- A performance review is an evaluation of an employee's job performance over a certain period of time, based on specific criteria.
- Performance evaluations are important for showing which employees are performing well, and which are struggling so that you can provide the appropriate support.
- Factors you should evaluate include quality of work, execution and communication.
- This article is for business owners and managers who want to learn how to conduct employee performance evaluations effectively.
Performance evaluations can be a source of dread for both manager and employee. After all, there's a lot to consider, especially when the assessments are tied to compensation or promotions. But there are ways to track and manage performance assessments that can make the process easier and give both employees and managers a better idea of what to expect from an evaluation. To get the most out of your process, it is important to have a clear understanding of what an employee evaluation is, what factors you should assess, and some of the best ways to evaluate your employees.
What is a performance evaluation?
A performance evaluation is a comprehensive review of an employee's job performance based on a certain set of criteria, such as their job description. A manager will look at an employee's skills, accomplishments, and work over a specific period and determine whether the employee is meeting, exceeding, or failing to meet expectations.
"[A performance evaluation] provides insight into the employee's overall performance at the company, which helps managers understand what each staff member brings to the table," said Vinay Amin, founder and CEO of Eu Natural.
Key takeaway: A performance evaluation is a comprehensive appraisal of the work an employee has done over a certain time period.
Why is it important to track employee performance?
When you manage a workplace, it's important to have a good idea of how your employees are performing, what they are struggling with, what they are doing well, and how they are growing in their roles so you can properly reward good work and provide help and resources to those who might be struggling. Without taking the time to track employee performance, you might not realize that some of your workers are struggling with key tasks or leaving the company because they were not fairly compensated for their work.
"Employees are the most important asset in a company," said Nancy Michieli, performance coach and manager of projects at Paton Engineers and Constructors. "Employee performance plans are less about tracking an employee's performance and are more of an opportunity to develop the employee and provide quality feedback for their growth."
Benefits of tracking employee performance
From gleaning key information about your team members to increasing employee satisfaction, there are significant benefits of tracking your employees' performance.
"When employees know that management is following their performance and behavior, and that authority keeps track of what they do with their time, employees manage to be more focused and less disturbed in their work, which increases the overall productivity of the business," said Brack Nelson, marketing manager at Incrementors Web Solutions.
These are some other benefits:
- Increased employee efficiency. Evaluating your employees' performance and progress gives you and your team members the insight necessary to set goals and fix problem areas, improving an employee's work and giving them something to work toward. A performance evaluation shows employees that their work is seen and valued, which can motivate them to work harder to meet the company's and their individual goals.
- Identification of strengths and weaknesses. You want to see where your employees and your business as a whole are performing well and where you are falling short. Regular employee performance evaluations are a great tool for providing this information, especially since you may see patterns in the performance of multiple employees and be able to fix widespread problems.
- Higher employee satisfaction. Employees need to be supported – both when they are excelling and when they are struggling. Employee performance reviews show who is performing well and deserves to be rewarded, and who is struggling and needs help to overcome challenges. When management ignores high and/or low performers, employees tend to feel frustrated, unsupported and disengaged with the company. That can lead to poor production levels and high employee turnover. [Looking to boost your team's engagement levels? See what several experts think is the key to improving employee engagement in 2021.]
- Better communication. Regularly scheduled employee evaluations can open up an avenue of communication that you may not have with your employees otherwise. An annual review is a great opportunity for you to sit down and touch base with an employee about their role and any changes they have experienced or expect, such as a promotion or adjustment in responsibility. For example, you may have an employee who is expecting a raise, but their performance has not been up to par – the evaluation process allows you to explain the areas where they are lacking and what they can do to improve.
Key takeaway: Tracking employee performance is important because it shows how your employees are doing and enables you to respond appropriately.
10 factors to use to evaluate employee performance
It can be difficult to determine how exactly you should evaluate your employees, especially if they perform a variety of duties and functions. Here are 10 of the most important factors to consider when you are evaluating your employees.
- Quality of work: Look at the work the employee in question has produced over the evaluation period. Was it well done? Was it thorough? Was every detail thought through? Were there any mistakes? You can consider feedback from clients or team members on the quality of the work and think about whether the employee's work fits the standard of your business.
- Execution: Look at how well your employee organizes, schedules, and completes tasks; how they manage their time; how creative they are; and how they communicate with their team members. Are they largely self-sufficient and able to complete their work on time, or do they require significant assistance or handholding on their tasks? Is their work considered "high-level"?
- Progress: Look at the employee's performance in the evaluation period. Have they met their goals from their previous evaluation? Have they grown in their role? Have they acquired new skills? It is reasonable to expect positive growth and development between evaluations.
- Adaptability: Does the employee handle change positively? Are they receptive to new ideas or adjustments? Do they demonstrate an ability to modify their working style or processes? Consider how the employee responded to previous goals that you set with them – did they make the necessary adjustments to meet their goals? [Read related article: Resilient and Adaptable Teams Are Key to Business Success]
- Initiative: Look at how the employee pursues their goals and responsibilities. Do they take it upon themselves to meet their objectives, or do they require some prodding? Do they demonstrate an eagerness to tackle goals or new responsibilities? Do they show a desire to excel at their job?
- Communication: Does the employee share their thoughts and ideas effectively? Do they listen to others well? How well do they take direction and feedback? Can they clearly convey their thoughts in both speaking and writing?
- Job knowledge: Does the employee display an acceptable level of knowledge regarding their specific role? Do they have the technical, administrative or specialized knowledge necessary to perform well? Are they willing and able to expand their job-specific knowledge?
- Problem-solving and decision-making: Can the employee effectively identify a problem and devise an appropriate solution? Can they quickly make and execute decisions? Do they get overwhelmed in the face of problems? Can they delegate and bring in outside assistance if necessary?
- Planning and organization: Is the employee organized and consistently prepared? Are they able to identify and prioritize their daily, weekly and long-term responsibilities? Do they regularly meet their deadlines? Do they effectively manage their time?
- Teamwork: Is the employee pleasant and polite to other employees? Do they work well in team settings? Do they display a professional and positive attitude? Are they able to communicate and collaborate well with others?
Key takeaway: The factors you should use to evaluate your employees include initiative, communication, planning and organization, and teamwork.
How to track and manage employee performance
There are many ways to track and manage your employees' performance, including software, checklists and forms. Whatever method you choose, remember that while you may only sit down with your employees for a formal review once or twice a year, evaluation needs to be an ongoing process throughout the year to give you a comprehensive view of your employees' activities and monthly progress.
Before you begin your employee performance evaluations, it can be helpful to take these steps:
- Ensure job descriptions are updated. An up-to-date job description enables you to provide an accurate evaluation based on the employee's current responsibilities.
- Update performance expectations. As a result of updating their job description, your expectations for an employee's performance should also change, since different key job functions have different outcomes.
- Check previous goals. Determine if the employee met their previous evaluation's established goals, performance standards and objectives. If they did not, make a note to discuss why in your evaluation meeting.
One of the most popular ways to track and manage employee performance is through software. Performance management software provides a central base where you and your company's other managers can input and track information on employee performance and easily access it when it's time to sit down for reviews. These are some of the most popular performance evaluation software providers:
7Geese provides people management software that allows you to set performance expectations, gather feedback, launch surveys, utilize staff analytics and run performance reviews, all on one easy-to-use platform.
BambooHR offers multi-rater feedback, a goal management tool, automated reminders, and a visual matrix tool that shows you how your employees stack up. Its open API allows it to integrate with other HR software.
Cornerstone is a user-friendly, automated performance management system that allows your team to engage in a customizable review process and connect with each other to gather multiple points of feedback.
UltiPro by Ultimate Software is a comprehensive performance management tool with many customization options, educational opportunities, career development tools and easy goal-setting capabilities.
Key takeaway: There are many methods you can use to evaluate your employees' performance, including HR and performance management software.