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How to Conduct Highly Effective Annual Employee Performance Reviews

As the end of the year approaches, many organizations are gearing up for their annual employee performance reviews. This process is meant to be an opportunity for managers to recognize employee accomplishments, identify any weak points, offer constructive feedback, and then set goals together to encourage growth and improvement. However, according to Gallup, only 14% of employees say performance reviews actually motivate them to improve their work, while 95% of managers expressed dissatisfaction with the process.

So, where is the disconnect? In fast-growing companies, initiatives like employee performance reviews may get overlooked in favor of pressing day-to-day business needs, becoming more of an afterthought than a well-planned, performance-enhancing tool. In addition, because annual reviews often focus on past mistakes and performance deficiencies, many employees dread them. According to the Society for Human Resource Management, 18% of women, 25% of men, and more than a third of Millennials across the board say they’ve been driven to tears by an annual performance review.

While the combination of high stress and seemingly lackluster results has caused some employers to dispense with annual reviews altogether, the annual employee performance review still has an important role to play in improving employee performance and engagement.

What is an annual employee performance review?

An employee performance review is a formal assessment that allows managers to evaluate work performance and track progress toward specific goals and expectations, which should have been established during onboarding or a previous performance review. Annual reviews also give employees a chance to evaluate their own strengths and weaknesses, recommit to the expectations of their position, and request additional training or support.

Performance reviews usually include both a written evaluation that details employee accomplishments, areas that need improving, and goals for the future, as well as an employee self-assessment form. These documents are completed ahead of time and discussed during the annual review meeting.

Why do you need annual performance reviews?

Annual performance reviews are valuable for several reasons. On a very basic level, they provide documentation for managers to track employee development and performance and act as a quantifiable evidence to justify promotions and annual pay raises (or, in some cases, to support termination of employment).

Additionally, employee performance reviews are beneficial because they promote transparency in the workplace. As Facebook HR leaders once noted in the Harvard Business Review, employee performance will always be measured in some way — the question is, will you hide the ratings system, or make it known to employees? No one wants to work for an organization that doesn’t clearly communicate the metrics by which performance is evaluated.

If approached the right way, annual performance reviews are also an integral tool for encouraging employee development, engagement, and success. Here are proven best practices that will help you get the most out of your annual employee performance reviews.

How to conduct a highly effective employee performance review

Plan ahead

The topics covered in an employee performance review are important, and conducting quick, surface-level reviews could leave employees feeling undervalued and unhappy. Instead, set aside ample time to prepare your evaluations and meet with each team member. Send out communications and employee self-evaluation forms well ahead of time to ensure everyone knows when reviews are due and when performance meetings will occur.

Go deep

Use your preparation time to get to the underlying issues behind problem areas. If an employee isn’t performing up to expectations, is it due to lack of motivation, or are there problems at home? If it’s motivation, better incentives, encouragement, or setting more attainable goals might be the answer. Perhaps it’s a matter of not having the right skills, a problem that could potentially be solved by providing employee training opportunities. Getting to the root cause of any problems upfront will help to guide your performance review conversation.

Get specific

Providing clear, descriptive feedback is an essential factor of effective performance management. Whether offering criticism or praise during an employee performance review, connect specific behaviors or choices to a particular outcome. Then, if addressing a problem area, provide actionable guidance for how you would like to see them improve. For example, “When you didn't submit your work on time last Monday, it caused our entire team to miss our project deadline. In the future, if you’re running behind or have hit an obstacle, please communicate that to the team so we can provide you with support or adjust the project timeline.”

Have an open dialogue

The most effective annual performance reviews are a two-way conversation. Once you’ve shared your feedback and reviewed the employee’s self-evaluation, open up the discussion to get their thoughts on their role within the company and their own career development goals. Find out if they might perceive their performance differently and why, or determine if there are ways you could help them improve their performance that you might not have identified yet.

Set measurable, attainable goals

Once you have identified areas that need improvement or goals employees may have for themselves, use the performance review meeting to set a career development path. Work with employees to set SMART goals that are:

  • Specific

  • Measurable

  • Attainable

  • Relevant

  • Time-bound

Individual goals might be based on the duties or expectations of employee job descriptions, related to the needs of certain projects, or behavioral in nature. When working with high performers, consider setting more challenging “stretch” goals that will motivate them to push themselves to enhance their knowledge and skills.

Take action

Finally, it’s time to discuss next steps and implement the changes necessary to support employee development (or, in some cases, to terminate their employment). You may elect to use employee assessments to identify specific skills gaps that may need improving, implement a formal employee improvement plan (PIP) to address any performance or behavioral issues, or perhaps monitor their progress through on-the-job performance metrics. Just remember to set a timeline with clear benchmarks, and then schedule regular check-ins to measure their progress.

By helping employees realize where they need to improve, set achievable goals, and receive the resources they need to succeed, annual employee performance reviews are a valuable tool for leading high-performance teams.

Want high-impact annual employee performance reviews? We can help!

Our expert HR advisors will help you maximize your human capital and improve employee retention with best practices for conducting employee performance reviews.


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