Complete Guide to Conducting Employee Evaluations and Performance Reviews

Nobody likes conducting evaluations and performance reviews. But when done correctly, employee evaluations can help employees and employers improve communication, expectations, and output. 

Performance reviews are essential: Reviews help you gauge employee productivity, find areas where they could improve, and even revamp workflows for the whole organization.

Businesses benefit from employee evaluations: Clearly-defined performance criteria can help managers spot potential problems with company policies, procedures, or management strategies.

Trust and transparency are critical: Approaching employee reviews with an open line of communication is the best way to improve employee experience, satisfaction, and productivity. 

This guide will show you how to plan, set up, and conduct an evaluation. Let's get started.

A proper evaluation process benefits both the employee and the employer.

Benefits for Employers

By evaluating employees often, managers can identify problems quickly and give feedback to boost productivity and mental wellness.

Considering that it costs about a third of an employee’s salary to train them, employee performance reviews do more than keep team members motivated. In the end, they help a business's bottom line.

Employers can also use employee evaluations to improve their processes and procedures. An employee performance evaluation can give employers the information they need to make future hiring decisions, improve employee retention, and identify anyone they may need to move on from. 

Benefits for Employees

Employees who know more about their jobs are more confident, motivated, and happy. A happy workplace increases employee engagement. It also helps leadership calculate bonuses, raises, and resource allocation. 

Professional evaluations can help employees set goals and achieve them. With regular feedback, employees will know how they perform and trust their abilities more. 

Additionally, the feedback helps set clear employee expectations that support a transparent and healthy work environment.

There are four main ways managers can evaluate employee performance:

• Standard evaluations

• Self-evaluations

• Team evaluations (360-degree feedback)

• The 4C method

Each of these methods has a unique purpose. Let's dive in.

1. Standard evaluations

In a standard evaluation, the manager reviews the employee's work and overall performance. Then, they'll meet with the employee to talk about their assessment.

Standard evaluations require top-down feedback. Some managers may use a template or checklist to organize their thoughts during the employee evaluation.

Standard employee evaluation considerations

Standard evaluations can be intimidating for employees. Employees who feel intimated will be less likely to speak up for themselves.

Managers should give positive feedback and constructive criticism in standard employee evaluations. Start the meeting on a friendly note and ask employees to share tips or ideas for improving their work.

2. Self-evaluations

In a self-evaluation, employees rate their work performance, discuss personal and career goals, and list how they've helped the organization.

There’s no need to overcomplicate things here. Most of the questions on the form should mirror standard evaluation forms. The goal is to see if the employee’s impression of their performance aligns with their co-workers and managers.

If there’s a disconnect, self-evaluations give the employee time to reflect on past performance and develop a plan to improve.

Considerations for managers using self-evaluations

Managers should complete self-evaluations before meeting with employees. By doing this, the manager and the employee will be better prepared.

Employers should use self-evaluations to make decisions about each employee. These ideas might include giving an employee more tools and training or changing their job description.

Self-evaluations can reveal where people have differing opinions. It might be better for the employee and manager to write about these differences and give specific examples.

Taking the time to write it down shows that they thought about it and kept track of it — and it reduces the immediate emotional impact of results that don’t align. When employees feel they're performing well, but their manager disagrees, self-evaluations can be challenging.

These reviews are usually more beneficial when combined with other review processes.

3. Team evaluations (360-degree feedback)

In a team evaluation, people who work closely with an employee get to give their input. The employee's team members don't have to worry about being judged because this feedback is anonymous. This makes it easy for everyone to say what they think without argument.

Considerations for managers using team evaluations

The questions on a team evaluation form should be the same as those on a self-evaluation form. Focus on core competencies and categories of behavior that affect the company's culture.

Employers should include the following questions in a team evaluation:

Quantitative questions: employees score their peers' performance on a scale or point system.

Open-ended questions: employees type in their comments.

After submitting the evaluation forms, the results should be written down and given to the employee.

Important reminder: Make sure to incentivize constructive criticism and have an action plan for inappropriate feedback. Anonymous reviews have the potential to spiral out of control.

Luckily, there’s a way to ensure feedback is constructive.

4. The 4C method

The 4C method helps managers provide constructive feedback in performance reviews focusing on four key elements.

1. Context: Give context to any situation or behavior mentioned in the feedback and why it is essential to discuss.

2. Content: List specific facts supporting the feedback.

3. Consequences: Clearly state any positive and negative impact from your feedback during the performance review.

4. Change: Discuss with the employee what changes (if any) they must make to meet goals and improve their performance.

This method gives managers a clear discussion agenda and ensures critical points are covered.

Considerations for managers using 4C evaluations

The key consideration to keep in mind with the 4C method is spontaneity. You want to leave room for employees to voice their concerns and discuss their goals and achievements.

This performance evaluation method may work best for a performance evaluation with an employee who needs to make significant changes. A high-performing employee might warrant a different approach.

Employers shouldn't use reviews alone to decide on bonuses, pay raises, or promotions. One of the best ways to put your team and organization's values first is to set up a 360-degree feedback loop. 

With a feedback loop, you’ll have a collection of manager notes, employee contributions, and job-specific metrics that can help you bring an employee’s performance into focus.

For an employee evaluation, you need a plan with both employer and employee goals in mind. That said, all employee evaluations should have clear, consistent standards that transcend the corporate hierarchy. 

The first step is to look at how an employer will evaluate the employee. This way, they can identify the employee's strengths and areas of improvement.

The criteria for employee evaluations

An employee evaluation should feel like a typical conversation — but that doesn't mean you shouldn't have a plan.

Start by reviewing the criteria for evaluating an employee based on their position and initiatives, the organization's goals, the company's culture, and its size.

Be honest and let every employee know the performance standards and evaluation criteria. When reviewing the evaluation criteria, ensure you have well-written notes about the employee's performance. 

When a manager relies only on what they remember, it can hurt their credibility and make it easy for employees to dispute any claims about their performance. Employee productivity tools are a big help here.

Even though the criteria might vary based on job title or industry, an employer may look at a few core skills:

• Communication

• Teamwork

• Quality of work

• Organizational skills

• Creativity

• Work ethic

• Innovation

Consider the metrics that will help you tell an employee’s story — even in unexpected ways. For example, if a manager beats their sales goals with a unique method, make sure to rave about their creative problem-solving skills.

Identify key strengths

If employees' strengths are recognized, they are more likely to do a good job. It also helps employees better understand the skills that impact the company most. These strengths include communication skills, problem-solving skills, and job-specific abilities.

Find opportunities for growth

It can be hard to give constructive feedback. Still, this part of an evaluation is essential for employee development.

For example, employees may need to improve their time management skills. When time-sensitive issues occur, thoroughly document them. Next time you check in, provide a positive solution to this observation. It could be as simple as using a time tracker. 

Ask about their work goals

Research shows that companies that appropriately assign roles have a 42% lower turnover than those that don't.

The only way to know what these goals are is to ask. Here are some examples of questions that help:

• How can your current skills help you reach your work goals?

• What skills do you want to get better at for your job?

• How can we help you get better at what you do?

• What do you enjoy most about your job?

• What do you find most challenging about your job?

Asking about professional goals creates trust and shows employees you care more than their work. You show your employees you're willing to help them develop and succeed — even if it puts retention at risk.

Make a plan together

After discussing what went well and what could be better, it's time to create a plan to improve performance. When making a plan, you’ll need input from management, the employee, and sometimes even other departments.

The plan should include clear, measurable targets and timeframes. Managers should discuss how they can help the person learn new skills and grow professionally.

The plan doesn’t stop there, either. The employer and employee should regularly schedule follow-up meetings to ask questions and discuss concerns.

End with optimism

Everyone should feel relieved and have a positive attitude when evaluating an employee. Some employees get nervous during formal evaluations, so keeping a positive tone is essential.

According to research published in the Journal of Industrial and Organizational Psychology, 59% of employees surveyed felt that performance reviews were not worth the time invested. Additionally, 56% believed they did not get constructive feedback.

Build a culture of trust and transparency

The critical element managers should consider as they construct their employee review strategy is using performance evaluations to improve confidence and clarity across the organization. 

A lot can be gained from a successful employee evaluation, but a lot is also at stake, including employee trust. Approaching reviews with a trust and transparency mindset can improve employee review outcomes and increase employee happiness.

If done correctly, the employee evaluation process can help improve employee productivity, job performance, and work satisfaction.

The following tips will assist you in making the performance appraisal process more manageable for employees and employers.

Evaluations should be face-to-face

An employee evaluation should be a personal matter requiring face-to-face interaction — even if your team works remote.

The face-to-face review shouldn't just happen once a year. Managers can make these face-to-face evaluations less stressful by having casual one-on-one meetings regularly..

Make sure you schedule enough time

Employees should have plenty of notice when a self-evaluation is coming up. Try to give no less than a month’s notice to prepare. Managers will also need this time to review employee notes and performance metrics.

Finding time for each employee can be challenging, but try not to squeeze these meetings in to get them over with. When you don’t have time for an employee, they can see it in your tone and body language.

Provide a positive solution for negative feedback

When it comes to reviews, negative feedback is a necessary evil at times. But no matter what the outcome is for a review, always follow with a positive solution.

If an employee is upset after an evaluation, they may lack the motivation to act. Positive responses to negative feedback empower employees to impact the business positively.

Be transparent and open

Employees can’t meet goals and grow when issues are sugarcoated or avoided. Having awkward and honest conversations is challenging, but transparency is critical for employee success. 

You should always deliver feedback with tact and consideration.

There is no one answer to this question. Still, most people agree that employers should perform annual employee evaluations. 

Employers should, however, conduct less formal reviews and one-on-ones regularly. Managers frequently base their evaluations on the most recent weeks they can recall. More frequent assessments help to avoid this issue and provide a clear record of an employee's performance.

It also ensures employees have goals and objectives to work on year-round — not just at the last minute.