An employee performance review gives managers and employees the opportunity to have an open conversation about an employee's performance. It is essentially the time of year when constructive feedback is exchanged, concerns are discussed and development plans are made and put into action.
As a manager, facilitating annual performance appraisals can be daunting, and oftentimes even stressful. You think about how you can communicate feedback effectively, and positively, yet you also think about where you should even start. Don't worry - this blog post has got you covered on how you can prepare, what actions you should take during performance reviews, and what you should do once the review process is over.
Annual reviews are a blessing in disguise that helps to build harmonious, productive working relationships across teams. Read on for the ultimate guide on how you can perform an effective performance review process.
What's in this post?
Why are performance reviews important?
Performance reviews are important because if facilitated correctly, employee performance reviews bring out the best in your team members. It offers them the opportunity for recognition, growth, and development in both their professional and personal life.
A study conducted by research and advisory company, Gartner, found that employee performance was 10% less productive in organizations that do not conduct performance reviews.
Here are three of the many reasons why annual performance reviews are important for your organization's overall success :
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Provides valuable feedback: Performance evaluations provide managers the opportunity to show recognition of their employee's hard work and highlight the areas that are in need of improvement. During a performance evaluation, delivering constructive employee feedback is crucial in making sure that you are also motivating your employees to want to improve. Providing them with regular feedback also gives you the chance to see whether employees are achieving the expected levels of performance, and give them guidance and encouragement. However, managers will also be able to get the chance to receive feedback from employees and see where they can become better managers and work on improving their leadership qualities.
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Improves performance: The success of a business relies on an employee's actual performance. Therefore, performance reviews are important for clarifying company goals and expectations to keep employees on track and to provide a clear benchmark for them so that it will be easier to identify a dip in employee work performance. This also increases employee engagement which automatically leads to an increase in employee performance.
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Spot and retain top talent: Performance reviews allow HR to spot specific traits in top-performing employees and determine those traits and skills for new hires. Through the feedback that is collected for each performance review, HR is also able to identify high-performing employees who contribute significantly to the organization's success. This gives HR the opportunity to keep in mind which employees can become prospective candidates for career advancement and future leadership roles through frequent feedback and employee performance reviews. Furthermore, HR can retain top talent by addressing any issues that employees bring up during performance reviews which, in turn, improves job satisfaction and reduces turnover.
Performance reviews help build a company culture that motivates employees to become their best selves.
Actions to take to prepare for an annual performance appraisal
Before stepping into an annual performance review, remember that you are about to have performance conversations. Meaning that you are preparing yourself to have a productive and positive discussion about an employee's progress. This includes discussing their professional growth, strengths and weaknesses, and an employee's contributions to the company's success.
Here are some of the actions you can take to prepare:
Collect performance data and make notes
In order to have a productive performance conversation, you can prepare for an annual review in advance by collecting all the necessary performance data for each employee. You can do this by requesting feedback from any relevant members of the organization that a specific employee has close working relations with. This can include other team members, managers, clients, and vendors.
This method of collecting performance data is also known as the 360-degree feedback method. It allows you to increase efficiency when assessing performance and gain a more in-depth overview of an employee's overall performance. Other ways to collect performance data also include gathering KPIs and any metrics that reflect on the employee's achievements. For example: how many calls has your employee made this year compared to the number of calls they expected to achieve per their last performance review?
Once the data has been collected, take notes on any information that stands out so that both you and your employee can discuss each point thoroughly.
Notify your employees beforehand
When performance reviews take place annually, it can be that employees lose track of time and forget when their next appraisal process begins. Therefore, you should give employees at least two weeks of fair notice for an upcoming performance appraisal to allow them to prepare, reflect on their past performance, and prepare any points of discussion they would like to bring up.
Provide self-assessment forms
After notifying your employees of their upcoming performance evaluation, one way you can help them prepare is to provide them with self-assessment forms. These forms can act as a prompt to get employees to reflect on their strengths, and where they can improve on, as well as noting down any roadblocks or obstacles that hindered them from achieving certain goals, and where they require further support.
Encourage them to think about any barriers they are having in regard to their performance and what plans they have in mind for future work or even any training and development opportunities that they can benefit from.
This allows for a fair evaluation, as you are allowing employees to share their perspective on how their year has been, and gives you the chance to focus on employee development which is a critical component in employee reviews.
Self-assessment forms also help you to prepare as they will give you space to provide helpful feedback for future performance, and gain more insight into how you can improve your performance management system.
Make enough time
You don't want to rush through employee appraisals, especially because you want to take your time with each employee to discuss your employee's efforts, and share feedback.
In comparison to the traditional approaches of performance reviews, an appraisal should be a conversation, which is why it is vital for you to block out enough time for each review to ensure that you cover every topic on your side as well as the employee's side.
Blocking out at least an hour in your calendar, plus extra time for wrapping up (+/- 30 minutes) is a suitable amount of time.
Create a structure
Every appraisal process is different, depending on your performance management system, but having a clear and concise structure for the annual reviews will help everyone stay on track.
You can create a structure with the help of performance review templates that allow you to address all points to be completed during a performance appraisal.
What are these points? They are explained below!
Actions to take during an annual performance appraisal
During the annual appraisal process, it is important that you hold employees accountable for their actions. In order to do so, there are a few elements that you should keep in mind to ensure a successful performance review.
Set SMART goals
SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) goals are a must in a good performance review. Defining these parameters in each annual review will help you to make sure that employee objectives are realistic to achieve, and aligned with the organization's goals and ambitions.
Setting SMART goals will also help you and your employees to be more specific with what is to be achieved in the future. Discuss your employee's work performance and see what has been done well, what goals have not yet been met, and how you can turn them into new, more achievable, and measurable goals.
Doing this is important as it will help both you and your employee to measure performance progress accurately and stay on track with deadlines and expectations.
Encourage your employees to share
Performance reviews are two-way conversations. Therefore, try to engage employees in discussions that draw out reactions and ideas. Try to avoid questions that require only a "yes" or "no" response as this can lead to a dead end and turn into a one-way conversation which does not allow room for employees to comfortably open up.
Allow your employees to lead the discussion on certain topics and let them explain their achievements and challenges to you. Remember to provide a safe space for them to voice any concerns they may have, and be open to listening to them and taking into consideration how you can help. This will encourage your employees to feel more confident in sharing ideas and giving you feedback more honestly and with positive intent.
If you are wondering how you can phrase feedback in a constructive and positive manner, check out this blog post for 30 phrases that you can use in performance appraisals that will motivate your employees.
Discuss L&D opportunities
Your employee's success is your organization's success. When discussing strengths and weaknesses, and roadblocks that employees are facing, you should take the opportunity to talk about training programs that employees can benefit from to improve their skills and work quality.
You can also ask them where they would like to invest more time into training, what workshops they would like to see more of or take part in, and what skills they would expand on that will help them become better at their job.
Statistics have revealed that 94% of employees would stay at their organization longer if there was investment in their L&D.
Discussing L&D opportunities also shows employees that you are interested in their professional growth. This motivates them to become more engaged in their work and creates a culture of continuous growth within the organization. It also shows your commitment to your team's success.
Discuss compensation
Performance reviews are the ideal time to bring up the topic of compensation. After identifying the employee's outstanding achievements and areas for improvement, you can discuss a salary increase or promotion opportunities if you see fit or if the employee sees it as suitable.
Have a look at the KPIs and achievements of each employee and see whether their actual performance matches up for a recognition that can be rewarded through compensation or other benefits.
Actions to take after an annual performance appraisal
An annual performance review does not end once the conversation comes to a close. Performance reviews are an ongoing process, with the appraisal itself being the check-in point.
Once the performance appraisal conversation is done: the goals have been set, challenges have been discussed, and achievements have been recognized, employee performance will continue to be tracked and progress will be monitored to ensure that individual performance continues to improve.
Here are some important actions to take after a performance conversation is over:
Summarize the discussion
Throughout the review, make sure to take notes of any important points that you have mentioned or that your employee has brought up. Therefore, once the discussion is over, take a couple of minutes to summarize all the important points such as the objectives and goals that you have set together with your employee to make sure they're clear and understood.
Ask your employee if there is anything you have missed or if there is anything else that they would like to add. Be sure to also briefly go through the next steps of the performance review process which is taking action to achieve their goals.
Create an action plan for the next steps
No performance review is fully completed if no action plan has been written down. What is the action plan?
The action plan provides details of what will happen next. How will your employee achieve their goals? Whether these steps relate to learning and development or training plans that they will take part in, write them down.
It's important to give employees an overview of how they can reach their goals and boost performance by taking into account the roadblocks they had previously faced and seeing how they can approach obstacles differently. If it is training programs and workshops that are included in their action plan, remember to monitor their progress, and let employees hold themselves accountable for their own development.
An action plan is the final wrap-up stage that motivates your employees to take charge of their own goals and improve performance.
Schedule the next appraisal
Once the action plan has been set, you can schedule the next performance review. This gives employees a time frame as to when they should aim to achieve their goals. Whether you decide to remain with an annual appraisal schedule or schedule a follow-up in the next three to six months, it is always good to inform your employees of when the next appraisal will be.
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