Employee Performance Reviews: Best Practices and Strategies to Improve Performance

Measuring the performance of your employees is an essential part of employee growth and a healthy organization. With proper and consistent evaluation, employers can keep their employees engaged, Opens in a new tablearn about their strengths and weaknesses, and find opportunities for development.

A good performance review helps employees align their efforts with the company goals by understanding the expectations of their work.

However, a poorly-prepared employee review can end up reducing employee performance and even encourage employees to look for a new jobOpens in a new tab.

If you want to find out more about employee performance reviews and the best practices to implement while creating one, this guide will provide everything you need to know.

A performance review, also known as performance evaluation or performance appraisal, is a regulated, formal process of assessing employees’ work performance

The primary target of a performance review is to learn more about employees, including their points of strength and weakness. The conversations help managers assess performance, give performance ratings, and at the end of the year, recommend the annual appraisal. It also helps in giving regular feedback.

The review process can also indirectly improve productivity levels and other essential aspects that can help employers offer them constructive feedback that can help them enhance their skills and overcome frequent mistakes.

Performance reviews assist in keeping the employer up with the team and reduce the detachment effect, making it much easier to set goals for the near and far future. A healthy review meeting with the manager helps employees know about their performance with growth and development prospects.

For instance, a recent report by ZippiaOpens in a new tab found that 43% of highly engaged employees and top talents are the ones involved in a performance conversation and other forms of feedback once a week with their managers.

The same report also found that up to 98% of employees become unattached from work if they get little to no feedback about their work.

Types of performance reviews

There are various ways to classify performance reviews. For example, you can classify them according to how often you conduct them. This includes weekly, monthly, quarterly, bi-annually, and annual reviews.

We can also categorize a performance review according to its purpose. These are typically known as “goal-oriented performance reviews”.

Almost all these forms of performance reviews are grouped under two main categories, known as “single layer” and “multi layer” performance reviews. In this section, we’ll take a closer look at the main differences between the two.

Single-layer

Single-layer performance review is the traditional performance review that employers and managers often conduct to assess their employees.

In this type, the main source of feedback is the employers themselves, which is why it’s called a “single-layer”.

This type of performance review will often focus on specific aspects of an employee rather than providing an overall overview of the employee’s value for the company.

In this type of review, the employee usually uses a universal rating system to assess various aspects of each employee. 

For example, they might rate the employees using star/number methods where higher stars/numbers mean a higher rating. This type of review is typically conducted on the entire workforce, especially lower-tier employees.

Since these reviews are often limited to the employer’s feedback, they’re typically lacking when it comes to providing an overall employee performance evaluation from the rest of the team’s perspective.

Multi-layer

A multi-layer performance review is a more comprehensive form of performance review that could involve feedback from a wider range of team members, including superiors, peers, and even subordinates.

As a result, the review includes multiple layers of feedback, providing more solid feedback about each employee and their overall value to the company, hence the name. Like single-layer performance reviews, multi-layer ones will also assess an employee’s performance, attitude, and contribution to the team. However, unlike a single-layer performance review, this will discuss these aspects from multiple perspectives. 

This allows the employer to pinpoint new areas where employees need development, such as teamwork/collaboration, engagement, communication, etc. The only downside of multi-layer performance reviews is that they may take longer to complete.

Also, since it involves feedback from a wider range of employees, you must set regulations and rules to make these reviews more transparent and prevent personal biasOpens in a new tab.

Therefore, a balanced combination of the two types of performance reviews can be a cost-effective method to keep up with the company without heavily impacting the workflow.

Key components of an effective performance review

When done right, a performance review can be a great asset for employees by helping them understand what they’re doing right and what they need to work on to align with the company’s goals.

Luckily, certain key elements and components constitute a proper performance review. Here’s a brief overview of each.

Purpose

The first and most essential component of a performance review is having a purpose. 

The general purpose of a performance review is to provide an overall understanding of an employee’s value to the company and promote a healthy culture of communication and constructive feedback that can help push both the employees and the company forward.

Outcome

Another essential element for a successful performance review is having a goal you’re working to achieve. The outcome of a performance review can vary greatly depending on various aspects. 

Not only that, but the same company can conduct several performance reviews, each for a particular purpose.

Accountability

Accountability ensures that all employees are held responsible for their actions and overall impact during a performance review. 

Proper accountability will ensure that employees are assessed fairly during the review. In other words, the assessment doesn’t measure aspects that aren’t among their core responsibilities, such as superiors’ decisions.

On the other hand, accountability also prevents employers from missing out on aspects an employee could influence, whether directly or indirectly.

Establishing accountability can vary in difficulty depending on the employee’s role, especially if they share mutual responsibilities with other team members or departments.

Teamwork

Besides being an essential skill for many employees, teamwork is one of the most common aspects that performance reviews may evaluate, especially among companies split into groups and teams.

Additionally, teamwork is also a key component of multi-layer and 360-degree performance reviews because it’s based on mutual understanding and communication between different parts of the team.

Timing

Although performance reviews and continuous feedback share many similarities, they’re not the same.

Therefore, you don’t need to conduct a performance review too frequently. Leaving some time between performance reviews can be a great way to notice differences, especially in aspects that might take longer to take effect.

On the other hand, if you conduct performance reviews too sparsely, you could miss out on important checkpoints and have so much ground to cover that you end up skimming over different aspects.

Now that you know more about performance reviews and the essential components to create one, here’s a brief walkthrough of the process to give you a better perspective on how it works:

Preparing for the review

Preparing for the performance review helps you make the most out of it, whether you’re an employee or a manager. Here are some essential tips to help you prepare for the review in both cases.

Conducting the review

To conduct an effective employee performance review, you have to focus on conveying the right message, whether you’re asking or answering questions.

For instance, the review should discuss realistic situations that could happen during a workday. Additionally, a good performance review will include ways to improve certain aspects for better alignment with the company goals.

After the review

Upon finishing the performance review, both manager and employee need to take time to assess the results and reflect on them to provide a proper follow-up strategy and create a suitable plan for employee development.

Implementing the right practices while conducting a performance review can massively improve its effectiveness. 

In this section, you’ll find some of the best practices and performance review tips that top employers use to add more value to the process:

1. Always take time to prepare for the evaluation beforehand

As previously established, the process of employee evaluation should start with a preparation phase. Taking some time to prepare comes with several benefits, such as:

2. Use tactful communication skills

Performance reviews require clarity and honesty, and therefore, you may be required to convey some negative aspects about employees or colleagues.

To get the performance review right, use tactful communication skills to reduce the negative impact of this type of feedback while staying on point.

3. Provide concrete examples during discussions

As previously established, transparency is essential for conducting effective performance discussions. Therefore, you should always support any claims with real-life examples and concrete evidence to clarify your points, make them more persuasive, and avoid getting sidetracked. This approach directly impacts the employees’ future performance.

In other words, instead of saying, “You have a teamwork problem”, you should mention some of the incidents that constituted this feedback. The purpose of performance reviews is to foster a healthy environment of trust and mutual growth.

4. Try 360-degree feedback

Implement 360-degree feedback into the performance review process. This feedback can be gathered anonymously, not only from managers but from all peers, subordinates, and superiors working around them.

Additionally, colleagues, customers, and even employees might be involved in this kind of feedback. The goal of 360-degree performance reviews is to help create a collective assessment of the employee’s value rather than focusing on superiors’ impressions only.

5. Put performance requirements in your employee handbook

The employee handbookOpens in a new tab is an excellent source of information for employees. It details the guidelines of the company as well as the company’s code of conduct, goals, policies, and values.

Including the performance requirements of the company in the handbook makes them easier to access by employees and encourages the workforce to abide by them by aligning their goals to meet the company’s expectations.

6. Make performance reviews an ongoing process

Building a culture of ongoing feedback makes it much easier to conduct micro-performance reviews. 

This technique is typically known as a performance management system and it is a more reliable alternative to annual performance reviews. More on that in the following sections.

7. Track the impact of reviews

Conducting a performance review without a proper follow-up plan/strategy can massively reduce its impact and encourage employees to take them lightly.

If you want the reviews to have a meaningful effect on workflow and overall employee performance, you should track the aspects discussed during the performance review.

This allows you to monitor the employee’s responsiveness to the performance review and whether it helped them improve their performance.

8. Apply strategies for reducing bias in performance reviews

Personal bias can massively affect the results of a performance review and hinder progress. In fact, a recent report by Fortune found that over 60% of employees were dissatisfied with the results of their performance reviewsOpens in a new tab.

You can implement various techniques to reduce or even eliminate bias while conducting a performance review, such as defining standard yet specific criteria to evaluate employees against rather than generalized ones.

For instance, you should implement a rating scale for every assessment and ask each participant to provide quick notes that clarify their choices.

Rethinking performance reviews as a continuous process with a human-centric focus is the key to an effective performance review process  

Continuous performance management is a modern alternative to conventional performance reviews that relies on one-on-one discussions and maintaining continuous feedback from superiors through scheduled surveys and check-ins.

Performance management allows organizations to merely track and evaluate their employee’s performance by continuously keeping up with how they complete their tasks and fulfill their roles in the company.

This method of evaluation is characterized by having a more human-centered approach that helps employees feel more empowered while sharing their feedback or working on their own development.

Benefits of continuous performance management

This style of performance evaluation process solves many issues that outdated models of annual performance reviews can’t solveOpens in a new tab. This includes the lack of employee engagement and weak communication.

In fact, Workhuman® conducted a survey on 3,500 full-time employees to assess the advantages of continuous performance management over annual performance reviews.

How often should I hold a performance review?

The ideal timing of a performance review can vary from one company to another. However, in most cases, it shouldn’t be too frequent or too spaced out. Ideally, the most common performance review cycle is quarterly, but you can continually optimize the timing of these reviews depending on the conditions of your business.

What are the best tools to create a performance review?

Luckily, multiple tools make it much easier to gather feedback and conduct performance reviews. For example, you can use Workhuman Conversations® to gather essential assessments and feedback from employees.

Creating an effective performance review system is all about implementing the right strategies during the preparation process. You should take all the essential key components into account while establishing an evaluation system, such as purpose, accountability, outcome, and proper timing.

If you want a more reliable alternative to an annual performance review, you should consider switching to the performance management system, which encourages better communication and engagement between managers and employees along with higher effectiveness over time.