Performance reviews are more than a metric for raises and promotions. They are a valuable way to set goals and motivate employees and an important part of a strategic people management strategy. By learning how to offer performance reviews, you can transform your business into a fast-growth company.

What Is a Performance Review? 

At its heart, a performance review is when a manager formally assesses the employee’s performance. The best reviews involve an open dialogue between the employer and employee, so the worker can ask questions, get feedback, and learn from the results of their review. While an annual performance review is the most common option, some companies also use quarterly reviews. 

During an excellent performance review, you should incorporate the following steps. 

• Express your positive intentions. 
• Develop actionable information as you create the review.
• Evaluate the worker according to set, standardized metrics.
• Provide the employee with feedback.
• Schedule enough time to discuss performance measures. 
• Explain the metrics and company ethics during the review.
• Describe specific behaviors or achievements. 
• Explain the impact of those specific behaviors or achievements.
• Encourage the development of the individual’s skills by discussing learning opportunities.

Researchers have previously found that about 70% of professional development that leads to career advancement comes from work experience. Because of this, it’s important to use performance reviews to guide employee behavior, set goals, and discuss learning opportunities. 

The success of your performance reviews is greatly determined by how you follow up afterward. In fact, the frequency you monitor your goals is connected to the likelihood that you will achieve them. Because of this, it’s important to set follow-up meetings with employees after the initial review is complete. 

Why Are Performance Reviews Important?

Performance reviews are important because they open a dialogue between employees and the employer. They encourage communication about the employee’s past performance and set the bar for their future performance.

For employers, a performance review matters because it helps you to engage workers and direct their behavior toward the goal you want. Meanwhile, employees benefit from a performance review because it helps them understand goals and learn how to change their behavior. For instance, a worker can learn about the kinds of behaviors that are expected to get their next promotion. 

This type of employee engagement, motivation, and communication is common in top companies. Recently, Asure conducted our 2024 HR Benchmark Report of over 1,000 businesses. In the study, we found that 91% of fast-growth businesses have a formal review process that allows them to identify and explain objectives. Only 66% of zero-growth companies have a formal review process.

How to Effectively Manage Employee Performance 

A performance review is an effective way to manage and assess an employee’s performance. For this review to be as effective as possible, it should achieve four clear goals.

Create Clear Expectations: The first step in the review process is to design your review rubric. Create clear expectations for the employee that are aligned with your company’s values and mission. Then, make sure to convey these expectations to your workers so that they know what they’ll need to achieve before the performance review occurs. 

Track Progress: Use reviews to gauge employee’s progress. In between annual reviews, you should have follow-ups to track their ongoing progress. Goals should be measurable and specific, so employees can clearly understand what they need to accomplish. 

Identify Development Opportunities: To encourage employee engagement, you need to find development opportunities that can help them grow. These opportunities could come in the form of stretch goals, new projects, or formal training.     

Perform an Appraisal: An appraisal helps you and the employee to see how they are doing on their performance goals. It is also used for promotions, raises, and bonuses.    

Use 360-Degree Reviews for Better Results 

A 360-degree review is where individuals at all levels of an organization get a chance to review each other. By also collecting information from subordinates and peers, this kind of review helps to spot blind spots and discover areas where the individual can improve. 

In Asure’s 2024 HR Benchmark report, we found that an impressive 78% of fast-growth businesses used 360-degree reviews. Meanwhile, just 36% of zero-growth companies used this kind of review.

Other Ways to Improve Employee Engagement and Performance

It’s important to remember that performance reviews shouldn’t be a stand-alone communication tool. If you’re telling the employee that they failed a part of the review, it shouldn’t be a surprise to them. There should be consistent communication and feedback so that the employee is properly prepared to meet the objectives in their review. Through the following steps, you can improve the effectiveness of your performance reviews. 

Conduct Stay Interviews 

Employee engagement and feedback shouldn’t only happen during your annual reviews. They should also occur during a “stay” interview. These interviews are intended to inform employers why employees want to stay or leave the company. Stay interviews are incredibly useful tools for helping you retain your best workers. 

Asure’s 2024 HR Benchmark survey of small businesses found that 73% of fast-growth businesses use stay interviews to understand why employees want to stay with their company. In comparison, only a third of zero-growth companies did the same thing.

Assess Engagement

In addition to assessing employees through annual reviews, you should also consider assessing your employee engagement levels. In our 2024 HR Benchmark Report, we found that 83% of fast-growth surveyed their workplace for employee engagement. Only 40% of zero-growth companies survey employee engagement.

Provide Learning Opportunities 

To help employees grow and achieve their performance metrics, it’s important to offer them learning opportunities. In our 2024 HR Benchmark Report, we found that 8 out of 10 fast-growth and less than half of zero-growth companies offered employees educational opportunities.  

Enhance Employee Development

After each performance review, employees must have ways to meet their developmental goals. Employee development matters because it helps you retain top performers, attract talent, engage current workers, and catalyze business growth. 

Provide Career Path Coaching

Career path coaching involves talking to workers about their career goals, where you see them going, and how they can get there. Only a third of zero-growth businesses offer career path coaching. In comparison, 78% of fast-growth companies do.

Create a More Engaged Workplace Through Performance Reviews 

With consistent performance reviews, you can increase employee motivation and engagement. From offering 360-degree reviews to scheduling follow-up appointments, there are a number of ways you can incorporate this kind of review into your workplace. 

If you want to learn more about employee engagement, we can help. Contact Asure’s team of small business HR experts today to learn more.