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 Performance Reviews: Creating a Strong Process

A strong and robust performance review process is essential for any business, but it is especially important for small ones. With limited resources, small businesses depend on each and every employee performing at their best. Having a solid review process can help a small business to:

  • Identify, develop, and retain high-potential employees,
  • Make better hiring decisions, and
  • Improve overall business performance.

Performance reviews or appraisals will look different for each company, but there are some best practices that hold true for all.

A strong performance review process involves more than a formal, once-a-year meeting.

As I wrote in my previous article, ongoing, real-time performance conversations are essential. If an employee is struggling in a particular area, the manager should not wait unit the performance review to bring it up. Instead, the manager should talk to the employee and develop a plan for improvement. This gives the employee time to work toward better performance, and it builds trust and rapport between the manager and the employee.

Make a process plan and share it with employees. If you are creating a performance review process for the first time, determine when reviews will take place and how employees will be evaluated. Be transparent. If reviews will take place at the end of the calendar or fiscal year, kick off the process at the beginning of the year. Share how employees will be assessed and why, train people on the process, and give everyone time to acclimate to it.

Keep reviews simple. One tried and true format is:

  1. Describe their top three strengths.
  2. Explain their top three opportunities for performance improvement. Keep it concise and consumable.
  3. Share any additional comments or questions from both sides.

To dive a little deeper, you could fold in a section on how the employee is performing against their role’s core competencies or the company’s strategic goals, if defined. Another option is to discuss goal setting. Goals should be specific, measurable, achievable, relevant, and time-bound (S.M.A.R.T.). But this isn’t for everyone. For many companies, just getting the nuts and bolts down on paper is great.

Consider self appraisals. It’s important for the employee to have a voice. Self appraisals allow employees to rate their own performance. Then, in the review meeting, they can compare what they see to what you see. It makes for great conversations.

Document it. Reviews must be written and signed by both parties, either on paper or digitally. This helps to ensure that everyone is on the same page, and it provides a record of the employee’s performance that can be used for future reference, like when making decisions regarding promotions, raises, or terminations. It also helps to protect the company in the event of a legal dispute.

Keep it professional. Never include your personal opinion about the employee. Personal feelings have no place in the performance review process. Think of it as a document in the employee’s records. It should only include facts based on actual events.

Take notes on performance throughout the year. When you give an employee real-time feedback, jot down a quick note. Having written feedback or event logs to refer back to when preparing reviews is immensely helpful.

As a small business leader, time is your most valuable resource. I assure you, implementing a strong performance review process is worth the effort - helping your employees improve their performance, achieve their goals, and contribute to the success of your company.

Originally published in  Small Business Monthly's November  issue of 2023 by Julie Tuggle-Nguyen, EVP of Human Resources