If you’re not giving employees a formal performance review, your workers are missing out on an important growth opportunity. Formal performance reviews are a way to redirect employee efforts, nurture talent, and improve employee engagement. In addition, they’re a key part of your raise determination for each worker. To maximize the effectiveness of your performance reviews, you should use a checklist to design and implement each review.
Do You Have a Formal Performance Review Process?
From improved transparency to better communication, a formal performance review process can benefit your company in a variety of different ways. Unsurprisingly, many of the fastest-growing companies use a formal performance review process.
In Asure’s 2024 HR Benchmark Report, we asked 1,065 small businesses if they had a formal performance review process. Then, we looked at what the company’s growth was like during the previous year.
We discovered that there was a 29-point gap between the answers we received from slow-growth and fast-growth businesses.
51% of zero-growth firms said they had a formal performance review process.
80% of fast-growth firms said they had a formal performance review process.
Why Employers Aren’t Utilizing Formal Reviews Enough
There are many reasons why an employer might not be using formal reviews effectively. At many small businesses, there simply isn’t a formal process for creating reviews. Often, managers dislike giving criticism, even if the criticism would help their workers improve.
During a recent Mission to Grow podcast on performance reviews, Mary Simmons, the vice president of HR Compliance, Learning, and Development at Asure Software, discussed how not giving formal reviews is harmful to organizations.
According to Simmons, “You’re robbing that person’s ability to get better if you don’t share with them that feedback.” More importantly, “Your top performers are top performers because they’re driven, and a driven individual wants to hear feedback.” If you aren’t giving your top performers useful feedback, you’re hamstringing them and stopping them from achieving their own goals.
Performance Management Checklist: Preparing for the Formal Performance Review
To start using formal performance reviews at your company, there are a few things you should do.
Check the Employee’s Job Description
Before you complete someone’s performance review, you should start by reading through the worker’s job description. This job description will detail the employee’s role and job duties, so it should form the basis of your performance review.
Use Your Performance Review Rubric
In general, you should use the same rubric for all of your employees. For example, most reviews have employers rate how well a worker fulfills their job duties. While the ratings and questions are set up the same for every worker, the job duties will vary based on the employee’s unique job description.
Rubrics are an important part of your formal performance review process. They help to standardize reviews and make them fair. Additionally, you can set score minimums. If a worker scores low enough, it can automatically trigger a performance improvement plan (PIP).
Consistency is important in HR. Beyond ensuring a fair workplace and positive company culture, consistency can also help you avoid discrimination complaints.
Each company is different, so the sections in your performance review may vary. Often, businesses include some of the following topics during their formal reviews.
- Teamwork
- Communication
- Leadership
- Goal achievement
- Culture and values
- Attitude
- Work quality
Look at Performance Documentation, Goals, and Contributions
When creating someone’s performance review, start by reviewing any documentation you have regarding their performance. Then, compare this information to their goals and job description.
Often, workers will make contributions that are outside of their role. Make a note of these contributions so that they can be considered during the performance review.
Studies show women are more likely to volunteer or be assigned to non-promotable tasks than men. Because of this, you should be careful about how you assign non-promotable tasks. Additionally, you should consider incorporating non-promotable tasks into your reviews.
Prepare Balanced Feedback
As you create feedback for the employee, try to make it as balanced and fair as possible. Additionally, you should always include concrete examples. People are more likely to remember feedback if it is connected to a story. Whether you are complimenting an employee or mentioning something you want them to work on, link it to an example so that they can understand and remember your feedback.
Get a 360 Review
360-degree performance reviews are an incredibly useful tool. Often, subordinates will have a different view of a manager’s aptitudes and obstacles. Getting anonymous feedback from subordinates and co-workers can help you create more effective feedback.
Discuss Progress Toward Goals
During the start of your formal review, you should consider the employee’s goals and objectives. Then, discuss how much progress the employee has made.
Review Future Goals
If the employee’s day-to-day goals are going to change, this is your chance to discuss them. You should also be talking about the employee’s job-related requirements throughout the year. Workers should never be surprised to find out about the tasks and objectives they’re supposed to perform because these discussions should be a part of your ongoing performance management.
Talk About Obstacles
Formal performance reviews aren’t one-directional. The employee should have a chance to discuss their current obstacles so that you can give them support and assistance. For example, workers sometimes struggle with the following issues.
- Poorly defined goals
- Communication issues
- Lack of support
- Inconsistent processes
Create an Action Plan
In serious cases, the action plan can actually be a PIP. However, all of your employee reviews should involve some type of guidance about future goals and behavior changes. Top performers like to get feedback so that they can improve, and a performance review is the ideal time to provide this feedback.
Explain Expectations
As a part of your performance review, you should explain your expectations for the employee. This should be done for their challenge areas as well as for their future objectives. If the employee has any questions, this is a good opportunity for them to ask for help.
Use Active Listening
While performance reviews are your opportunity to provide employees with feedback, they are also a chance to receive feedback as well. Your ultimate goal is to help every worker succeed, so take time to listen to each employee’s needs and ideas. To practice active listening, try incorporating the following tips.
- Listen attentively and remove distractions.
- Rephrase what the employee says to make sure you understand.
- Ask questions to clarify any confusion.
- Don’t interrupt.
- Make sure your body language is engaged and shows you’re listening. For example, your body should be turned toward the speaker. As they speak, nod your head to show you’re listening.
Pick the Right Setting
To have an effective performance review, you need to choose the right setting. Because some performance reviews include difficult conversations, it’s a good idea to choose a location that is fairly private. You don’t want to have any distractions, so turn off your phone and block out your schedule for the review.
How Often Should You Have Formal Performance Reviews?
Often, organizations will conduct some type of formal performance review every three to six months. At the minimum, you should have a formal annual review.
Even if you only decide to have annual reviews, you may want to consider performing an additional review for workers who have just finished their probationary period. This type of review can give the new hire guidance and help them know which skills to work on before their annual review comes up.
No matter how often you do formal reviews, it is a good idea to conduct informal check-ins throughout the year. Many companies use ongoing, informal reviews to help redirect employee development and help employees meet their long-term goals.
Take Your Formal Performance Reviews to the Next Level
Only about one out of four companies in the United States reports that their performance reviews are being done effectively. Unfortunately, this means that many workplaces are missing out on key benefits. Through effective reviews, you can spur employee development and company growth.
To learn more about formal performance reviews and other performance management practices, reach out to our small business HR experts today.