequent and accessible process. It usually involves conducting frequent check-ins, providing on-going feedback, and establishing clear communication between managers and employees.
Performance Review Process Flowchart
The following infographic highlights the complete performance review process followed by organizations.
Types of Employee Performance Review
Performance reviews are constantly evolving. What was once a top-down approach has now metamorphosed into a holistic, continuous, and dynamic process. Though the top-down approach is still in practice, it is loaded with inconsistencies that cause disengagement among employees.
A more practical approach towards employee development and engagement is to conduct continuous performance reviews. As modern HR strategies talk about improving the employee experience, it is important to incorporate a wholesome and action-oriented review approach that helps employees in their personal and professional development.
Overall, organizations use different types of reviews to rate the performance of their employees. You can refer to the below list to understand which process will be more effective and suitable for your organization.
Annual Performance Review
A form of traditional review wherein a manager and employee discuss the various aspects of employee performance once a year. It usually takes into consideration the annual accomplishments, contributions, and challenges of an employee and offers feedback based on the discussion. Most organizations are transitioning from annual reviews to more frequent and actionable processes. Also Read: Problems with annual performance reviews
Semi-Annual Performance Review
Held twice a year, once at the beginning and the other one towards the middle of the year, semi-annual performance reviews provide opportunities for adjustments in the plan and to take corrective action, if required.
Quarterly Employee Performance Review
Quarterly reviews help managers take quick action on the performance of their employees and make adjustments to the plan during the review meetings. It is a more proactive approach towards improving employee performance.
30 60 90 Day Employee Performance Review
30 60 90 Day performance review is a review process used specifically for new hires during their probationary period. Managers assess the performance of new employees on their 30, 60, and 90 day anniversaries and offer them support to easily transition into their new roles.
360 Performance Review
In a 360 performance review, employees get feedback from the people they deal with quite frequently. It usually involves input from the manager, direct reports, clients, vendors, customers, and employee self rating. It is one of the most effective ways to understand the strengths, weaknesses, and behaviors of employees that affect their performance.
Peer to Peer Performance Review
It is a multi-rater approach in which co-workers review the performance of their peers and evaluate them on their skills, competencies, behaviors, attitudes, and various other aspects. Peer to peer review provides a holistic view of employee performance and helps weed out any bias and inconsistencies.
Employee Self Evaluation
It is a form of review in which employees assess their own performance during a particular time period. By highlighting their aspirations, goals, and challenges at work, employees give a fair view of how they think and feel about their work.
As per Arthur Worsley, Founder, The Art Of Living, employee self evaluation is becoming more integral to the efficacy and effectiveness of performance reviews. It allows management to understand where it’s doing well and where it needs to improve, according to the employees.
They are a great way to determine the essential areas each individual employee needs further support in. The more effective your support provision, the more likely that your employees’ performance will improve and the more likely you’ll be able to retain them for the long term.
Benefits of Performance Review
The purpose of conducting performance reviews is multifaceted. It helps in setting a performance benchmark and evaluating employees against it. It helps managers identify their most potential employees and those whose performance is not on par with the set standard. Furthermore, managers use reviews to understand employees’ personal ambitions and align them towards organizational objectives.
Performance appraisals help employees evaluate their own performance and provide them with comprehensive feedback to hone their skills and alter their attitudes and behaviors for higher performance and productivity.
Conducting continuous performance reviews can be extremely beneficial to your organization. Effective, planned, and structured reviews can help achieve the following:
Maintain a record of employee performance and use it to create a customized development plan for every employee
Identify strengths and weaknesses of employees and assign them projects based on this knowledge
Create a performance plan at the beginning of the year and set clear expectations
Enhance employee engagement by making employees a part of the organizational journey
Increase performance and productivity by motivating employees
Improves communication between employees and managers
Improves organizational effectiveness and efficiency in achieving goals and objectives
Performance Review in a Hybrid Workplace (Process)
Effective performance reviews can lead organizations towards success. It helps increase employee engagement, productivity, and the overall efficiency of the organization. Furthermore, it helps both managers and employees improve relationships and collaborate to achieve higher goals.
But then why do most managers and employees feel uncomfortable just with the idea of a performance review?
According to a survey conducted by Gallup, only 14% of employees agree that performance reviews inspire them to improve. Another report by Deloitte found that 58% of HR managers think of performance reviews as an ineffective use of time.
Traditional performance reviews with a top-down approach do more harm than good. Most leaders believe that traditional performance reviews are ineffective and actually make the performance worse about one-third of the time.
Max Wesman, Chief Operating Officer atGoodHire, views traditional performance reviews as ineffective and a waste of important resources. As per him, traditional performance reviews, which were once a cornerstone of the workplace, have since faded into obscurity as the global workplace takes shape and adapts. Most workers resent the performance review process—as do many managers—owing to its focus on punishing and reprimanding rather than fuelling positive change. In response, formal appraisals have since been gradually replaced with frequent, informal check-ins that reward employees for productive behavior rather than chastise them for past mistakes.
The challenges of employee evaluations have been further aggravated by the hybrid work environment.
Most managers haven’t met their team members in-person, which leads to biases and unclear perceptions about their performance. With a growing number of employees opting for remote and hybrid work, it becomes increasingly difficult for managers to provide fair and accurate evaluations of their employees.
If you are facing similar challenges, then follow the below employee performance review process to conduct meaningful employee evaluations in a hybrid workplace.
Create a Standard Employee Evaluation Criteria
To avoid any bias and inconsistencies creeping into the process, it is better to create standard evaluation criteria. Managers should discuss the criteria with employees before the start of the year. HR managers and leaders must ensure that every employee is aware of the performance evaluation process being followed by the organization.
Bonus Tip: Use a real-time performance management system like Engagedly to create a standardized process for employee evaluation.
Review Employees Based on Their Monthly, Quarterly, or Annual Goals
Evaluating employees based on the achievement of their goals is the best way to conduct performance reviews. Whether your employees work remotely or from office space, setting and tracking goals helps keep their efforts aligned in one direction.
Moreover, employees have something to look forward to every day. They are clear about their tasks and responsibilities and know that their performance appraisals will be based on the goals discussed during the performance planning process.
Bonus Tip: Use aspirational and committed OKRs to monitor the performance of your employees.
Use 360-Degree Feedback for a Comprehensive Performance Review
Using 360 degree feedback provides employees with a more equitable, fair, accurate, and holistic review of their performance. It also helps in eliminating personal bias as there are multiple reviewers in the process.
In fact, research has shown that feedback from peers is more effective at improving performance and enhancing engagement in the workplace.
Bonus Tip: 360 degree feedback should be conducted every quarter to monitor changes in an employee’s performance and provide them with guidance to overcome any challenges.
Use Performance Management Systems to Track Employee Performance
A performance management system like Engagedly helps in continuous tracking and analysis of employees’ performance and provides insights to leaders to take appropriate action. It provides an overarching mechanism for evaluating performance, creating customized learning paths, and developing talent towards optimal performance.
Keep employee performance notes handy while conducting the review
Be specific about the feedback
Talk about behaviors and attitudes that help employees excel
Keep compensation out of the review
Cite instances and examples of both good work and areas of improvement
Be more empathetic and involved
Learn how to write performance reviews effectively
Employee Performance Review Best Practices
There is a fine line between an effective performance review and a bad one. When done right, performance evaluations lead to motivation, goal alignment, and enhanced productivity and engagement.
On the contrary, a badly conducted review can stray your employees from the path of optimal performance and can even lead to disengagement and frustration among them.
A performance review is an opportunity for both managers and employees to create bridges and find ways to overcome challenges and celebrate accomplishments. That’s why it is suggested to conduct frequent reviews rather than wait for problems to grow bigger.
Without proper execution, performance reviews fail to fulfill their purpose and eventually lead to a waste of time and resources. The review process laid out in the previous section, along with the below performance review best practices, will help to get the most out of the discussions.
Prepare for the review meeting beforehand: Keep performance records, accomplishments, awards, and other related documents handy. If you use a performance management system to keep track of employee performance, then make sure to go through the performance history before starting the review meeting
Use the continuous feedback approach to avoid anxiety during the review. It will further strengthen the ties between managers and employees and help establish a two-way communication system between them
A performance review template helps conduct effective reviews in a strategic and action-oriented manner. A customizable template allows reviewers and human resource managers to make adjustments to include/exclude the evaluation parameters and create a standard performance review form for employees.
Depending upon the areas of assessment, you can use different evaluation forms to have open and two-way communication with your employees. Furthermore, it helps keep track of employee performance records in one place and can be used during appraisals.
A performance review template should be
Clear, concise, and easy to follow
Provide an in-depth analysis of the evaluation parameters
Offer insights to gauge the overall employee performance
Assist in development and career planning of employees
Performance reviews don’t have to be dreadful. Instead, they should motivate and empower employees to make strategic changes to be more productive and resourceful for the organizations. Only by making reviews continuous, on-going, and action-oriented can organizations get buy-in from employees and use the data insights to leverage their talent and achieve higher goals.
Srikant Chellappa is the Co-Founder and CEO at Engagedly and is a passionate entrepreneur and people leader. He is an author, producer/director of 6 feature films, a music album with his band Manchester Underground, and is the host of The People Strategy Leaders Podcast. He is currently working on his next book, Ikigai at the Workplace, which is slated for release in the fall of 2023.