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Best Practices in Employee Performance Reviews

It’s time for calendar-year entities to engage in midyear employee performance reviews. Love them or hate them, performance reviews can help employers improve employee productivity and boost morale. But they’re often rushed or underappreciated. Here’s how you can get more from this administrative chore.

Mixed Reviews

A recent Gallup poll found that only one in five employees felt the company’s performance review process is managed in a way that motivates them to do outstanding work. Roughly the same percentage believes that the metrics assessed during the review process are within their control.

Similarly, a Leadership IQ survey found that only 13% of employees and managers think the performance review process is useful. More telling, only 6% of CEO respondents — the people who set the tone for their organizations — found the process useful at their organizations.

Clearly, these attitudes are a problem. If managers don’t think reviews are useful, they become a rote task with little meaning. They’re seen as a form of compensation announcement, not useful feedback. And if employees think they’re useless, or demeaning, they won’t value the feedback. Even star employees may dread performance reviews, and many managers feel the same way. After all, you’re either judging or being judged — and both can be uncomfortable.

However, performance reviews have become a necessary evil that companies can’t seem to do without. According to a 2019 study by management consulting firm McKinsey, organizations that eliminated performance ratings soon discovered that they needed some type of “annual documented administrative evaluation” to justify employees’ promotions, raises, bonuses and other employment decisions. The companies often created “ghost” ratings that were used internally, but not shared with employees. This turned out to be just another type of performance review.

Best Practices

What can your organization do to make the process less burdensome, more meaningful — and even motivational? Consider these tips:

Establish your objectives. Key goals of performance reviews are to identify problem areas and implement plans to improve them. Another objective is to acknowledge employees that meet or exceed expectations. Managers should be prepared to note skills, attitudes or habits that high-performing employees possess and consider ways to transfer them to other members of their team.

Clarify standards. Clearly inform employees from the get-go what they’re being evaluated on. In other words, what goals are important, and how will they be measured? Put expectations in writing and discuss them so everyone’s on the same page.

Allocate enough time. Performance reviews affect employees’ livelihoods, including how much they get paid and their opportunities for advancement, so the process shouldn’t be rushed. It’s critical to pay attention to employees’ job performance and behavior throughout the year. That’s why many companies have adopted midyear (or even quarterly) reviews.

Provide constructive feedback. The goal of a performance review isn’t just to tell the employee why they are or aren’t getting a raise or promotion. The goal should be to provide feedback that helps them perform their job functions more effectively. During the review, managers should convey their intent, and phrase things to suggest 1) areas where employees can improve, and 2) specific steps they can take to improve.

Use examples. Citing specific situations that happened during the year — both successes and failures — can help drive home key points. For example, “Your presentation was poor,” isn’t particularly helpful. But saying, “Your presentation didn’t include important information, such as life-cycle costs and demographics,” identifies potential areas of improvement.

Point out the impact of their behavior or actions. Too often, employees are unaware of the cause-and-effect between their actions and outcomes. For instance, to help a salesperson understand why a deal didn’t close, you might say, “You interrupted people during the sales meeting. The buyer was less interested in listening to your ideas as a result.” Then you could direct the salesperson to listen more to buyers’ needs and refrain from pushy sales tactics.

Be reasonable. Employees won’t change their personalities after a performance review. Your review should focus on things a person can control. Also beware of “cloning bias.” This happens when managers expect subordinates to achieve an objective the same way the manager would achieve it. It’s important to realize that, even though two people approach a task differently, both may be able to successfully complete it. Give employees the freedom to do things their own way, as long as the desired outcome is ultimately achieved.

Listen to what employees have to say. The best performance reviews are two-way conversations. After you review each section of the evaluation, ask for a response. For example, you could say, “Does this review make sense?” or “Here’s what I’m basing this on: What’s missing?” 

Follow up. If there are issues that should be addressed after the performance review, create an action plan with the employee with dates for review. Help employees set goals and provide the resources or training to meet them. In some cases, high-performing employees can serve as mentors or provide in-house training sessions to help co-workers improve their performance.

For More Information

How are performance reviews perceived at your organization? Consider polling managers and staff on how effective your process is and how it could be improved. Your HR department might also provide training to managers to better understand issues such as motivation and ability — and how the review process can be used to improve employee performance.

Contact your professional advisors to help evaluate your review process, identify and track the costs involved, provide additional training, and establish measurable and achievable goals.