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An employer’s guide to running successful performance reviews

Updated 26 July 2022 • 12 min read

A successful performance review is one in which managers and employees prepare thoroughly, come with a positive mindset and leave feeling empowered to achieve their goals.

In this guide, we’ll walk you through the key components of running a successful employee performance review, including who should conduct them, how often to schedule them and what topics to cover in them.

What is a performance review?

Performance reviews formally assess employee performance and, more specifically, their contribution to the organisation over a given period of time.

Managers and the business operators gain from the performance review process by learning more about an employee’s strengths and weaknesses, as well as receiving an opportunity to offer constructive feedback on performance and career development.

Ideally, employee performance reviews should be done in line with regular business reviews, allowing managers to effectively assess how employees and teams are contributing to overall success.

Performance reviews may take place annually, quarterly or monthly. When used effectively, they boost employee engagement, encourage a culture of positive feedback and set the tone for continuous improvement.

What’s the difference between a performance review and performance management?

Performance reviews occur at regular intervals and evaluate an employee’s progress made since the prior review, but form only one part of performance management overall.

Modern performance management is the collaborative and ongoing process in which employee and business performance is assessed and aligned to one another. As a key function of human resources or workforce management, performance management techniques can include goal-setting, performance assessments and a regular rhythm of check-ins and one-on-ones.

A good performance management process will give employees the ability to provide feedback to management about what they need to support them in effectively performing their jobs. For example, employees may express a need for additional training, new hardware or even a more ergonomic workstation.

Why are performance reviews important?

Performance reviews offer insights into how individual efforts lead to collective success, ideally delivering on business objectives as a result. They can also provide an overview of a team’s strengths and weaknesses, creating opportunities for career development adjusting team structures.

Here are some of the benefits of a successful employee performance review process:

Aligns employee and business goals

Once employees understand your business vision, values and goals, as well as how their work contributes to it all, they’ll have a clear view of their accountability – both to themselves and to their team.

Creates a clear understanding of job roles

Performance reviews empower individuals to consider their role within the organisation and clarify any questions they may have.

By establishing a clear understanding and ownership of specific roles and tasks, employees and supervisors can remove any ambiguities in the workplace. Individuals are responsible for their own work and duties.

Provides regular performance feedback

Regular performance feedback leads to better communication throughout the workplace. Performance reviews help identify an individual’s strengths and weaknesses and, most importantly, make them aware of expectations.

Performance reviews can motivate employees to feel more satisfied with their work and go above and beyond their expectations.

Supports career development

Performance reviews allow employees to plan and set career development objectives. Other performance management initiatives can support them with additional training or mentoring that aligns with their career ambitions and the business’s plans.

Motivates good performance

Performance management can include rewards besides compensation for a job well done, such as time off or a bonus to recognise the work of high achievers.

Who should conduct a performance review?

Usually, an employee’s direct manager conducts their performance review as they know most about their role, current work and performance. In some cases, a supervisor, a team leader, a more senior manager, or someone from human resources might lead the performance review alongside the direct manager.

What are the main objectives of a performance review?

The main objectives of a performance review are to:

  • provide feedback

  • improve understanding

  • improve performance

  • set goals

  • reward performance.

Provide feedback

Employees can better understand what their manager and the company expects through constructive feedback. Additionally, they can ask questions and provide their immediate supervisors and managers with feedback.

Improve understanding

Performance reviews can help employees understand:

  • what they're doing right

  • where they need to improve

  • how their work fits in with the company's long-term goals.

They can also help clarify expectations and allow managers to discover and resolve any issues.

Improve performance

Performance reviews are an excellent way of highlighting employee achievements and discussing how they improve performance. They allow employees to evaluate how well their efforts match the company’s goals.

Set goals for future performance

Performance reviews allow managers and employees to discuss, agree and set goals for future appraisals that align with the organisation’s long-term goals.

Reward performance

It’s also important to reward employee performance if they’ve achieved or exceeded goals and targets. Rewards include monetary bonuses, extra time-off and promotions.

When should employers hold performance reviews?

There are no hard and fast rules for when employers should hold performance reviews. Every organisation is different – some opt for annual reviews while others hold them every month.

The important thing is that your rhythm of employee performance reviews align with your overall business reporting schedules, giving everyone the chance to assess, discuss and make changes in a timely manner.

What should be covered in a performance review?

The ability to communicate, collaborate, solve problems and achieve goals is vital. Most employers focus on specific areas or skills that employees require to perform effectively. But performance reviews should also include the following:

1. Feedback on overall performance

The first objective of a performance review is for managers to understand employees’ overall performance. From there, managers can provide constructive feedback highlighting issues and providing suggestions on improving or maintaining an employee’s performance.

2. Discuss strengths and weaknesses

The performance review is the time to discuss strengths and weaknesses. Ironing out individual weaknesses helps improve the company as a whole. But managers should also acknowledge employee strengths and find ways to build on them. Managers can identify where employees may benefit from extra support based on feedback and observations.

3. Identify potential growth areas

During a performance review, managers can provide constructive feedback and inform employees about specific growth areas and skills to improve.

For example, an employee may need to learn a new technical skill, receive management training or take on a challenging project for career growth.

4. Confirm ongoing goals

Finally, managers and employees need to identify and confirm ongoing goals. To align with performance review schedules and company goals, goals need to be specific, measurable, achievable, relevant and time-bound. At the following review, both parties can discuss and evaluate the current goals before setting new targets.

How to conduct a performance review

It's essential to conduct performance reviews positively and productively to increase the likelihood of an effective outcome. And adequate preparation from both management and employees alike is crucial to this.

1. Collect employee data and examples

Before the performance review, managers should collect relevant employee data and examples from various sources, including:

  • engagement survey responses

  • notes from 1-on-1 meetings

  • examples of recognition

  • recent feedback from pulse surveys

  • talent review ratings

  • previous performance conversations

  • hiring documents

  • strengths and work style tests

  • input and 360-degree feedback from other managers or colleagues.

The more data you can collect to add context to the review, the more valuable and fair it'll be.

2. Create an agenda

The best way to have a meaningful review is for managers and employees to create and agree to an agenda beforehand. It allows both parties to prepare adequately and avoid any surprises.

3. Prepare employees for feedback

It’s vital that you prepare employees for feedback and set out expectations for the meeting by covering these 3 items:

  • Employees should know their role in preparing for the meeting. They should check the agenda, add topics they’d like to discuss and know when and where the meeting will take place.

  • Employees should know what to bring to the meeting and what information the manager may refer to or bring to the discussion.

  • Employees should understand their responsibilities before and after the meeting and how their manager plans to help them succeed.

By aligning expectations with your organisation's performance criteria, employees won't feel confused or alarmed when their review begins.

4. Allow ample meeting time

Allow enough time for performance review meetings for employees to discuss and work through the agenda.

5. Open the review positively

It’s best to open the performance review positively by acknowledging the employee’s strengths and contributions. It lets them know they're valued, makes them more receptive to constructive feedback and helps them join the conversation comfortably.

6. Revisit existing goals

Next, revisit the existing goals, objectives and targets. Focus on areas that require more work as well as achievements. And then apply those learnings to future goals, planning and performance.

7. Ask the right questions

Asking the right questions keeps employees focused on the topics critical to the organisation’s success. For example, managers could ask:

  • what achievements are you proudest of?

  • what are your goals for the next quarter?

  • what are your development goals for the next 6 months?

  • what roadblocks stand in your way?

  • how did your performance affect the team or the organisation?

  • how can I improve as your manager?

It’s also important to encourage employees to ask questions so that you can work together to help them achieve their goals.

8. Outline next steps

Complete performance reviews by agreeing on new or revised goals. Remember to discuss ideas for training and development, new incentives, rewards or promotions. These should all follow on naturally from the topics discussed in the meeting.

Performance review tips

Here are our top 6 tips to ensure your performance reviews are a success:

1. Performance reviews should occur regularly

To cultivate employee success, you have to schedule regular performance reviews. Waiting a year is too long. A lot can happen in your workplace or with your employees during that time. And it’s important to stay aligned and keep the communication going during those changes.

The ideal solution is quarterly or monthly performance reviews, plus a 360-degree year-end review. It allows managers and employees to stay aligned on goals, progress and performance. It also:

  • helps employees understand precisely where they stand and what to do to improve

  • lets managers provide coaching and help overcome obstacles

  • provides organisations with access to the latest performance data.

Regular monthly or quarterly performance reviews don’t have to be lengthy to be effective. Keep a tight agenda that addresses relevant ongoing performance.

2. Performance reviews should be objective

To make sure performance reviews are objective, managers should come prepared with data from various sources, such as recent recognition, 360-degree feedback, talent review ratings, one-on-one notes and goal progress.

They should back up every discussion with data, not opinions. Modern performance reviews should be:

  • held quarterly or monthly

  • involve two-way conversations

  • review recent performance

  • remain transparent and collaborative

  • use current employee data

  • conclude with next steps and follow up.

3. Performance reviews should promote two-way communication

Not only should performance reviews occur regularly, but they should also be more engaging. Managers and employees should prepare and promote two-way communication throughout the process.

Discussions can address:

  • career growth and development

  • engagement challenges

  • alignment to organisational goals

  • changes or key messages from senior leadership

  • recognition

  • peer feedback

  • customer feedback.

4. Performance reviews should be forward-thinking

Traditional performance reviews centred around the past—how the year went, what went well and what didn’t go well. While it’s good to reflect on the past, it’s better to focus on the future as employees can impact what happens.

So, modern performance reviews reflect on the past but spend most of the time looking forward.

5. Performance reviews should be documented

Managers and employees need to document both positive and negative events, such as a completed project or a missed deadline, for the period that the performance review covers. Make notes as and when events occur so you can discuss and evaluate items at the performance review meeting.

6. Performance reviews should include next steps and follow up

Finally, performance reviews should include the next steps, any intermediate follow-ups and a date for the next review. This makes sure managers and employees are aligned and working towards the same goals.

Performance review mistakes to avoid

Here are 3 mistakes for managers to avoid in a performance review:

Don’t forget to be constructive

It’s better to give employees an example or to back up a point of feedback with relevant data, as well as providing any tips you can offer them to improve performance. This will help employees feel positive and open to your suggestions.

Don’t compare employees

Always try to focus solely on each employee’s individual contribution to overarching team or business goals, rather than comparing one employee against another.

Don’t provide false praise

While saying something positive in every performance review is great, it’s never advisable to give false praise. Taking this route will likely lead your employee to think they are doing better than they really are, denying them the chance to improve in the process.

Improve workforce management with MYOB

It’s essential to reviews regularly if you want to align employees to your organisation’s goals and that means having access to reporting and business insights from across your workforce whenever you need them.

MYOB’s workforce management software brings onboarding, rostering, time tracking, payroll and budgeting together in one seamless solution – making it easier to collate reporting and insights when you need them.

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