“Would you fight to keep this employee on your team?” – this is the question every Netflix team lead is expected to answer annually about each of their team members. This is how a dream team is built – not just a group of top-tier professionals, but a true community of brand ambassadors.
According to experts, this result is largely achieved thanks to an advanced performance management practice rooted in a culture of objective feedback.
In fact, Forbes research shows that objective recognition of achievements increases employee engagement by 30%.
But how can a manager objectively assess an employee’s achievements and compare them with the performance of others? To address this, most HR professionals in leading companies rely on Performance Reviews.
The Purpose and Objectives of a Performance Review
What Is a Performance Review?
A Performance Review is a systematic, structured process for evaluating employee performance over a specific period. It is based on collecting feedback from both colleagues and management.
The key objectives of a Performance Review are:
- To determine how effectively an employee is fulfilling their duties,
- To assess whether the results meet established standards and evaluate their contribution to the company’s goals,
- To identify areas for growth and develop a roadmap for the employee’s professional development.
This approach is a vital tool for optimizing workflows, boosting productivity, and fostering the growth of the company as a cohesive organization.
Why Performance Reviews Are So Popular
There are countless debates online about which type of Performance Review to choose and how often it should be conducted. Yet its popularity is undeniable, and more and more experts are calling it a powerful tool for shaping a modern business management philosophy.
Why? First and foremost, because the practice of performance evaluation brings equal value to both employers and employees.
For employees, it offers a clear understanding of their strengths and weaknesses and helps them realize how to increase their professional value. For employers, it provides a solid foundation for making informed decisions on promotions, financial incentives, or including an employee in upskilling or reskilling programs.
Moreover, it is a powerful tool for identifying those employees whose contribution to achieving business goals is the most significant – and for supporting their development and motivation.
In essence, a Performance Review is an opportunity to:
- Objectively assess an employee’s current value to the company and identify their potential,
- Deliver high-quality feedback on results,
- Gain insight into the employee’s professional interests, identify growth areas, and understand the direction their development should take,
- Develop actionable recommendations for management to create and implement policies aimed at boosting employee engagement and loyalty.
A Performance Review is a form of communication between top management and employees – one that helps improve efficiency, loyalty, and overall engagement across the organization.
The Drawbacks of the Performance Review Method
Despite its benefits, experts also highlight several aspects of the Performance Review process that require careful attention and fine-tuning:
- Subjectivity of evaluation: Human bias can significantly distort the true picture of an employee’s performance. To minimize this, it’s recommended to expand the circle of reviewers. Whenever relevant, feedback can be gathered not only from colleagues and managers but also from clients and partners. It’s equally important to foster a strong corporate feedback culture.
- Unclear goals and expectations leading to high stress levels: When companies use Performance Review results to reduce bonuses or justify dismissals, it can create a toxic work environment. To avoid this, it’s essential to set clear evaluation criteria and to cultivate a culture where employees feel safe initiating feedback and openly discussing it.
- Focus on the past rather than on growth: If a Performance Review focuses solely on past performance – especially on mistakes – without including discussions about career development, it risks losing its motivational effect.
A noteworthy example is Microsoft’s approach to transforming its performance management process: objective evaluations of past results are used primarily to assess the employee’s potential to contribute to the company’s future growth.
- Excessive bureaucracy: The process shouldn’t be overly formalized, and employees should not have to spend too much time preparing for the evaluation.
Deloitte offers an interesting case of transforming its performance management system — moving away from lengthy annual reports to regular check-ins and informal discussions about goals, motivations, and results.
- Formality: Employees often do not receive detailed feedback or clear recommendations for future growth after the evaluation.
According to a Gallup study, teams whose managers received motivational feedback during Performance Reviews demonstrated 12.5% higher productivity in the following period compared to teams led by unmotivated managers.
- Overemphasis on individual achievements: Excessive focus on individual performance can undermine teamwork and create unhealthy competition within the team.
Main Types of Performance Review
There are quite a few variations of the Performance Review process. Businesses choose the most relevant type based on their mission, key objectives, strategy, and company policies. Let’s take a closer look at the most common ones.
Traditional Annual Performance Review
This method involves a detailed annual evaluation of an employee’s achievements. The focus is on identifying strengths and weaknesses and setting future goals. The main drawback is the long gap between evaluations.
Continuous Feedback
This approach is based on regular monthly or quarterly meetings with employees to discuss work results and development opportunities. It focuses on current achievements and allows real-time adjustments to personal development plans. It also enables quick responses to identified issues. According to Forbes, 96% of surveyed employees prefer this type of review over the Annual Performance Review.
360-Degree Feedback
This method involves collecting feedback from multiple sources – not just managers, but also colleagues, subordinates, clients, and stakeholders. It offers a well-rounded perspective on an employee’s competencies. However, ensuring objectivity requires a mature corporate feedback culture.
Self-Performance Review
In this format, employees are invited to assess their own strengths and weaknesses and suggest ways to improve their performance. The main challenge lies in the risk of underestimating or overestimating one’s own abilities, so this method is often combined with other types of evaluation.
OKR/KPI-Based Review (Objectives & Key Results / Key Performance Indicators)
Employees’ performance is evaluated against clearly defined, measurable goals (OKRs and/or KPIs). This method is especially popular in tech companies and retail. Its key advantage is the transparency and clarity of the evaluation criteria.
Management by Objectives (MBO)
In this approach, managers and employees jointly set individual goals aligned with the company’s overall objectives. It is particularly effective for specialists whose roles involve clear KPIs.
Competency-Based Review
In addition to evaluating work results, this method also assesses professional skills, behavior, and alignment with corporate values. It is widely used in companies that prioritize corporate culture and leadership. The downside is that not all competencies can be measured using clear quantitative metrics.
Project-Based Performance Review
This type is commonly used by project-based companies after the completion of large-scale projects. The focus is on evaluating the employee’s contribution to the overall team result. It is especially popular in consulting, IT, and creative industries. However, it does not provide a complete picture of an employee’s long-term development.
How to Conduct an Effective Performance Review
The key to a successful Performance Review lies in thorough preparation at every stage – always with a focus on the company’s strategic goals.
Despite the variety of evaluation practices, the core stages of a Performance Review typically include preparation, feedback collection, and results analysis.
The preparation stage involves defining the goals and evaluation criteria, creating questionnaires, and selecting the respondents. Meanwhile, the results analysis stage goes beyond reviewing data – it also highlights successes and challenges and leads to drafting a personal development plan for the employee.
What Metrics Are Evaluated During a Performance Review
There’s no universal list of criteria – they’re usually adapted to fit specific roles and responsibilities. However, most experts agree that a comprehensive evaluation should include feedback on both hard skills (job-specific competencies) and soft skills.
The most commonly assessed soft skills include an employee’s effectiveness in communication with colleagues, clients, and stakeholders; engagement in internal company processes; ability to work independently within their area of responsibility; creativity and ability to apply non-standard solutions.
It is crucial to define clear metrics wherever possible, especially when it comes to:
- Quantitative performance indicators (KPIs): For sales teams, this might include the number or volume of closed deals; for marketers — growth in CTR or the number of qualified leads.
- Goal achievement (OKRs): Reflects how successfully an employee has contributed to the company’s business objectives. For example, for a project manager this could mean staying within budget, meeting deadlines, and ensuring customer satisfaction.
- Professional growth and learning: Participation in professional courses and training programs aimed at expanding knowledge and improving competencies.
- Leadership and contribution to team spirit: This also includes assessing the employee’s motivation to meet the goals that have been set.
Performance Review: Practical Tips
At the preparation stage, it is important to define the evaluation goals and the competencies that will be assessed.
This is often done using a competency matrix developed by the team’s Lead or Head. Typically, the matrix consists of a set of both hard and soft skills.
Within this competency matrix, several types of evaluation can be applied – for example, self-assessment and peer review. Each employee rates their own skills and competencies using a predefined scale, while colleagues and direct managers evaluate them in the same way.
To identify an employee’s potential, companies often use a talent management tool called the 9-box grid, which plots performance on the X-axis and potential on the Y-axis. This approach helps assess an employee’s willingness to grow – whether through acquiring new knowledge, upgrading qualifications, or progressing in their career – and helps identify future leaders.
Open-ended questions should always be an integral part of the Performance Review. It is essential to give evaluators the opportunity to justify their scores by answering questions about the employee’s contributions to projects and the team. Using concrete examples is highly encouraged, as this helps minimize bias.
Developing a culture of feedback is also crucial: employees should understand that providing objective, constructive feedback to colleagues is a skill in its own right.
Employees may also be invited to prepare a self-presentation as part of their Performance Review. This is a retrospective summary of personal achievements that have directly impacted business results.
Additionally, employees might be asked to assess their own readiness for promotion by using a Roadmap – a document that outlines the required level of expertise for specific roles.
Many companies use Roadmaps to help structure and clarify promotion paths for their employees.
How to Analyze Feedback
A standardized rating scale, approved within the company, is usually used for ranking evaluations. This could be a numerical scale (1, 2, 3…), a letter scale (A, B, C…), or descriptive categories (e.g., Top Performer, Low Performer, ABC Player — where the letter indicates the employee’s level of motivation).
The feedback analysis process involves calculating average scores and identifying strengths and weaknesses. To ensure fair and objective results, it’s important to:
- Apply clear and consistent criteria,
- Evaluate performance over the entire review period, rather than focusing only on recent or high-profile events,
- Assess overall effectiveness by reviewing all key competencies,
- Avoid bias by judging the employee individually, rather than comparing them to others.
Practical Tips for the Interview
The key to an effective Performance Review lies in thorough preparation – both from the manager and the employee being assessed.
How Employees Can Prepare for a Performance Review
For an employee, a Performance Review is, first and foremost, an opportunity to showcase achievements, receive constructive feedback, and plan for future growth. Here’s what’s important:
- Understand the format – whether it’s a formal meeting, filling out a questionnaire, or an informal conversation.
- Be ready for an honest, two-way dialogue.
- Analyze your achievements – identify key results and goals you’ve met. Highlight those you are especially proud of and describe how they’ve impacted the team’s performance.
- Be open to constructive feedback – reflect on situations where expected outcomes were not achieved. Think about the reasons why and what could help prevent similar situations in the future.
- Prepare questions for your manager – for example: What results are expected of me in the next period? What growth opportunities are available (courses, training, new projects)? What steps do I need to take to be considered for a promotion?
- Evaluate your own performance – even if the company doesn’t require a self-assessment, it’s helpful to reflect on your progress to support a more structured conversation. If you’re planning to discuss a salary increase or a promotion, be ready to justify your value to the company and explain how your role has evolved since your last review.
How Managers Can Prepare for a Performance Review
For HR and managers, a Performance Review isn’t just a formal procedure, but a powerful tool for developing the team and improving overall performance. Preparation should include the following:
- Review all relevant information carefully – this includes the employee’s self-review (if available), collected feedback, key points from previous meetings, and prior assessment results.
- Create space for an open dialogue – be prepared to listen and prepare questions that will help steer the conversation in a constructive and friendly direction.
- Take notes during the meeting – record both the employee’s input and your own conclusions.
- End the meeting with clear agreements — summarize the key achievements and growth areas; outline a specific development plan with deadlines, and document it in the HR system or the employee’s personal file.
What to Do After the Performance Review
It’s important to view the Performance Review as a starting point for future development.
Employees should carefully analyze the feedback and the development plan, then set clear, time-bound goals along with success metrics. It’s crucial to track progress regularly and seek feedback from colleagues or managers when needed – not just during the next review cycle. If challenges arise, don’t hesitate to bring them up.
Managers, in turn, should fully support employees in meeting the agreed goals, help find a mentor if necessary, and monitor progress regularly (without micromanaging). They should also provide feedback and adjust the plan if the employee is veering off track.
And most importantly – maintain ongoing communication.
Automating Performance Reviews with the SMART HCM & LMS HR Platform
Fostering a corporate culture centered around continuous improvement and professional growth requires modern tools for automating assessments and optimizing employee development processes.
SMART HCM & LMS is a comprehensive Microsoft-based solution designed to help organizations build a modern HR ecosystem. It combines all the essential HR tools – including automated competency assessments, goal setting, and skills development.
Documenting and Tracking Employee Progress
Tracking employee progress is an essential part of any development process and includes:
- Documenting Performance Review results: All assessment data is stored in the employee’s personal profile. The system automatically generates reports and integrates them into HR analytics. For example, once the manager records the review results in the HRM system, the employee receives a checklist of tasks for the upcoming period.
- Real-time progress tracking: For instance, if an employee is assigned a training course as part of their upskilling plan, the system logs the registration, monitors the course completion, and updates the employee’s competency status in their profile.
Step-by-Step Guide to Implementing Performance Reviews with SMART HCM & LMS
While Performance Reviews are a powerful tool for optimizing talent management, implementing them can be a real challenge – especially if employees lack trust in the objectivity of the process. To ensure a smooth and transparent rollout, companies should:
- Define clear goals, set evaluation criteria, select questionnaire formats, and assign roles and responsibilities for all participants.
- Involve subject matter experts from each department in developing the evaluation criteria.
- Prepare employees for the change by offering learning materials and training sessions to help them understand the purpose and procedures of the review process.
Automating Performance Reviews with SMART HCM & LMS helps eliminate repetitive manual tasks and ensures the process is as transparent and efficient as possible. The platform supports:
- Automated setup of various assessment formats (90, 180, 270, and 360-degree feedback),
- Creation of questionnaire templates tailored to roles and business goals,
- Automatic distribution of evaluation requests,
- Flexible role-based access for reviewers,
- Automated reminders for review deadlines,
- Access to video instructions on the corporate portal,
- Real-time monitoring of feedback completion status,
- Automatic generation of reports and analytics based on review results,
- Comparison with past assessments and tracking of progress over time,
- Automatic assignment of training courses (through LMS integration) based on development plans,
- Monitoring of course completion.
Frequently Asked Questions
- How often should Performance Reviews be conducted?
The frequency depends on the type of regular evaluations adopted by the company: traditional annual reviews, biannual ones, project-based evaluations (for project-driven assessments), or quarterly reviews for companies that opt for continuous feedback. It is important that each stage is well-prepared and thoroughly worked through.
- What is a self-assessment of performance?
A self-assessment allows employees to evaluate their own competencies, identify their strengths and weaknesses, and propose their vision for self-improvement to enhance their results, based on an established scale within the company.
- How effective are Performance Reviews?
According to Forbes, 83% of employees expressed the desire to receive feedback, whether it is positive or negative. Additionally, 40% of those surveyed lose motivation if they don’t receive feedback or if it is too formal.
- What are the 5 performance ratings?
There are various approaches to measuring employee competencies, either quantitatively or qualitatively. The most common 5-point scale looks like this:
- Excellent / Significantly exceeds expectations
- Exceeds expectations / Exemplary / Very good
- Meets expectations / Professional / Good
- Needs improvement / Developing / Partially meets expectations
- Unsatisfactory / Does not meet expectations
- What should be avoided in a performance review conversation?
- Criticism without examples and facts.
- Comparing the evaluated employee to the achievements of others.
- Spreading rumors.
- Using words like “always” and “never” as they can demotivate.
- Phrases like “it needs more time…” Instead, be specific about the timeframes for completing tasks.
- What issues are associated with performance assessments?
- Unclear goals and expectations, often due to insufficient communication from HR.
- Focusing on past mistakes instead of future development.
- Over-bureaucratization: employees spend too much time preparing for assessments and waiting for feedback.
- Formal approach.
- Lack of balance between evaluating individual achievements and team qualities.
One or more of these factors can create stress around the evaluation process.
- What to do if I am dissatisfied with my performance review?
It’s important to approach Performance Reviews as an opportunity to understand your strengths and weaknesses and outline a growth plan. If you disagree with the evaluation:
- Take time to carefully analyze the feedback.
- Focus on objective facts: separate genuine shortcomings from possible subjective undervaluation.
- If specific examples of your effectiveness were overlooked, request a meeting for a re-discussion.
- Avoid emotional responses during the meeting and present clear arguments.
- Ask for specific criteria and expectations for the future.
- How to improve your performance review score?
Introducing progressive employee assessment methods, like Performance Reviews, indicates the company’s interest in professional employee development and its readiness to invest in it.
To improve your performance score, it’s essential to show management your conscious, goal-oriented work on results, behavior, and professional skills. Here are some practical steps:
- Familiarize yourself with the company’s evaluation criteria and ask management what constitutes an excellent rating for your role.
- Develop a personal growth plan to reach the required level of competencies (with clear success metrics) and track your progress. Share your achievements with management.
- Regularly ask for feedback, not just during the Performance Review.
- Work on improving essential soft skills.
- Prepare for reviews in advance by regularly documenting your accomplishments, for example, in a personal results dashboard.
Interested in optimizing your company’s talent management processes? Request a free consultation here.
