Scene: A supervisor and her direct report sit across the table from each other in a small, generic conference room. The employee’s visibly nervous (What if she brings up all those mistakes I made a few months ago? Did I close enough deals in the last half of the quarter? I wonder if I can get approval for that new training program?), while the supervisor is harried, shuffling through paper to get to the right forms (I can’t believe I have to do four more of these today. And how am I going to tell Caleb that our suppliers find him impossible to talk to? And where is that form?). After a few pleasantries, some bland positive feedback, tentative talk about impersonal goals, impersonal questions about what they could improve on, and rushed form-filling, both parties make a quick exit feeling uncertain and unsatisfied. 

Thus ends another performance review cycle. 

Conducting regular employee reviews can seem like a big ask for small businesses. Perhaps there’s no system in place. Maybe everyone’s already stretched thin. Maybe you tried employee reviews and nothing changed. Or maybe you’re doing them, but it’s more to check a box than with any real expectation for better outcomes (see above).

But when done right, performance reviews provide employees with real pathways for improvement, open lines of communication between management and employees, align individual and company goals, let you articulate how employees will be evaluated and what success looks like, and give opportunities to coach underperformers and double down on high performers. And, these reviews don’t have to be complicated. 

Here’s how to design a performance review to help employees – and the company – succeed:

The Baseline: Nothing in a performance review should come as a surprise to your employee. If they’re blindsided during the conversation, something has gone wrong. Either you haven’t effectively communicated the goals of the organization or the expectations for the employee or what counts as success, or your employee hasn’t listened to or internalized them. 

Performance reviews are most effective when they’re just one tool in your employee development toolbox. Ideally, you’re giving a lot of feedback in real time, developing your relationships with your team, and nurturing a high-trust environment. When reviews come around, this means your employees already know the standards by which they’re being judged, how their role progresses the company’s goals, and what skills they should be working on. It also means that you’re prepared to have a nuanced conversation about performance, what’s causing certain behaviors, and actionable steps for growth, and what an employee’s goals are.

Frequency: Quarterly? Semi-annually? Annually? Companies in different industries and of different sizes have different standards for how frequently employee reviews are conducted. And, the frequency might vary with employee role and level (entry-level employees will probably need more feedback, and might benefit from more frequent reviews). Company goals, culture, and cycles also guide the review process – continuous improvement cultures might review more frequently. Develop a review cadence that aligns with both your company’s and your employees’ needs. Then follow through consistently. In our opinion, it’s probably more frequent than you think.

Outcomes: To get the most out of an employee review, and to provide valuable insights to your employee, it’s worth thinking through and communicating in advance what the purpose, structure, and expectations of the review are for that employee. The goal might be clearer if there’s a particular problem with an employee’s work, attitude, or behaviors: discuss and correct whatever the problem is. But the goal of an employee or performance review isn’t just corrective (and if you’re waiting for a review to bring up issues, you’re doing a disservice to everyone involved). Other possible goals of these periodic reviews include:

• Have a discussion about the employee’s performance and progress in their role, including both positive and negative feedback.

• Outline areas for improvement and specific, actionable goals for the employee to work towards.

• Establish and improve communication between an employee and you as their manager.

• Discuss their role and how it fits into the overall goals and objectives of the company – and what actions, attitudes and initiatives will provide the most value and unlock the most potential for advancement.

• Determine the employee’s potential for promotion or advancement in the organization – and give them the opportunity to articulate what advancement looks like to them.

• Provide a basis for setting compensation and benefits. 

Participation: Who’s in the room depends on your company’s size, structure, and policies, as well as what a particular employee needs in terms of evaluation, motivation, and support. The simplest answer to who should be involved in a performance review is the employee and their immediate supervisor. 

Preparation:

• Set and communicate clear objectives for the review.

• Gather information – your notes on an employee’s performance, input from the employee on what they’re proud of or want to work on, feedback from customers, team members, or other collaborators. 

• Prepare specific examples to support your review, both positive and negative, and to present balanced and objective feedback.

• Communicate the goals and ideal outcomes (see above) in advance. You want your employee to know what’s coming and to feel more at ease during this meeting, even when there are specific problems or issues to untangle.

• Prepare to listen. Actively and openly listening to your employee’s perspective on their performance, feedback, and concerns builds trust and fortifies the foundation for a productive working relationship.

• Come with answers. Prepare for your employees’ questions with specific and actionable responses: How can I be successful in the next quarter? What benchmarks do I need to hit for a raise/promotion/bonus? How can I help the department meet their goals this year?

Structure: It’s probably going to take some experimentation to figure out a specific performance review structure that works for you, for your organization, and for your employees. But here’s a quick outline to get you started:

1. Get feedback from your employee on how they would rate their performance based on their goals and objectives for the review period. It’s worth asking them to evaluate themselves first (and actively listening to what they’re reporting to you); if you start with your feedback and assessment, their response is likely to be either defensive or simply mirror what you’ve said. 

2. Then give your evaluation based on your observations and the feedback you’ve received from other stakeholders in light of the employee’s goals and objectives for the review period. Did they meet the bars for success? Exceed them? Show places for improvement? Double down on specificity and examples of both actions and impact. An employee may nod their head at “You need to be more assertive” or “You’re a good team member,” but they’ll get more utility and direction from “I’ve noticed that you have great ideas about XYZ when we’re talking one one one; you should present those in our monthly departmental meetings” or “Your co-workers have talked about how generous you are with making sure people get credit when they’ve contributed to a project.”

3. Discuss and get buy-in for the organization’s goals for the next review period. Is the focus on product development? Customer retention? Reinvestment? Talent recruitment? Whatever the business’s goals are for the next quarter or the next year, make sure your employee knows them and is ready to support them. 

4. Talk through your employee’s individual goals and brainstorm tangible action plans to get there. If you’re trying to solve for performance issues, are there courses or training available that might help? Or if an issue has to do with a lack of motivation, are there ways to restructure incentives? Or is there a way to shift their role to better capture their talents and contributions? For employees who are thinking about a promotion, a pay increase, or the next step in their career, what are the steps they need to take to get there/ What support can you provide them with to help make the case for advancement?

5. Document the discussion, goals, plans, and specific metrics for success for the next review period. 

They take work and preparation, but regular, thoughtful performance reviews are a key piece of employee development, retention, and job satisfaction.

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