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The Importance of Performance Reviews

Published November 23, 2023 (last updated on July 4, 2024) | Adam Wyatt - Content Writer

female office manager conducts performance review with female employee

A performance review is a highly individualised, constructive conversation between a manager and an employee about performance, successes, habits, development, weaknesses, and growth. They are formal assessments of individual abilities and sets goals for future performance. They are also known as appraisals, performance appraisals, performance evaluations, or employee evaluations. Employee performance reviews can be really vital in retaining employees, offering career progression pathways, and improving team morale.

What is a performance review?

Performance reviews are formal conversations between employees and managers at set periods of time (quarterly, six months, yearly) to discuss how they feel employees are doing and how they can do better if needed. Managers and supervisors usually drive the conversation and there is a formalised process that may differ from company to company.

While performance reviews are traditionally formal, companies are now looking to integrate them casually and conduct them more frequently.

What is the point of a performance review?

Performance reviews have been debated by researchers and academics. Many have suggested that they are outdated, don’t work, and are not effective. But there is data to suggest that employees are looking for constructive feedback and opportunities to improve. So, what’s exactly the point of a performance review?

  • Encourages managers to observe consistently- While managers do keep an eye out for performance, success, strengths, and weaknesses, having a formalised performance review can ensure they observe employees consistently and identify potential.

  • Open opportunities for dialogue- Performance reviews act as an opportunity to have an open and honest dialogue among employees and managers. Employees want to know (and they deserve to know) where they stand in terms of performance.

  • Act as clear pathways for career progression- Performance reviews will help provide clear pathways of career progression for employees. What’s next? What do they have to do to reach to the next stage?

  • Addresses underperformance- No one likes having difficult conversations about underperformance. Managers sometimes avoid starting conversations with employees who are not performing well or just coasting by. Such discussions are tricky and sensitive, and managers may not feel ready and equipped to conduct them.

What are common goals for a performance review?

Finding the right formula for successful performance reviews is not easy. Your company’s size, industry, location, values, and work systems all play an important role. Performance reviews need to be customised to your goals and how growth looks for your employee, not a template or a singular rating system. What are some of the common goals for a performance review?

Be objective

Subjective performance reviews can hamper employee progress and damage manager-employee relationships. Performance reviews should be based on data available from a variety of sources such as project management tools, one-on-one notes, recent recognition, goal progress, etc. Every statement and piece of feedback should be propelled by data- not thoughts or opinions.

Be transparent

Employees can get anxiety around the performance review process and it’s natural. How can you reduce this anxiety? Involve them in discussions and planning. Be honest about how this process works. Provide them with a detailed, collaborative agenda that covers main points of discussion. You can also provide a snippet of what to expect so there are no surprises or shocks.

Look towards the future

While performance reviews consider past performance, it can also be disengaging and demotivating to be evaluated on something they can’t change or improve now. Use the review to reflect on the past but not to focus on it. Instead focus on what they can do in the upcoming months to progress or succeed.

Reduce bias

It’s quite normal for managers to have biases. One of the goals performance reviews should have is to reduce and eliminate these biases. Managers may not see remote workers regularly but that doesn’t mean they are not contributing. Having a performance review gives a chance to eliminate proximity bias. Further it can also help tackle recency bias, which is basing a review on an employee’s most recent performance while ignoring or dismissing earlier efforts.

When to do a performance review?

It honestly depends on your business, structure, capacities, and approach. Every team is different, so leaders should decide what schedule is most appropriate for their departments and employees.

You can have company-wide reviews once or twice a year and team wide based on their needs. Informal reviews can be conducted any time.

Set performance goals and expectations at the beginning of each year so employees and staff understand their KPIs and responsibilities.

10 words to avoid during a performance review

Words carry a lot of power. Managers should be very careful about the way you communicate to your employees. The right words can motivate your employees and the wrong ones can negatively impact them.

Performance reviews can be tough for your employees. When meeting with your employees you should make sure to be thoughtful, considerate, and approach conversations with tact.

What are the words or phrases to avoid during a performance review?

  • ‘I have no feedback’- This sentence can be disheartening and bring forth an impression of disinterest or ignorance. Every employee has things they do well and things they need to improve upon. If you say this or say ‘no feedback’ employees may feel you pay no attention to them or do not care enough about their work.

  • ‘Always/Never’– Words like ‘always/never’ can be blanket statements and can be detrimental to constructive criticism. ‘You always do this’ ‘You never do this’ can make your employee feel like they are on trial.

  • ‘I promise you’- Don’t make promises and don’t make threats. Our recommendation would be to completely avoid ‘If you do ABC, I promise you XYZ.’

  • ‘You’re a good employee’- Employees want to hear specifics and details. ‘You’re a good employee’ is so vague and generic. Get into the nitty gritty of why they are performing well, what do they consistently well on a daily basis.

  • ‘Compared to’- Don’t compare them to other employees or yourself. No one wants to be compared to their colleagues and doing so will only produce resentment, mistrust, and jealousy. Stick to their individual accomplishments and compliment them on their individual strengths.

  • ‘Quick review’- Imagine working somewhere for 6 months or even a year and then being told that you get a quick 10-minute performance review. Employees want to know you are willing to invest time and effort in their career and progress.

  • ‘For a raise’- Avoid bringing up compensation in a performance review. This review should solely focus on skills, abilities, and aptitude. Combining pay and performance review will make the employee unwilling to learn or improve anything that isn't tied to monetary gains.

  • ‘People have said/I have heard’- Performance reviews are not popularity contests or a place to discuss personal opinions. If you as a manager were not able to observe the employee’s performance first-hand then do not base your review on it. Peer feedback does play a role here but that should be collected formally and recorded officially, not based on verbal conversations or office gossip.

  • ‘Lucky’- Calling your employees ‘lucky’ to achieve something or perform demeans their individual capabilities. It comes across as petty and condescending.

  • ‘Bad/Terrible’- Similar to good, saying a particular project was bad or they performed terribly does not give them any information to work with. What specifically about the project/job was not up to company standards? How can they use that as a learning opportunity?

Can an employee have a self-performance review?

Employees can also self-evaluate their performance. This can be done in conjunction with company performance reviews or separately.

It can be hard to see yourself and your performance from an objective point of view but think of the bigger picture. Writing a self-assessment is a great exercise to see if you can identify your strengths and weaknesses accurately. We all think we are working hard but is that work turning into something productive, relevant, and does it have meaning?

Some questions to consider when you are writing a self-performance review or self-assessment:

  • Did you accomplish anything notable?

  • What mistakes did you make?

  • What did you learn?

  • Was there a time you took initiative at work?

  • What do you hope to achieve by the next performance review?

If your business has self-performance reviews, managers should carefully read them and give feedback as necessary. Otherwise, employees may feel it is a futile exercise.

What to expect from a performance review?

Employees will be expected to honestly evaluate their performance over the course of a fixed period of time or however long they have been in the role including strengths, weaknesses, areas of improvements, and accomplishments.

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