How To Evaluate Employee Performance

Leading an employee performance evaluation, also known as a performance review or performance appraisal, is like giving a report card to grown-ups.

A performance evaluation provides a snapshot of an employee's performance and contributions to the organization over a period of time. An effective evaluation process can have a positive impact on an employee’s day-to-day efforts, impact on the organization, and long-term aspirations.

In this article, learn more about what an employee performance evaluation is, feedback methods, how to conduct an impactful evaluation, and tools to help your organization streamline the process.

What is an employee performance evaluation?

An employee performance evaluation is a formal review of a team member’s work, performance, and contributions toward the business over a specific period of time. Employee evaluations are typically facilitated by an individual’s supervisor or manager and focus on reviewing each worker’s strengths and areas for improvement based on previously agreed upon goals and expectations.

As an example, a sales team member may have a semi-annual performance evaluation that covers their progress toward reaching sales targets, prospect or customer satisfaction rates, and adherence to sales team processes.

Set clear expectations from the start

Setting expectations before evaluating employee performance can boost employee confidence and support productive performance conversations. Clear expectations can help workers understand what success looks like—for themselves, their team, and the organization as a whole. And yet, less than half of employees (48%) know what’s expected of them at work. This confusion can drag down employee engagement and motivation.

To help clarify employee expectations:

• Define job roles and responsibilities. This includes a job description, the specific tasks and deliverables they need to produce, and their position within the team.
• Set targets for work performance. On a regular basis (i.e., annual, quarterly), work with employees to set goals and objectives that are specific, measurable, achievable, relevant, and time-bound (SMART goals).  
• Establish realistic key performance indicators (KPIs). KPIs are the metrics used to track progress toward goals and objectives. However, only 21% of employees strongly agree that they have performance metrics that are within their control.
  

When employees have a clear understanding of what they need to accomplish, they can more readily adapt as circumstances change and they can stay better focused on the outcomes they’ve committed to.

Effectively evaluating employee performance requires a combination of methods to provide a comprehensive view of each worker’s strengths, areas for improvement, and impact on the organization as a whole. Common methods are outlined below.

How to evaluate employee performance

Effectively evaluating employee performance requires a combination of methods to provide a comprehensive view of each worker’s strengths, areas for improvement, and impact on the organization as a whole. Common methods are outlined below.

360-degree feedback

For a more complete view of an employee’s contributions, draw on other sources of feedback—not only your experience as their direct supervisor, but also their peers, colleagues, subordinates, contractors, and the customers or clients they interact with.

This more holistic view of performance and behavior can provide valuable insights you might otherwise be blind to, revealing both strengths and areas for improvement such as how the employee communicates, solves problems, leads, and collaborates.

360-degree feedback can be difficult to implement without company-wide buy-in. That’s because comments should be anonymous in order to encourage honesty and minimize biases, and people should be given guidelines—even training—on how to give effective and constructive feedback.

Peer evaluations

A key element of 360-degree feedback is peer evaluations, which can help provide a more complete view of how employees communicate and collaborate than manager feedback alone. Peer evaluations can offer insights into workers’ teamwork or interpersonal skills and help managers uncover accomplishments, strengths, or challenges they may not have otherwise known about. These evaluations are also particularly helpful for workers involved in cross-team collaboration.  

When collecting peer evaluations, use a standardized form or template and encourage transparency and honesty so all workers evaluate their team members on the same scale.

Self-evaluation

An employee self-assessment, also known as a self-evaluation or self-appraisal, is when an employee takes a critical look at their own performance as part of the performance evaluation system.

A self-assessment typically follows predetermined criteria and performance expectations, like a performance appraisal form or employee development plan. It’s a chance for the employee to consider their recent accomplishments, challenges, strengths, areas for improvement, and other matters they want to raise as part of the review process.

An employee may also want to reflect on:

• Whether they’ve made progress on their goals—and, if not, what hurdles they ran into
• Skills or knowledge gained and how they can be leveraged going forward
• Informal feedback the employee has received from others
• How they’ve excelled over this review period and how they can carry that momentum forward
• Additional support or resources that would help them reach their goals
  

Incorporating self-evaluation into this process encourages ownership and personal accountability. It also creates a foundation for a more honest and effective discussion between you and the employee. They may come prepared to highlight things you’ve missed, to add context to a situation, or to provide a different perspective on points you’ve raised.

Quality of work

This method of feedback focuses on assessing a worker’s output, rather than qualitative feedback from peers and other sources. Measuring quality of work is most effective when progress is continually tracked over time, rather than attempting to reflect on a team member’s work when the time comes to evaluate employee performance.

Ways to measure quality of work include:

• Tracking quantitative metrics related to customer satisfaction, time to resolve customer conflicts, error rates, and adherence to deadlines and company processes
• Developing checklists or rubrics to objectively assess all employees’ work
• Auditing or reviewing individuals’ completed work
• Reviewing work quality over time to identify improvements or opportunities for additional training

Expectation setting

In addition to setting expectations when workers join your team and before performance evaluations, setting expectations for next steps following evaluations is important. This method involves clearly defining the path forward based on the evaluation results.

Elements of expectation setting include:

• Working collaboratively to identify goals for the next review period
• Identifying detailed action steps for areas of improvement, including opportunities or resources for professional development
• Setting specific timelines for making progress toward and achieving new goals
• Scheduling check-in points to review progress, such as during recurring one-on-one meetings

Importance of frequent feedback

Performance review cycles are typically done on an annual basis, but for many employees that isn’t enough. One survey found that 63% of workers want more “in the moment” feedback on their performance. This desire is particularly strong among millennial and Gen Z workers, who want input that will help them reach their goals and move forward in their careers.

Instead of waiting for an annual review, create an employee feedback loop that has both purpose and a sense of momentum.

Steps you can take include:

• Considering a 90-day cadence. Quarterly milestones are increasingly common because a period of 90 days is short enough to stay focused but long enough to make measurable progress. Use this regular opportunity to discuss performance, track progress, and review longer-term goals.
• Encouraging open and honest communication. Regular employee reviews can help you learn workers’ thought processes and perspectives. When respect, honesty, and an open mind are encouraged, performance discussions with employees can be more productive.
• Providing positive and negative feedback. Feedback should aim to help the individual employee improve—whether you encourage them to do more of the same or offer suggestions that may help them excel next time. However, giving constructive feedback isn’t only about improving performance, but is also an important way to show appreciation and recognition for a job well done.
• Addressing performance issues as soon as possible. Delivering critical or negative feedback is never easy, but if employee performance falls short of expectations, you should address it promptly. An annual review or quarterly check-in shouldn’t be the first time an employee hears about a problem. Document any performance issues for future reference and schedule a meeting as soon as possible to provide clear feedback and guidance on how to improve.

How to conduct a performance review

Conducting a performance review requires a thoughtful, step-by-step process. By aligning on and implementing a consistent performance review process, your team can evaluate all workers on an even scale and hold individuals accountable for reaching performance goals.

With the right process in place, your organization can also more effectively make business decisions related to raises, promotions, or additional training based on the outcomes of performance evaluations.

Preparation

Adequate preparation before scheduling and conducting performance evaluations can help ensure the discussions are productive and help drive improvements with both individual team members and across the organizations.

Steps to consider as you prepare for performance reviews include:

• Developing templates for manager feedback, peer feedback, and self-evaluations
• Keeping an ongoing record of worker accomplishments, areas for improvement, and other performance data so you don’t overlook key information when it comes time for reviews
• Writing clear, concise employee evaluations for each individual
• Drafting talking points to expand upon what is written in evaluation forms
• Blocking time for employees to complete self-evaluations
• Scheduling training sessions for both managers and employees to learn what to expect during the performance review process, along with guidelines and best practices
• Creating a frequently asked questions (FAQ) doc with common questions and answers about the performance review process
• Scheduling meetings with advanced notice so team members have enough time to prepare

During the review

Once you’ve prepared, the next stage is conducting individual performance reviews. During this time, you have the opportunity to meet with each employee to discuss past performance and look ahead to future goals and expectations.

Here are some ways to support smooth performance reviews:

• Discussing all points on feedback and self-evaluation forms
• Tying feedback to the role, responsibilities, and specific goals, rather than the individual employee
• Sharing specific, measurable data with employees when discussing performance
• Actively listening to employee feedback, such as asking for clarification on certain points, asking follow-up questions, and taking notes
• Leaving time for each employee to ask questions
• Outlining solutions for improvement, such as additional training or development resources  
• Collaboratively identifying SMART goals with each employee for the next month, quarter, six-month period, or year
• Verbally recapping overall performance feedback and next steps at the end of the meeting

Post-review

Following up after the review can help ensure employees have the support they need and stay on track with goals discussed during the meeting. Written follow up is also important because in many cases, workers may be stressed or anxious during the performance evaluation meeting, which can present challenges with retaining all the information discussed.

Consider the following actions after each employee performance evaluation:

• Send a follow up email to each employee to thank them for their time, reiterate feedback, and confirm next steps
• Circulate performance evaluation feedback as needed, such as uploading to performance management software, sending to other leaders on your team, or sharing with HR team members
• Compare employee evaluation data across departments and the organization to identify trends and insights
• Connect with HR team members and other leaders to discuss recommended next steps for each worker, such as raises, promotions, or development opportunities
• Offer ongoing feedback and support during recurring one-on-one meetings
• Share professional development resources, such as online courses or certifications, to help employees improve in their roles

Employee evaluation challenges and solutions

Effective employee evaluations are essential to the success of both workers and the business as a whole. Understanding and addressing common challenges can help increase the likelihood of conducting smooth, impactful employee evaluations.

Common employee evaluation challenges include:

• Bias. Conscious or unconscious bias can have a negative impact on employee evaluations and lead to unfair evaluations. Implementing structured, objective evaluation forms, conducting bias awareness training, and using 360-degree feedback can help your organization minimize bias and conduct more balanced evaluations.
• Unclear feedback. Poorly defined expectations and vague language during the performance evaluation process can lead to lack of clarity or confusion. Set clear expectations and use objective language rather than subjective language. Phrases like “I believe” or “I feel” are subjective, and can diminish the importance of critical feedback. Also have clear metrics, data points, and actionable next steps to clearly convey feedback and areas for improvement.
• Employee anxiety. Evaluation discussions can be stressful for employees. To minimize employee anxiety and support productive performance conversations, share more frequent feedback between formal evaluations and conduct employee training so they know what to expect. During employee evaluation meetings, engage in active listening, encourage workers to ask follow up questions about feedback, and work collaboratively toward aligning on next steps.

• Lack of follow up. Limited or no follow up after an employee evaluation can hold workers back from reaching goals. Effective follow up can show team members they’re supported and hold them accountable to agreed upon next steps. Follow up in writing with immediate next steps, connect with your HR team about potential actions related to promotions, raises, or internal transitions, and continue to check in with team members about their performance during recurring one-on-ones.

Tools for performance evaluation

Organizations are increasingly adopting technology-powered tools to streamline processes across business functions, including for performance evaluations. In fact, data from Verified Software Research projects that the global performance management software market will see a combined annual growth rate of 12.21% from 2024 through 2031.

Examples of tools that can help support performance evaluation include:

• Performance management software. A technology platform that helps companies track, evaluate, and improve employee performance through integrated features such as goal setting, feedback loops, performance reviews, and data analytics. Top performance management software providers include Lattice, PerformYard, Trakstar, and 15Five.    
• Feedback tools. Software applications or platforms that enable managers, employees, and peers to provide constructive feedback to one another, which helps support timely, structured feedback processes. Feedback tools include Qualtrics, SurveySparrow, Spidergap, and Leapsome.
• Skill assessment tools. In addition to collective feedback, reviewing past work, and tracking progress toward goals, skill assessment tools like eSkill, Criteria, iMocha, and Harver can help your team assess workers’ skills during the performance evaluation process.
• Learning management systems. Once you identify areas for growth or improvement as part of the performance evaluation process, learning management systems such as TalentLMS, 360Learning, Docebo, and AbsorbLMS can help employees build new skills or strengthen existing competencies.

Employee performance review template

An employee performance review template is a document that’s standardized across a department or company for use as part of performance evaluations. The template typically incorporates a numerical rubric or similar rating system, specific feedback and examples collected during the review cycle, and space for additional performance evaluation comments to provide clarity and motivate employees.

Many performance management software providers and feedback tools include integrated performance review templates, which streamline the process of centralizing and identifying insights for feedback across employees and departments.  

The performance review template is often built around core competencies, values, and behaviors that have been prioritized across the organization. The template might include sections on:

• Job performance
• Progress toward or completion of goals
• Quality of work
• Skills and competencies
• Reliability
• Initiative and creativity
• Interpersonal communication
• Advancing diversity, equity, and inclusion
• Cooperation and collaboration with others
• Overall contribution

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Sample performance review

The following is a sample performance review for an employee named Alex Brown who joined a software technology company about a year ago in a customer support associate role.

This employee has strong performance overall, adheres to deadlines, and collaborates well with team members. However, they have opportunities for growth and improvement by enhancing some of their technical customer support skills and paying closer attention to detail.

Click to view full size

Close gaps with a performance improvement plan

Performance assessments and professional development work hand-in-hand toward a common purpose: to help employees succeed while building a sustainable and competitive business. Part of this process is creating an employee development plan for team members, which can be a great foundation for the evaluation process.

An employee development plan is a document that sets out a highly individualized career path and includes details such as employee goals and objectives, learning and development opportunities, metrics to help track progress, and an implementation plan.

If an employee isn’t meeting performance standards, also consider creating a performance improvement plan (PIP), which is a formal document that highlights specific areas of improvement. A PIP provides a guide to help them make progress. While PIPs can be part of employee development, they’re most often used to help employees transition into new roles or to address ongoing work performance issues.

In any case, think of a PIP as an educational tool that realigns an employee’s performance with an organization’s expectations. When followed, performance improvement plans can help employees:

• Meet or exceed job requirements
• Access the support and guidance they need to succeed
• Move toward promotions and advancement opportunities
• Bring a stronger sense of confidence to the employee’s work
  

That confidence and clarity can have an outsized impact on an employee’s position in the workplace, with the potential to increase productivity, improve morale, and keep your most talented people working with the company over the long term.

Recognize and reward high performance

Performance reviews are as much about recognizing and celebrating an employee's achievements and strengths as they are about motivating improvement and identifying top performers.

The information gathered as part of the employee performance review process often feeds into a company’s overall workforce management strategy, which can in turn influence promotions, succession planning, training and development, and compensation and benefits.

Use the appraisal process to foster a culture of recognition and appreciation. Ways you can support this include:

• Recognizing top-performing employees with promotions or bonuses
• Highlighting special achievements with team or company awards
• Sharing public recognition via email, in team chat channels, or during meetings
• Offering top workers stretch assignments or mentorship opportunities to continue building their skills
• Hosting team-building activities to celebrate team milestones or achievements

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Learning how to evaluate employee performance is an important skill that can help your team challenge themselves and perform at their best. Establish a process that sets clear expectations, uses specific data, and prioritizes fairness, consistency, and transparency. Incorporating these techniques can help you create a stronger and more robust team.

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