Employee evaluations, or performance reviews, can strengthen your business. An evaluation allows you to discuss a team member's strengths, weaknesses, and plans for training and development to help them realize their full potential. It's also an opportunity to set and monitor goals. Finally, it's a chance to recognize and reward outstanding job performance.

All of this adds up to more successful and engaged employees — who can then help support you in maintaing business success. While the benefits are clear, if you've never conducted an employee review, you may be nervous. Not to worry: It's a straightforward process once you get the hang of it. The key to success is knowing what points to address and how best to communicate those points.

This guide provides a basic introduction to evaluating an employee successfully.

What Is an Employee Evaluation?

An employee evaluation is a review of an employee's performance by their supervisor. Evaluations are generally held at set periods, e.g., quarterly and annually. The actual evaluation generally consists of a face-to-face meeting and a written evaluation, which can then be used as a point of comparison for subsequent evaluations to monitor progress.

As part of an employee's evaluation, you might touch on points like the individual's:

  • Attendance and punctuality
  • Communication skills
  • Teamwork
  • Problem-solving ability
  • General quality of work (e.g., ability to reach goals, meet deadlines, etc.)

Benefits of Employee Performance Reviews

Employee reviews take time and thought. Go in prepared and give each person the same level of time and attention. While this can be a time-consuming process, it's well worth attempting to do it. Here are some benefits of an employee evaluation:

  • Prepare employees for greater success: Feedback is critical to improvement. An evaluation allows you and your employee to pinpoint developmental areas and gives you an idea of employee needs (e.g., further training ) to thrive.
  • Provide an opportunity for feedback: The feedback you provide in an employee performance review can be a first step in helping them get on track to greater success. Further, you can also request feedback from them, making you a better manager.
  • Create valuable human resources documentation: Every employee evaluation should have a written record summarizing the content, time, and date. This serves as a metric for measuring employee progress.
  • Legal protection: Having a written evaluation form is also valuable for legal reasons. As a small business owner, you may have to fire workers. In rare cases, disgruntled ex-workers may contest their firing or even make legal claims (e.g., accusing you of discrimination). Having a documented history of their performance (e.g., proof that they consistently came in late and didn't meet goals) can help you in these instances.

Tips for a Successful Employee Evaluation

Follow the below tips to ensure a smooth employee review process.

Come Prepared

To ensure a clear, streamlined, and productive process, it's best to create a written document outlining the points you want to address ahead of the employee's evaluation. A simple grid-style matrix can help you organize your thoughts:

Point Details Action Plan
Attendance & Punctuality Your notes, including concrete examples and documentation (e.g., a record of their attendance based on your in-house time tracker). If there's a point for improvement, note this here.
Communication Skills Your notes, including concrete examples and documentation (e.g., a fantastic presentation they gave to their team). If there's a point for improvement, note this here.
Teamwork Your notes, including concrete examples (e.g., a team project they participated in that proved difficult due to clashes with a teammate). If there's a point for improvement, note this here.

This is just a generalized template example. The matrix you create will depend on the metrics that are valuable to your individual employees, teams, and the overall success of your organization. Further, matrices need to be adapted to various employees depending on their roles. For example, a salesperson may be judged on meeting sales goals, while an editor may be judged on editorial accuracy.

Maintain Consistency Across Evaluations

While metrics may need to be tailored to an employee's role to some extent, it's important to keep general points consistent across roles, like communication or attendance. You want to maintain fairness across your employee evaluations, and it's not fair to judge one worker but not another on a basic attribute like attendance.

For human resources and legal reasons, it's also important to maintain a consistent approach to employee evaluations. You don't want to be accused of discrimination for disparate judging methods, for example.

Don't Just Highlight the Negatives

When delivering news during an evaluation, start with the negatives. Address points that could use improvement, using constructive feedback to suggest how they can improve. You can also empower your worker by inviting them to share ideas for improvement. For example, they might request additional training to master a task with which they have been struggling.

You should also emphasize good things. An employee review is just as much about providing recognition and reward as it is about discussing concerns. Starting with negative feedback allows you to end on a positive note. If you're planning to award a bonus, raise, or promotion, this is your chance.

Prioritize Transparency

Transparency is critical when delivering an employee performance evaluation. Don't generalize. Offer specific examples and documentation to back up your claims. For example, say you have a worker who is chronically late. If you use a time-tracking system (where they "punch in") you can pull up a record of their tardiness. It's not meant to shame them; it's just to back up the facts.

Providing your employee with the written overview of your evaluation will further ensure transparency and clarity. You might even go through the matrix you've created together, filling out the "action items" column together.

Set Goals Together

When inputting action items, consider the end goal that those items should lead to. Drafting a separate document outlining targets for your employee is a constructive way to motivate them. Aim to make goals SMART: Measurable, Achievable, Realistic, and Timely. Both you and your employee should keep a copy of these goals on hand for future reference.

You can empower a team member by giving them personal agency over their goals. This ensures that the employee evaluation remains collaborative. You don't want it to feel like it's simply you, the boss, casting judgement on them, the employee.

Solicit Feedback

Another way to make the employee evaluation process feel more collaborative is to invite feedback. Ask your employee whether there are things you can do to help them succeed, such as providing additional training or matching them with a mentor. You can even ask them to perform an informal self-evaluation. Do they agree with your assessment? Why or why not?

You can also ask for feedback about the evaluation process itself. You might even consider a follow-up questionnaire for employees to complete anonymously. This ensures that you'll get honest answers because people may worry that their answers will be held against them. Digital survey tools allow for anonymous information gathering.

Watch Your Language

It's not just the content that matters in a performance appraisal. Your communication style throughout the review process is also critical. Use action words and provide specifics. For example, don't just say someone has good problem-solving skills. Say they "actively seek creative alternatives when problems arise."

Also, be mindful of your nonverbal communication. Make eye contact, remain in a relaxed posture (e.g., don't hunch your shoulders or clench your fists), and turn to face the person without your arms crossed.

Manage Employee Evaluation Expenses With Skynova

Managing quarterly and annual performance reviews can be time-consuming. The right HR software can help save your time and keep an accurate record of your performance management evaluations. This may also be a business expense that you can write off as a tax dedication — talk to your certified accountant to be sure.

With managing expenses like this, trust Skynova for help. The Skynova accounting software aims to take the stress out of financial management for small business owners. Enjoy simplified tracking of expenses, income, and more. Find out how it works.

Notice to the Reader

The content within this article is meant as general information about conducting employee evaluations. It is meant as advice and is not applicable to all situations. Consult a business lawyer to ensure your employee evaluation process is in line with relevant laws, e.g., anti-discrimination legislation. Further, consult a professional accountant to ensure that any accounting tools or processes you implement are in line with accounting best practices.