Understanding employee performance reviews

More than just a formal assessment, an employee performance review provides an avenue for managers to develop their staff. While the short-term goal of a performance review is to give feedback and evaluate, the long-term goal is to help an employee reach his full potential, something that ultimately benefits the organization.

Some managers assess their employees quarterly while some do it every year. But regardless of pace, it is absolutely necessary for the leaders to make the most out of these review sessions by conducting a clear, constructive, and actionable assessment that will allow employees to gradually, if not quickly, improve their work performance.

While conducting constructive employee performance reviews sounds easy, many human resource managers are having difficulty doing it. For one, it is a lengthy process that consumes time and resources, with traditional performance review models costing companies at least $2.4 million per 10,000 employees, according to a Gallup study.

Despite the amount of time spent preparing for employee performance reviews, the same study shows that only 14 percent of the employees agree with their results. Worse, at least 90 percent of HR leaders are saying that the results they get do not yield accurate and actionable information, leading to the only logical question: what went wrong?

READ MORE: 64% employees see performance reviews as 'partial or complete waste of time'

In this article, we will tackle how to set the stage for a constructive performance review, traditional and modern review models, and how to conduct an efficient employee assessment that will guarantee results.

Setting the stage for performance reviews

The best way to get the most out of employee performance reviews is to clearly define the roles and responsibilities of your employees. Clearly outlined job responsibilities provide employees with a roadmap to success, fostering a sense of purpose and direction.

Setting clear expectations on quality, quantity, processes, and the nature of tasks during a certain period will allow managers to narrow down the scope and limitations of the performance review the time comes to prepare for one.

It is also important to put these expectations in the context of broader company goals and organizational values. This will make it easier for managers to communicate the impact of an employee’s performance to the organization during the performance review process.

Creating a culture of trust and open communication

If your employees are not comfortable with being open and honest with their managers on a regular basis, chances are they will approach performance reviews with the same attitude. This is why fostering a culture of open communication even before the assessment is important.

The best way to start is to create channels of communication where employees can express themselves and ask for feedback whenever they need to. It will also be helpful to provide a platform for raising concerns and communicating company updates.

The trust you build on a daily basis will pay off when you begin to conduct the performance reviews as employees will be more comfortable talking about their strengths, weaknesses, and the help they need as they try to improve their work.

READ MORE: Managers, avoid these performance review biases

Planning and preparation: Setting the baseline

A study by the Society for Human Resource Management shows that 90 percent of employees want to receive feedback on a regular basis. The key takeaway here is it may not always matter whether you perform assessments quarterly or annually, but consistency will always matter.

However, it is worth noting that deciding on whether you conduct annual or semi-annual reviews require careful consideration of the specific performance indicators that you want to measure, as some of them can be measured monthly, while some require more time.

This drives us to the most important part of the preparation – collecting the relevant information.

Data-driven insights are integral to objective performance evaluations. Utilize key performance indicators (KPIs) relevant to each role to assess employee contributions. If an employee is in a sales role, metrics like revenue generated, conversion rates, and client satisfaction scores can provide quantifiable data.

Traditional vs modern performance reviews

Traditionally, key performance indicators are enough to back an employee assessment session. But since the goal is to deliver a constructive employee performance review, we need to look at modern review models that will allow us to create a clearer picture beyond just the KPIs.

First and foremost, modern review models use KPIs that are crafted in collaboration with the employees themselves, which makes the journey towards the review a shared understanding in terms of expectations.

Using tailored KPIs is a sign of understanding that no employee, no matter how similar their roles are, are one and the same. This contrasts with traditional assessment models that focus only on a standard set by the manager.

Crafting KPIs under modern performance models also considers the role of the managers in achieving several goals. This means that some KPI metrics are weighted against the amount or quality of support an employee gets to achieve the desired outcome.

Lastly, modern assessment model leverage information beyond individual KPIs, such as personal assessment, peer review and department KPIs. In a nutshell, the most constructive employee reviews take all the necessary data available to paint an accurate picture of the performance.

READ MORE: Your KPIs need to change in the post-COVID world

Conducting the performance review meeting

There are a thousand ways to go about a performance review session, but starting with the acknowledgement of an employee’s strengths and achievements will send the message that the meeting is being done from a place of care. Moreover, recognizing the contributions of an employee will only instill confidence and motivate him to be better in the future.

After this, you may move to discuss some of the areas for improvement with the employee. Begin from a place of concern and ask the employee what management can do to help them in these areas. When the employee is done expressing his side, you may start talking about what improvements you need from them. This is the part where you clearly state expectations for the next review period.

But you should not leave them to their own devices, which brings us to the best part of modern employee assessments – collaborative goal setting. To do this, agree on a specific set of goals that are “SMART” (Specific, Measurable, Achievable, Relevant, and Time-bound). Elaborate on ways they can achieve these goals, agree on desired quality and quantity, and set a time to look back on them.

Lastly, to drive the point that the performance review is all about developing and helping an employee reach their full potential within the company, align the goals you have outlined with the vision of the company. Remind them how important their performance is to the company, which will only motivate them to do their best.

What to do post-employee review

Constructive employee performance reviews are just a means to an end – which is to help your people become future assets of the organization. These reviews also serve as cues for management to give incentives and rewards, or even promotion to deserving candidates.

Always follow up performance review sessions with actual action, so the employees will feel that these meetings are not done in a vacuum. Check on your employees regularly and allow them to communicate openly should they have concerns about the goals you have set.

In a sense, it’s like going back to step one of conducting constructive reviews, which is to continue cultivating a workplace where open communication, transparency, support, and trust is encouraged. Doing so will not only help you develop your people, but also lower your turnover rates.

As your employees do their part in improving themselves, leaders must exercise due diligence in enhancing their work experience. An employee performance review is always a two-way way process that benefits both the employee and the organization.