Businesses use performance evaluations to assess their team’s work performance. These evaluations also help employers pinpoint deficiencies in work performance and determine the company’s expectations for the future. Written performance evaluations are best because a written evaluation creates a tangible record, which can be reviewed and referenced in the future.
The performance evaluation process generally involves a series of steps:
- Developing guidelines and standards against which an employee’s performance may be compared.
- Gathering appraisal information, which when analyzed against the established standards reflects the employee’s performance.
- Discussing the appraisal information with the employee.
- Documenting the evaluation process in the employee’s personnel file.
Businesses use performance evaluations for the following reasons:
- As positive communication tools to help employees improve job performance.
- In salary administration for determining merit increases.
- As regular workforce monitoring tools.
- In the disciplinary process where an employee’s job performance is unacceptable and could lead to discipline or termination.
Whether you’re looking to build a formal evaluation process or improve your existing one, this post will provide the actionable steps you need. In this post you’ll learn:
- What are the benefits of conducting regular performance reviews
- What are the types of performance evaluations
- How to conduct meaningful performance evaluations
- How to implement a formal performance evaluation process at your business
- How to ensure your performance review process is legally compliant
What are the Benefits of Conducting Regular Performance Reviews
An effective performance evaluation system can benefit your business in many ways including:
- Assess Employee Potential. An effective performance management helps business leaders make informed decisions about employee promotions and transfers. A sound performance evaluation system can also help you proactively identify employees with special skills and abilities.
- Identify Training Needs. Performance ratings help evaluate the effectiveness established training programs. Your business might design and target training programs to better address the performance problems caused by a lack of training.
- Assist in Compensation Planning. Linking pay to performance is an effective compensation strategy, especially at growing businesses. Reliable, consistent performance evaluation processes enable your business to predict future payroll costs and reward your high-performing employees.
- Identify and Correct Poor Work Performance. Performance evaluations generate discussions between employees and supervisors that identify poor work habits. During these conversations your and your employees can uncover mutually agreeable ways to correct issue areas.
- Defend Against Lawsuits. The performance evaluation process allows companies to document poor job performance. Employers depend on this documentation to defend themselves successfully against employee claims of unfair termination or disciplinary action.
- Motivate Employees. Performance evaluations can motivate employees in their efforts to meet your business’ performance standards. A positive evaluation assures the employee that your business recognizes their hard work and that they will be rewarded for exceptional performance.
What Are the Types of Performance Evaluations
When it comes to conducting performance evaluations, there are several different methodologies your business might opt to leverage. Some of the most popular ones are elaborated on below.
The rating scale method provides a high degree of structure for evaluations. The scale rates employee traits or characteristics on a bipolar scale where there is a neutral point and the two ends of the scale are at opposite positions of the opinion, ranging from “poor” to “excellent.”
The characteristics evaluated on these scales include employee attributes such as the following:
- Communication ability
- Work skills competence
An employer can select which traits to rate based on factors that are relevant to performance of the employment position. Proper selection of traits may protect against legal action based on a claim of discrimination.
In the essay method approach, the supervisor or manager prepares a written statement about the employee being evaluated. The essay describes specific strengths and weaknesses of the evaluated employee in job performance. It also includes suggestions for courses of action to correct any problem(s) identified in the evaluation. The statement may be written and edited by the supervisor or manager alone. It may also be composed in collaboration with the employee who is evaluated.
Management by objectives (MBO) performance evaluation is results-oriented. It attempts to measure employee performance by examining the extent to which employees meet predetermined work objectives. The objectives are usually established jointly by the supervisors and employees. Once an objective is established, the employee is usually expected to identify the skills needed to achieve the objective. Employees do not rely on their manager to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress toward achieving the objective.
How to Conduct Meaningful Performance Evaluations
Many businesses have ineffective performance evaluation processes that result in little insights for the leadership team to reward high-performers, address performance issues, and make other informed business decisions. Here are some key things to keep in mind to ensure your evaluation process is effective:
In order to be effective, performance reviews must be honest and candid. Although supervisors may be unduly harsh on employees during an evaluation, excessive leniency occurs much more often. It’s a good idea to note and praise good work done by an employee in the past. However, the evaluation must also identify any issue areas in employee performance. Defending a wrongful termination suit is extremely difficult if the reason for termination was a problem that existed for an extended period of time and was not noted on the employee’s performance evaluations. The employer’s case is further damaged when the employee received favorable performance evaluations, including favorable remarks on the categories of performance that are later involved in the reasons for termination.
Uniformity Among Supervisors
An employer should always monitor managers as they conduct performance evaluations, making sure the process is uniform throughout the organization. If your process lacks uniformity, supervisors in one department may give more favorable (or harsh) evaluations than those in another department. When these inconsistencies occur, it is difficult for an employer to defend against wrongful termination because the suit could attack the credibility of the business’ evaluation system.
Strengths and Weaknesses
Each evaluation must include a discussion of the employee’s strengths and weaknesses. Evaluations should include deserved compliments (rather than only criticism) to be fair, balanced, and objective.
Giving constructive criticism in performance evaluations also has advantages. Some constructive criticism of good employees may help lay the groundwork for negative evaluations of those employees in the future if their overall performance deteriorates. This is particularly true when an employee brings a wrongful termination suit after an unfavorable performance evaluation. When defending against a wrongful termination suit, it may be helpful for the employer to demonstrate that the employee was previously criticized for some of those same faults (which triggered the termination) on prior evaluations, even though the problem perhaps was in its infancy at that time and did not warrant an overall negative evaluation.
How to Implement a Formal Performance Evaluation Process at Your Business
If you’d like to launch a formal employee performance evaluation process or refine your existing one, consider providing the following:
- Clear written instructions to all managers involved in the evaluation process.
- Relevant training for supervisors and human resource leaders involved in the evaluation process to ensure complete understanding of all employee job duties.
- A job-related performance evaluation system.
- Reasonable precautions to guard against improper bias by the evaluating supervisor or manager.
- A procedure that includes multiple levels of review and approval of the evaluation.
- Central monitoring by human resources to ensure uniform performance rating standards among all supervisors and managers conducting the evaluations.
- A procedure that allows the employee to comment or respond to the evaluation.
- A procedure providing the employee with an appeal process of a poor evaluation, within a reasonable time after the evaluation.
- A procedure requiring the supervisor to identify specific performance goals as part of the evaluation process.
How to Ensure Your Performance Review Process is Legally Compliant
Federal civil rights and state fair employment practice laws are in place to prohibit employers from implementing performance evaluation systems that discriminate against employees based on race, color, religion, gender, national origin, or disability. To avoid liability, your business must ensure that its supervisors and managers base their performance evaluation judgments solely on job-related factors.
In determining whether performance evaluation systems are discriminatory, courts generally apply the same standards used to determine whether employee selection procedures and tests are discriminatory. Under such standards, a performance evaluation system is nondiscriminatory if it is both valid and reliable. When the system does not satisfy both requirements, the discriminatory impact of the improper factors might cause the system to violate one or more federal or state laws.
Valid and reliable performance evaluation programs normally share the following characteristics:
- The performance evaluation program is formal and in writing.
- Ratings are reviewed to ensure that high and low ratings are documented with information demonstrating what the employee did or did not do to earn the rating. Reviews also look for statistical patterns of adverse ratings and evidence that a supervisor needs more training rating employees.
- The evaluation relates to the particular job in question. This means that employees are not rated on items that are irrelevant to job performance. An evaluator who must use a preprinted form that is not specific to the job should have the option of checking “not applicable.”
- The evaluator is familiar with the employee’s job duties and actual performance. Evaluators should be allowed to state or check “not observed” when necessary.
- Employees must read their evaluations, sign the evaluation to acknowledge their reading of the evaluation, and have the opportunity to provide written commentary on the evaluation.
- Evaluations are not final until employees have the opportunity to comment.
- Higher-level management reviews all evaluations.
- Supervisors receive training in evaluating employees.
- Evaluators receive clear written instructions as to the implementation of the evaluation.
- Evaluation forms are as clear and simple as possible.
- Definitions and examples are included to clarify the scope and meaning of various rating categories.
- Standards or expectations are identified clearly for each aspect of performance and are communicated to the employee.
- Employees have input in setting performance expectations.
- The relative importance of each aspect of performance is communicated.
- The primary goal of the evaluation is to enable employees to improve. Evaluators help an employee recognize strengths and weaknesses and help employees develop plans for improvement.