How to Evaluate an Employee? The Ten Steps for Excellent Performance Reviews

What Is a Performance Evaluation?

A performance evaluation regularly reviews an employee's job performance and overall organizational contribution. It is an ongoing process whereby managers and other leaders assess an employee's skills, achievements, and growth, or lack thereof. This assessment typically involves a formal written review, feedback sessions, and goal-setting for the next evaluation period.

Performance evaluations are also known as performance reviews or performance appraisals.

Employee evaluations are practically handled by managers reviewing their direct reports' performance, skills, competencies, and work capacity in a written form. Each company has a template they follow; however, they are different by industry and might contain various observations, checklists, rating scales, outcomes, or progress toward goal achievement. The reviews also cover a space where managers mention the specific contributions through the year and areas of improvement of the employee.

Employee evaluations are usually conducted annually as part of a year-end assessment process in businesses of all sizes. Sometimes they are handled after the employee's work anniversary, and they determine if an employee gets a promotion or salary raise.

What are the Benefits of Tracking Employee Performance?

Tracking employee performance has several benefits:

1. Enhances employee engagement by recognizing their efforts and achievements.
2. Provides insights into employee strengths and weaknesses, enabling targeted training and development initiatives.
3. Supports informed decision-making regarding promotions, compensation, and workforce planning.
4. Promotes alignment of individual goals with organizational objectives.
5. Helps identify and manage underperformance early, preventing larger issues down the line.
6. Supports employee development by identifying areas of improvement and training plans.
7. Highlights outstanding professionals and next leaders
8. Supports the growth of the company vs. stagnation.
9. Provide visibility in front of senior leadership.
10. Offer opportunities for increased pay, bonuses, or promotions.

For employers, performance reviews are also a legal measure to protect against litigations on why an employee was terminated or as evidence for why someone has not been promoted. 

According to Gallup, only about 36% of U.S. workers are engaged in their jobs. Engaged employees often perform higher, which underlines the importance of performance evaluations in identifying engagement levels and addressing engagement issues.

How to effectively evaluate employees?

Here is a step-by-step guide on how to effectively evaluate employees. Our focus is split into three parts: Pre-evaluation, during the evaluation, and post-evaluation, to make it easier to follow.

1. Set Clear Expectations

From the onset, communicate clearly about job roles, responsibilities, goals, and performance expectations. This ensures that the employee knows exactly what is expected of them.

2. Establish Specific Goals

Determine the SMART goals or OKRs relevant to the employee's role. These should be measurable, realistic, and aligned with the department and organizational goals.

Here is our SMART goals model you can implement in your business.

Alternatively you can use the OKR framework to set goals and follow progress.

3. Provide Regular Feedback and Address Performance Issues Promptly

While performance reviews usually take place annually, we recommend meeting with your employees regularly to discuss their work, specific goals, and career aspirations.

• Organize quarterly check-in meetings, where you discuss progress, performance, and long-term goals advancements. Take these meetings as an informal preparation for the annual meeting.
• Provide consistent feedback to help the employee to improve their abilities. Avoid conflict and document your learnings, both accomplishments and weaknesses.
• Suport with goal achievement. If your organization is running faster, and you have more short-term goals, maybe having more 1-on-1 meetings where progress and ongoing goals need to be discussed.
• Track performance regularly. Keep track of the employee's progress toward meeting the set expectations and KPIs. 
• Address performance issues promptly. If the employee's performance falls below expectations, you must address it promptly. Don't wait until the yearly review to find out about such issues. If this happens, document this issue, and provide clear guidance about the impact of such behavior and how to solve the problem so that it never happens again.

4. Collect Feedback and Insights

If applicable, gather feedback about the employee's performance from various sources, such as peers, subordinates, and customers. This provides a holistic view of the employee's performance. 

Here are the tools to help you with data:

• 360-degree feedback surveys from peers, subordinates, and direct supervisors are great ways to learn more about employees' contributions and behavior within a team honestly.
• The employee job description to be more focused on the key areas where you will provide feedback, including strengths and weaknesses the coworker might have.
• The past performance review where you understand if there is progress from the previous report and if the recommended training and suggestions have been followed.
• The SWOT analysis with key skills, main achievements, and areas where the employee excels. List opportunities for growth and threats that might hurt teams' performance.
• Specific KPIs such as attendance figures or sales results make your analysis more accurate. 

Tip: There are online tools to track individual and team goals, providing an accurate perspective for each employee and helping you write a more specific report.

Companies that adopt regular employee feedback have 14.9% lower turnover rates than workers who do not receive input. (source: Gallup).

5. Check the employee self-assessment

A self-assessment is an evaluation where an individual assesses their own skills, abilities, and performance. It allows people to reflect on their strengths and weaknesses. The key sections typically focus on skills, goals, performance, development needs, and future improvement plans. The purpose is professional and personal growth through self-reflection and guidance for the upcoming performance review and meeting with the manager running the review.

The employee self-assessment follows the performance review format and provides many points that can be tackled during the evaluation meeting.

6. Prepare for the Evaluation

Review all the data collected, make an assessment, and prepare specific examples to illustrate your points. Your main ideas to be provided to the employee during the performance review meeting should be mainly positive, focused on the key results, and, eventually, future improvement. If there are many negative points, the employee probably should have been terminated.

• Draft your report. You can put together a draft report highlighting your key points, areas of development, and topics where more work is needed.
• Make a list of questions. Suppose some topics from the initial assessment are unclear. In that case, list questions you will address during the meeting to ensure all points are covered and maximize your evaluation meeting's overall impact.
• Planning is key. As a best practice for managers, we recommend sending calendar invites to all your direct reports for one-hour evaluation meetings 1-2 weeks in advance. Also, provide them a deadline to submit their self-evaluation so that you can read them carefully and draft your report.

7. Conduct the Performance Review

During the review, discuss the employee's accomplishments, areas of improvement, and future goals. Provide constructive feedback and listen to the employee's input and concerns. If there is a negative point you want to address, be specific, and provide a plan on how the area can be improved. You might also share some of the coming year's objectives and strategic plans.

During the performance review meeting, don't just praise your employee for good work or raise concerns. Create a place where dialogue is welcome. Allow your employee to share his strengths, weaknesses, and overall perspective about work, environment, team, managers, and ways to improve things. Listen to them about how their career goals can advance to the next step. 

There are also more introverted employees, where some good questions can spark a good conversation and uncover excellent insights for the performance review: 

• What are your goals for the company this year?
• What will be your most difficult challenges in accomplishing your business objectives this year?
• How frequently do you want to receive feedback?
• What do you like best about your job? 
• What recent professional or personal accomplishments have you had? 
• What do you think about your manager?
• What resources or assistance do you require from the department to achieve your objectives?
• What abilities do you want to learn this year?

During the performance review, don't hesitate to recognize strengths and the effort put in moving the organization forward, and motivate them by clarifying that they are high performers. Such an appraisal process fosters a culture of appreciation. Bonuses, awards, public recognition, and promotions are great ways to showcase such accomplishments.

Tip: You should review the performance, not the personality.

8. Document the Evaluation Using The Employee Evaluation Form

Record the details of the evaluation for future reference. Having all the details recorded in a digital form allows you to use the document progress and make decisions about promotions or raises.

We do provide below an editable template that you can use for your evaluations. Personalize to capture the desired criteria and ensure consistency with each evaluation.

If your employee has participated in relevant training sessions or earned certifications, include them in your evaluation report.

9. Develop a Performance Improvement Plan (PIP)

If necessary, create a plan to address performance issues. This should include clear steps for improvement and a timeline for reassessment. PIPs can also help employees improve their performance, especially when transitioning towards new roles and making a more competitive business.

10. Follow Up

Regularly check in with the employee to discuss their progress toward their performance goals. In this way, your culture will improve, and your workers will be keener to discuss issues with you during the year rather than keeping things blocked.

Tip: We do provide several examples on how to write a follow up email.

Top Employee Performance Factors

When doing a performance review, you usually need to assess the following elements:

Assess an employee's output's precision, thoroughness, and usefulness. Questions: Are the tasks completed accurately? Is the work consistently high quality? Does the employee pay attention to detail?

Evaluate the volume of work an employee produces. Questions: Is the employee able to manage their workload effectively? Do they meet or exceed productivity expectations? Are deadlines consistently met?

Measure how well the employee understands their job and keeps up-to-date with their skills. Questions: Does the employee demonstrate a strong understanding of their job role? Do they keep their job knowledge up-to-date? Are they able to apply their knowledge effectively?

Assess employees' ability to solve problems, make decisions, and implement solutions. Questions: Does the employee effectively analyze problems and develop solutions? Can they make sound decisions under pressure? Are they able to implement solutions effectively?

Evaluate an employee's ability to adapt to changes and handle unexpected situations. Questions: How does the employee handle change? Can they adapt their approach when necessary? Do they maintain their performance under changing circumstances?

Measure an employee's ability to work effectively in a team. Questions: Does the employee work well with others? Do they contribute positively to the team dynamic? Can they collaborate effectively to achieve team goals?

Assess an employee's ability to communicate clearly and effectively. Questions: Does the employee express themselves clearly and professionally? Do they effectively convey their ideas? Are they a good listener?

Evaluate an employee's ability to take initiative and demonstrate leadership. Questions: Does the employee take the initiative in their tasks? Are they proactive in identifying and solving problems? Do they take on leadership roles when appropriate?

Measure an employee's dependability, punctuality, and consistency. Questions: Can the employee be relied upon to complete tasks? Are they punctual? Do they consistently meet expectations?

Assess the employee's attitude toward work, including their enthusiasm, positivity, and professionalism. Questions: Is the employee enthusiastic about their work? Do they maintain a positive attitude, even in challenging situations? Do they behave professionally?

Other factors that can be assessed are the level of execution, consistent improvement, customer feedback, sales generated, ability to take ownership, delivering on time and on budget, attendance, and punctuality.

How is Performance Measured?

Performance is typically measured using different performance evaluation models or frameworks. Find below some of the most common ones:

1. 360-Degree Feedback

This involves collecting performance information from an employee's subordinates, colleagues, and supervisors, as well as a self-evaluation. This provides a comprehensive view of an employee's performance.

2. Rating Scales

Employees are rated based on a set of specific characteristics, such as teamwork and reliability. The employee evaluation form provided below uses a 1-5 rating scale for each criterion evaluated. 

3. Percentage of Goals, OKRs, or KPIs Achieved

If your organization is setting and tracking goals for your workers, then this measure might be the right one to spot your high performers and the employees lagging. Having concrete numbers, you can refer to is another tool from your performance review toolkit. This could include sales revenue for a salesperson, customer satisfaction ratings for a customer service representative, or project delivery timelines for a project manager. These metrics are then compared against predetermined standards or goals.

4. 9-Box Grid

Also known as the 9-box model, it is a simple tool for evaluating individual team members' talent on a performance by potential matrix. The method will highlight who are the underperforming colleagues, who are the stars, and where your people might need some training. It's a great tool to provide a perspective about the people you should promote and, most probably, the ones you need to terminate.

5. Attendance

People must rest, recover, enjoy vacations, and not burn out. Moreover, vacations help employees to come back with fresh energy and new perspectives on business problems. Still, vacations are planned absences that go through leave software and get approved by managers. This is all good. However, sometimes, unplanned absences emerge. Ok, they happen. However, it can be a problem if they constantly appear, and employees must be accountable for such situations.

Performance Review Form Template

We recommend using a Performance Appraisal Form consistently across the organization or department. Such a form typically has several sections where feedback can provide but also a numeric way of assessing progress. We provide an evaluation template below and an example you can use for reference.

We provide the Word version of the Employee Performance Review template, which is free to download.

Download the Employee Performance Review Template

FAQ Employee Evaluation

What's the Purpose of the Employee Evaluation?

The purpose of employee evaluation is to formally assess and document an employee's performance, provide feedback, identify areas of improvement, and develop plans for personal and professional growth. Evaluations also offer an opportunity to align individual performance with the company's strategic objectives, thereby supporting the organization's overall success.

Takeaways 

1. Regular Feedback is Crucial: Continuous feedback supports employee development and helps keep performance aligned with organizational goals.
2. Objectivity is Key: Evaluations should be based on measurable data and facts rather than subjective opinions to ensure fairness and accuracy.
3. Employee Involvement is Beneficial: Involving employees in goal setting and self-assessment can increase job satisfaction and engagement.
4. Documentation is Important: Keeping a record of all evaluations helps track progress, identify trends, and support decision-making for promotions, raises, and terminations.
5. Evaluation is a Two-Way Process: While managers should provide feedback to employees, they should also be open to receiving feedback from employees about management and the organization.