Impressive and effective. How to evaluate employees using the Performance Review method?

Imagine this: an employee has worked at the company for a certain amount of time and would like to discuss career opportunities. Alternatively, management may want to evaluate the team's effectiveness over a specific period. In such cases, the company should conduct a Performance Review of the employee – assessing the demonstration of professional qualities in work, effectiveness in task completion, and potential for career advancement, discussing understanding of their role in the team, providing constructive feedback, and assisting with goal setting and achievement.

This is precisely why the practice of implementing performance reviews was invented in large companies. Performance reviews are one of the most popular methods of evaluating personnel, and the frequency and depth of this assessment depend on the size of the company as well as its objectives.

The Performance review method – what is it?

First, let's clarify what we are dealing with:

Performance Review (from English "performance review") is a method of evaluating work over a specific period of time that identifies the strengths and weaknesses of an employee, provides feedback from management and colleagues, and offers assistance in setting goals for future professional development. The review process takes place one-on-one between the manager and the employee.

Why is this approach so popular?

• He uses the 180° or 360° assessment, part of which is the self-assessment by the employee of their stated work qualities (competencies), as well as evaluations from the line manager and colleagues. As a result, a person receives the most objective picture of how their skills are manifested at work.
• This is the simplest and most objective way to clarify with the employee their strengths and weaknesses, discuss closed and open goals and tasks, and set goals for the next period.
• If the employee has wishes regarding career development or salary increase, the performance review will help make an unbiased, informed decision regarding career advancement.
• Finally, this is an open way of communication with employees that positively impacts the employer's image.

What criteria are considered when evaluating an employee?

During the review, corporate and professional competencies are assessed. It considers the competencies that are directly needed for the position held, but also so-called soft skills: whether the person was good at communicating  with clients, whether they independently solved arising issues, whether they were able to approach tasks creatively, etc. All of this can be described, indicators can be added - the main characteristics that help understand how to assess a competency - and obtain a measurement of the same communicativeness or autonomy in numerical value. And this is one of the advantages of an objective Performance Review.

The review also assesses the employee's potential within the current capabilities of their position. How do they reveal themselves, demonstrate their skills, and can they qualify for promotion? Assessing potential is important for identifying active and engaged employee players who can be nurtured within the team and developed for high-level positions.

On the other hand, the effectiveness at the workplace is evaluated. It is necessary for determining the most productive employees, but on the other hand, it helps to identify which department is short-staffed to handle the tasks. To do this, it is necessary to analyze three components of effectiveness:

• closure of work goals (OKR)
• productivity at the workplace and solving everyday tasks
• achievements and contributions to the company's development over the period

What is the purpose of a Performance review?

First, regular performance evaluations provide an opportunity for team members to showcase themselves, discuss personal achievements with management, and talk about fair compensation in the form of a salary review, if appropriate.

Secondly, the method is also beneficial for the company. Performance reviews help identify the strengths and weaknesses within the team, track employee effectiveness and its decline, and understand what influences the collective. This approach is necessary for line managers to influence the career paths of their subordinates in a thorough and reasoned manner. If there is numerical evidence that an employee is not meeting their responsibilities, it is much easier to explain this by presenting facts and figures. A plus of performance reviews is their transparency - everything is open, evaluations are conducted fairly, goals and task statuses are easily tracked, so the employee has no complaints against management.

What are the stages of conducting a Performance review?

As we have already determined, there are two parties in this process - the manager and the employee of the company. Each of them prepares step by step. The manager needs to:

Determine the competencies for evaluation over the period

Select which competencies we will evaluate and define the indicators for assessment. For example, if we choose the competency "Communication Skills," the indicators for a high rating will be the willingness to take responsibility for communication with clients and colleagues, the ability to construct a logical dialogue, the ability to persuade and sway the client to one’s side, the ability to create rapport, to listen, etc.

Competencies can include:

• Level of knowledge of the product or service
• Communication within the team / with external customers or clients
• Engagement in teamwork
• Willingness to take responsibility
• Time management
• Conflict management
• Adaptability

Gather performance indicators

• KPI (from English "key performance indicators") – a quantitative assessment of completed work based on the volume of tasks and the time spent on them. KPIs, as they are also called, can vary depending on the position – the number of written scripts, social media posts, launched advertising campaigns, etc.
• OKR (from English "Objectives and Key Results") – a specialized marker of completed work depending on its impact on the company's ultimate goal. For example, game developers were tasked with getting a game into the top 10 for downloads on the Apple Store. If an employee invested in this goal, their OKR will be higher. Setting OKR goals is discussed in 1-on-1 meetings with the direct supervisor, who helps identify the most important ones.
• Work report is requested from the employee, who analyzes their tasks over a period and shares the results with the manager before the meeting.

Conduct an assessment of the activities

The employee evaluation can be conducted using the 180 and 360-degree methods. In the first case, the person assesses themselves, and their direct manager evaluates them using the same criteria. In the second case, colleagues are also involved. Using the example of 180-degree evaluation, let’s review the procedure:

• To create a questionnaire about the employee, we develop questions based on the competencies selected above. If the employee performs well, they receive a high rating. If they are inactive, the rating will be lower. A scale from 1 to 5 is usually used, where 1 is a negative result, and 5 is a positive one.
• We add questions about effectiveness and potential in the workplace. To assess these indicators, we use closed tasks completed over the period, the plan achieved during past 1-on-1s, and other resources related to the employee.
• The completed questionnaire is handed over to the employee for self-assessment. At the same time, the employee's manager evaluates them based on the same criteria.

This assessment cycle can be conducted using automated programs that help create questions, add competencies for evaluation, and send surveys to employees on time. Moreover, immediately after the assessment cycle is completed, the program automatically allows for scheduling a final 1-on-1 with the manager.

Prepare for a conversation with an employee

Before the 1-on-1 meeting, the manager should analyze the similarities and differences in the employee's evaluation results, review previous 1-on-1 meetings, and recheck whether the employee has achieved the set goals and what factors may have hindered them from doing so. Additionally, a preliminary discussion plan is prepared for an effective meeting.

Meeting with an employee

During the meeting, the employee and manager analyze performance indicators from the past period, discuss competency evaluations, review completed tasks, and collaboratively set new goals. Management must take the initiative in prioritizing – this way, the individual will find it easier to understand what to focus on first and assess their readiness level. However, this moment is often overlooked – and that's a mistake. What other errors can occur in a performance review?

Errors in performance evaluation – what are they, and how to avoid them?

The first and biggest mistake participants encounter during the Performance Review process is exaggerating or downplaying their merits. This is how the psyche works – we perceive any admission of guilt or mistake as a negative that may affect the management's attitude or even the salary level. Therefore, before the evaluation, the manager must clearly set priorities – everything being assessed should be considered only in the context of future growth in the company. Want to grow? Assess yourself soberly and freely accept the team's criticism if it is constructive.

What else should the parties involved in the evaluation consider?

• Avoid criticism without examples and facts
• Stop comparing employees and their achievements
• Spread or support rumors within the company
• Be repetitive and use arguments that have already been made
• Avoid the words "always" and "never," as this negates recognition of mistakes or self-improvement
• Avoid the phrase "I need more time," because for any task, participants clearly outline the timeframes for completion; if an employee complains that they simply ran out of time, it may be perceived as an attempt to make excuses

What to do after a performance review?

After the conversation, it is essential to document the agreements discussed to ensure that both the company and the employee have the same understanding of the situation. It is important to outline the goals that were jointly set – and to schedule the next meeting. In general, a small follow-up is required, sending out the conclusions to the employee to avoid misunderstandings. Sometimes this is forgotten, so it is the manager's task to ensure there is a written confirmation of the conversation's outcomes.

Pros and cons of conducting a Performance review

The overall benefit of the method

This type of evaluation is a good method for managing performance, motivation, and the development of your subordinates. Its significant advantage is the evaluation of an employee from multiple perspectives – self-assessment, colleagues' opinions, and the manager's opinion. The graphs obtained from the evaluations and performance coefficients can be used by the company to summarize interim and final results of the year. And, of course, it is important to remember the peculiarity of Performance Reviews – this is just one method of calculating effectiveness, but it specifically helps to retain the successes of talents that are important to the company, nurture them, and promote them up the career ladder.

Here are a few more advantages for both parties:

• Division of responsibility in the open feedback process
• Recognition of achievements and appropriate rewards
• Alignment of individual tasks and creation of a Development Plan
• Clarification of expectations and tasks
• Improvement of communication and increasing loyalty

Are there any downsides?

If we're talking about ratings that affect year-end results and the possibility of asking for a raise, we should remember that they are not always objective. Here are the drawbacks of evaluation:

• management focuses on quantitative rather than qualitative results
• poorly defined KPIs, OKRs, and development goals negatively affect a person's understanding of their role and tasks, which can lead to performance review ratings being too subjective and not reflecting the truth
• poorly developed questionnaires for 180° or 360° assessments will exacerbate the situation

The conclusion is that we should first work on objective indicators for compiling questionnaires for the staff and the manager conducting the assessment.

We are automating the review process using HRM platforms.

The tools for conducting assessments include:

• programs that help establish communication: Google Meetings, Google Calendar, individual reminder emails for meetings, etc.
• task management programs: Trello, Todoist, Evernote
• surveys and questionnaires for feedback

The problem here is that during the work process and preparation for the review, even the most meticulous managers can forget about some minor nuance that ultimately affects the mutual understanding between them and their subordinate. As a result – mistakes in communication and poor goal setting.

A platform for HRM tasks can bring tasks together if it provides the ability to conduct employee reviews. For example, the Perform module allows:

• schedule 1-on-1 meetings, immediately assign necessary tasks for the meeting, and monitor its outcomes

This is what the meeting card looks like for each employee in Perform

• write down OKRs and set priorities for goals up to their completion dates. This way, everyone will have a clear vision of what needs to be worked on – and there will be far fewer questions about deadlines
• create a 180° employee evaluation cycle with the possibility of adding questions about professional competencies, performance assessment, and potential. The employee will assess their own skills, and their line manager will evaluate the skills of the subordinate. The system will analyze the responses and compile them into a convenient chart for comparison.

180 Degree Assessment Results in Perform

• after the evaluation cycle, the employee falls into one of the blocks of the 9 boxes matrix, and management can see to which category of potential development and effective work he belongs.

Matrix of 9 boxes in Perform

Companies that use the performance review method in their work

Adobe

The assessment method at Adobe has been in use since 2012; moreover, the company utilizes automation processes to facilitate communication with employees. Over nine years, the company calculated that through reviews, it saved more than 100,000 work hours that employees spent clarifying tasks or filling out unnecessary briefs. Loyalty metrics increased by 10% after the introduction of the HRM platform.

Google

The giant in the labor market, Google, approaches employee evaluation very meticulously – the company has introduced an additional level in the review process called "calibration." After a manager creates a preliminary ranking for an employee, based on a scale from "needs improvement" to "exceeds expectations," they gather a focus group to review individual performance metrics and reduce the level of subjectivity in the ranking.

General Electric

The experience of conducting performance reviews in this company dates back to 1979 and, according to management, has become somewhat of a ritual. Over the years, the company has developed an entire application for communication with employees – it helps collect daily feedback on work processes and even allows for gathering "goodies" for activity, which can later be converted into an additional motivation metric.

The use of Performance Review, in our humble opinion, is one of the most comprehensive ways to evaluate an employee not only quantitatively but also ideologically. The idea is simple – to help understand that evaluation is necessary for the development of professional qualities. So, if all the rules of the game are followed, who would refuse to "enhance" their skills and prove that they are indeed contributing to the success of the entire company?

If you are interested in automating the employee evaluation process, take advantage of the 14-day free trial – just sign up on the company's website and get the opportunity to test the needed features.