- Employee performance reviews should cover communication, collaboration, reliability, work quality, problem-solving, and timeliness.
- Give regular, informal feedback consistently. In formal reviews, be honest, hold face-to-face conversations, give relevant examples, and end on a positive note.
- Performance management software and professional employer organizations can help you hold effective performance reviews regularly.
- This article is for small business owners and managers who want to implement effective performance reviews or improve their performance review process.
Employee performance reviews are essential for all businesses. However, how you conduct reviews determines their effectiveness. A performance review can empower your employees to reach new heights – or drive your team away.
An effective performance review helps employees identify growth opportunities and potential areas of improvement while still maintaining healthy business relationships. But writing an effective review isn’t easy, and managers often don’t receive enough guidance. We’ll explore best practices for writing and conducting comprehensive reviews and share how performance management software can help.
How to conduct an effective employee performance review
Consider incorporating the following six best practices to ensure you’re conducting excellent performance reviews.
1. Provide regular, informal feedback to employees.
While performance reviews typically happen once or twice a year, don’t limit feedback to review periods. Consider the following when incorporating informal feedback:
- Offer consistent assessments throughout the year. If you provide your employees with consistent assessments throughout the year, there won’t be any surprises come review time. “Don’t catch your people off guard in a performance review,” advised Erika Rasure, client financial therapist at Beyond Finance. “This should not be the first time that they are hearing from you that they are not performing as expected.”
- Take notes on employee performance. Take constant notes on employee performance – especially when no performance reviews are on the horizon. “Employees deserve a robust assessment of their work for the entire period being covered,” said Gary Schneeberger, founder and president of ROAR. “Far too many performance reviews are based only on what the manager can remember from the last few weeks before the evaluations are due to HR. Managers have to be intentional about taking and filing notes.”
- Don’t neglect your top performers. Suppose you’re only addressing issues or focusing on the employees who aren’t performing as well as others. In that case, you’re missing an opportunity to express gratitude and show appreciation to employees who shape your company’s innovation, creativity, and culture. Though they may not need as much guidance as other employees, these individuals could lose their passion or motivation if they are not occasionally recognized.
“Highly valuable employees who do their job and do it well are often not the priority of concern in performance review cycles, resulting in missed opportunities to communicate how much the organization values the drive and the results of the top performers,” said Rasure. “An unexpected ‘keep up the great work’ email [or] a quick phone call or text sends a consistent signal to your employee that you are paying attention and value what they do.”
2. Be honest with employees during a performance review.
No worker is perfect, and there will always be room for improvement. When delivering constructive feedback, be honest and consider the following:
- Don’t skirt uncomfortable issues. Decide what’s worth addressing, and don’t hesitate to bring it up. If you know an issue is affecting your team, tiptoeing around the subject won’t get you anywhere. “If someone is a poor performer and you don’t squarely address it, know that everyone else in the office knows that the person is a poor performer, and [employees] will brand you as weak or cowardly for not addressing the situation,” said James R. Bailey, professor of leadership at the George Washington University School of Business.
- Be tactful with honest feedback. Bailey encourages being honest with workers – but not brutal. Deliver feedback how you’d want to receive it. The discussion is unavoidable, so choose an appropriate approach and stick with it.
- Be abundantly clear about expectations. Good managers must demonstrate and expect clarity, said Leon Rbibo, president of The Pearl Source. “There needs to be crystal-clear clarity on both sides of the table, both in what the manager expects from the employee moving forward and in what the employee needs from the manager.” Without setting clear expectations, nothing you discuss during the evaluation will help the situation, and you’ll find yourself revisiting the same topics at the next performance review.
Performance reviews aren’t a one-way conversation – getting employee feedback is essential. To gather honest employee feedback, it’s crucial for management to create a company culture where sharing feedback feels natural and welcome.
3. Conduct face-to-face employee performance reviews.
A written review should be a brief but direct overview of discussion points, making for a more nuanced face-to-face conversation. You might want to schedule a meeting in a coffee shop or out-of-office location to provide a comfortable atmosphere. If you’re reviewing remote workers, schedule a video chat so you’re still having a live conversation. This approach leaves room for discussion and feedback and prevents miscommunication.
“The only way to deliver performance reviews is face to face, with ample time to present and process, listen, and respond,” said Bailey. “It’s just too important to relegate to email or telephone. Doing so would send a signal that you didn’t care enough about the subject even to take the time to meet.”
After outlining any shortcomings or mistakes, discuss resolutions and invite employees to comment on the issues you raised.
Need a way to meet “face to face” virtually? Read our guide to choosing the right video conferencing platform. You can also read our GoToMeeting review to learn why this platform is our top video conferencing service for small businesses.
4. Use tangible, pertinent examples during the performance review.
When discussing areas for improvement or what an employee has done well, ensure you reference clear examples to show you’re paying attention. (This is why taking notes over a long period is essential.)
“If you’ve got nothing to refer to, then you’re speaking anecdotally,” said Rbibo. “This prevents clarity and understanding. If an employee is falling behind in certain key performance areas, point to one or two specific examples, and address how you’d like those handled differently in the future.”
5. End the performance review on a positive note.
Your review should end with mutual understanding and respect. You don’t want your employee to feel like they’re in the dark going forward. Instead, equip them with achievable business goals, a sense of optimism, and an employee performance plan moving forward.
“Use the review process as an opportunity to set attainable goals specific to addressing the expectations the employee isn’t meeting, but which also makes the employee feel like they have a clear, reasonable plan of action that can get them back on track,” said Rasure.
Encouraging your employees and expressing your appreciation boosts a good review and lifts an employee’s spirits after a less positive evaluation. Positive reinforcement and constructive professional feedback can help give workers the confidence and drive they need to perform better.
6. Choose your words with care during evaluations.
Pay close attention to how you phrase your evaluations. Excellent leadership language includes meaningful and action-oriented words with a far greater impact than standard phrases like “good” or “satisfactory.”
Here are five words and expressions that will help you effectively highlight an employee’s contributions, based on James E. Neal’s book Effective Phrases for Performance Appraisals.
- Achievement. Incorporate this into a phrase, such as “achieves optimal levels of performance.”
- Communication skills. Phrases like “effectively communicates expectations” or “excels in facilitating group discussions” go a long way with an employee.
- Creativity. Appreciating employees’ creative side can make for a happier, more motivated team. In a performance evaluation, try phrases like “seeks creative alternatives,” followed by specific examples and results.
- Improvement. Employees like hearing they’re improving – and that it’s being noticed. “Continues to grow and improve” and “is continuously planning for improvement” are two constructive phrases to use in a performance review.
- Management ability. Leadership skills and the ability to manage others are key to employee success. Phrases such as “provides support during periods of organizational change” carry weight with your employee.
What is an employee performance review?
An employee performance review, also known as a performance evaluation or performance appraisal, is a formal assessment of an employee’s work in a given period. In an employee performance review, managers evaluate an individual’s overall performance, identify their strengths and weaknesses, offer feedback, and help them set goals.
Employees typically can ask questions and share feedback with their manager. They may also complete a performance evaluation self-assessment as part of the performance review process.
While performance evaluations have traditionally been annual reviews, more companies are moving toward quarterly, monthly, or even weekly feedback. Some organizations have entirely eliminated the formal performance review process, replacing it with regular, casual one-on-one check-ins with management.
The importance of employee performance reviews
Regardless of how frequently or in what manner your company conducts performance reviews, these meetings should benefit employees and managers. Workers will gain a better understanding of what they’re doing well and where they can improve, and they can ask questions or provide feedback to their managers.
In turn, managers can communicate expectations to their team, identify the highest performers, and correct issues before they escalate.
Unfair performance reviews are a significant factor in employees quitting; this means providing fair, frequent, and accurate feedback are even more essential.
What skills and competencies should a review assess?
Regardless of industry, most employee reviews include an assessment of the following skills:
- Collaboration and teamwork
- Quality and accuracy of work
- Attendance, punctuality, and reliability
- The ability to accomplish goals and meet deadlines
A review should also include:
- Any company-specific or position-specific competencies
- The employee’s accomplishments and contributions to their role or organization
How to measure the employee’s performance
After addressing key assessment areas, evaluate and weigh each element to get a picture of the employee’s overall performance.
How you format and organize this information is up to you and your company’s needs. Some organizations use a grading system of A through F, while others rely on numerical scoring, percentages, or written descriptions (e.g., “most of the time,” “some of the time”). Whichever system you use, ensure it’s objective and easy to understand.
Once you finish the grading process, set up a time to discuss your findings with each employee and build an employee performance plan together.
How performance management software can help
The true cost of performance reviews is the time managers and HR staff spend gathering and writing the review’s foundational material. To reduce the financial burden on your small business, consider integrating performance management software into your annual review process.
High-quality performance management software can deliver real-time reports and enhance collaboration between employees and managers. Your platform can help you complete the process and store the results for later review.
How to implement performance management software
Depending on your HR requirements, you can incorporate a performance management solution in-house or outsource the process to a third party.
Performance management solutions
Some performance management solutions include an open API system that allows you to customize the software to fit the size and scope of your HR requirements. For example, Namely and BambooHR include an open API that allows for third-party integrations. (Read our BambooHR review to learn more.)
Performance management solutions may offer the following features:
- Allow managers and HR staff to set and monitor goals
- Create custom reviews
- Automatically solicit responses from managers, employees, and peers for the review cycle
- Offer a platform where employees can self-serve many of their HR needs
Professional employer organization (PEO) companies offer another way for small and midsize businesses to provide effective employee feedback. The best PEO services let you outsource performance reviews and other HR tasks through a co-employment arrangement – a contractual agreement where the provider assumes responsibility for assigned tasks.
Using the PEO company’s apps, managers and employees have real-time access to payroll, time, and benefits. PEOs also provide a full range of professional HR benefits, including compliance with the latest employment regulations.
Some excellent PEO companies include the following:
- Insperity. Insperity is our top PEO for risk management. It offers performance management features as an extra on top of its traditional PEO services. Read our Insperity review to learn more.
- ADP TotalSource. ADP TotalSource is our top pick for customer service among PEO providers. It also offers performance and talent management options. Read our ADP TotalSource review to learn more.
If your business needs additional HR support, check out our reviews of the best HR software and the best HR outsourcing companies.
Performance review examples and templates
The entire performance review process can be challenging for managers and employees, especially when they don’t have an established framework to guide the conversation. A review template helps ensure successful interactions throughout your organization.
If you’re struggling to write a template for company-wide use, consider these four performance review templates to get you started:
- Smartsheet: Annual employee review template
- Workforce: Three-month performance review
- GroSum: Quarterly performance review
- SHRM: Self-performance review
With these templates and all the above advice, effective performance reviews are within reach.
Max Freedman, Sammi Caramela, and Kiely Kuligowski contributed to this article. Some source interviews were conducted for a previous version of this article.