How to build an effective performance evaluation system

A performance evaluation system is a bit like the dentist’s wheel. Everyone knows it’s ultimately a good thing for all parties included — yet no one is too eager to face it.

You may have heard of many performance evaluation examples that failed to make a dent in an employee’s progress. In fact, according to Gallup, only 14% of employees strongly agree their performance reviews inspire them to improve. This can be because these evaluations offer no actionable results. Or because of the lack of more informal, frequent feedback throughout the year leaves employees jaded.

In any case, 14% is not good. Not for the employees, not for you (who spend all this time evaluating everyone) and not for the company.

Having an effective performance evaluation system in place can really make a difference. It improves team communication; it motivates your employees to keep striving for excellence; it facilitates overall growth. An effective system also helps weed out any “bad apples” faster — before their poor performance or behavior affects the whole organization.

How to build that system?

Consider this article your step-by-step guide. Because you know you can do better than 14%.

Eight tips for a good performance evaluation system

1. Review your current system

The first step to building anything is to take a look at your foundations. What does your current performance evaluation system look like?

It doesn’t matter if you don’t have a fully-fledged system in place — after all, that’s what this article is about. As Human Resources Manager at SILA, Payal Sondhi, writes in an Entrepreneur article, “reviewing what you already have helps build a better performance evaluation system.”

Just take a look at the pieces you already have and see what they’re actually doing for your company.

Take a note of things like:

• How often you evaluate employees
• How regular is the feedback you give them
• If there is any bias in the process
• If the evaluation helps them actually improve

Then, take a look at your objectives. What do you want your performance evaluation system to achieve? What are the corporate goals you want your employees to strive towards? How do you align your performance evaluation process to your company culture so that it doesn’t feel an awkward, alien process to people?

Once you have answers to these questions, you’ll be ready to get started with the next step.

Set performance measures

Even the best managers (and people) often have bias.

There are six kinds of bias that can come up during an employee’s evaluation, as Vice President of Employee Success at Reflektive, Rachel Ernst, writes in a Forbes article. These may be anything from contrast bias (comparing employees to one another) to recency bias (focusing only on recent performance).

To make sure unconscious bias is not sidetracking your performance evaluation goals, you need to set performance measures.

Performance measures are a set of rules that pinpoint how an employee should behave. These measures will of course differ based on your industry and on the employee’s particular role.

For example, if you’re evaluating a receptionist, a performance measure can be the number of calls they’ve allowed to ring more than three times before picking up. If you’re evaluating a sales manager, a performance measure can be how many client deals they’re closing per month.

Unsure what these measures should be in your employees’ case? Take a look at the original job description for that role and use those perimeters. This is usually a good place to start.

Of course, performance measures don’t show the whole picture. You can’t really measure attitude and soft skills — both of which are important aspects of an employee evaluation. But setting performance measures will at least give you the “bones” of your performance evaluation process.

Factor in employee training

You already know how important continuous training is to keep your employees engaged. And thanks to your LMS, you already have reports and records of everyone’s progress.

So why not take these reports into consideration in your performance evaluation process?

Sure, you’re evaluating employees based on how well they perform in their work, not based on how good a student they are. But reports from employee training can give you important insights into an employee’s engagement and character.

For example, have they attended all the live videoconferencing sessions? Have they finished their assignments on time? Have they applied what they learned into their everyday work? And have they exhibited curiosity and desire to learn more? This Training Industry article shows how identifying curious learners will help you make better overall evaluation decisions.

For legal reasons, though, you may need to mention in your training material that the course results may be used as part of future performance evaluations.

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Create a performance evaluation form

Now that you have an idea of the things you should be measuring, you should create a performance evaluation form. Evaluation forms should include things like:

• Job knowledge and skills (here you can input your insights from employee training)
• Quality and quantity of work (according to the performance measures you’ve set up)
• Attitude and habits (arriving late/early, likability with other colleagues, team spirit, etc.)

You should have different types of forms for different roles/levels of hierarchy. For example, a manager’s performance evaluation form should include things like:

• Ability to inspire others
• Ability to offer feedback
• Team performance
• Leadership skills

Again, the performance evaluation form won’t cover every single aspect of an employee’s life. But they will cover enough to help you run an objective performance evaluation process.

Let employees review themselves

Setting performance measures and creating evaluation forms may feel a bit like you’re “grading” your employees. But this is not school — and these are not your students (apart from when they’re training, of course).

Greenleaf Book Group’s CEO Tanya Hall highlights the importance of letting employees speak for themselves in an Inc. article.

It’s a good idea then to first distribute the performance evaluation form to the employees themselves. Once they fill it in with how they think they’ve been performing, then it’s your turn to do the same. At your performance evaluation meeting, you can compare evaluations and give them a chance to voice their views, before proceeding with your own feedback.

Be specific with feedback

You may build the most robust performance evaluation system in the world, but if your feedback is not specific and actionable, it won’t move the needle. Feedback matters.

Here’s what you need to consider when offering feedback during an employee evaluation:

• Balance the positive with the negative. Offer praise where needed but do help your employees understand their weak spots.
• Avoid vague comments. Your employees don’t want to hear platitudes. They want to hear specifically what they did and didn’t do well.
• Let them know the consequences of their actions. If they’ve dropped the ball on a project, chances are someone had to pick it up. Explaining the impact of their (poor) performance on their teammates can go a long way towards motivating them to improve.
• Ask them what they think of this assessment, and if they had the chance to review themselves beforehand. Now that they’ve heard your evaluation, they will have had a chance to reassess and understand things better — or explain their perspective.
• Offer a roadmap for improvement. End the session with setting attainable goals for the future, and make a plan together for monitoring their progress towards these goals.

Have “worst-case scenario” procedures ready

No one wants to think about this, but in some cases, an employee simply doesn’t work out.

If an employee is repeatedly not hitting their performance evaluation goals or not adhering to the company’s values, you need to initiate “worst-case scenario” procedures. What are those? Mainly, disciplinary and termination procedures.

There are usually three steps in this part of the performance evaluation process:

• A private, verbal warning. Focus on the specific situation/incident and make it clear that a repeat offense will result in a written warning and could lead to termination. Make sure to offer them a chance to respond/explain their actions — but keep it brief.
• An official written warning. This should be their “yellow card” moment: it should be made clear that if their behavior/performance doesn’t change, they will be let go. Make sure to include the specific steps that they need to take within an x amount of time to course-correct, and how you intend to help them. This warning note should be signed by both the CEO and yourself/their immediate supervisor.
• Termination. Here you’ll have to work with your legal department to ensure that you’re following the laws and best practices of your area and industry. Be brief and objective when explaining the reason for the termination. Make sure to let the employee know details, such as whether they will be offered severance or days of notice, what happens with any vacation days they haven’t taken, etc. If possible, end on a positive note. Highlight their good qualities and suggest other career paths they could excel at.

Set up a schedule

In most cases, the performance evaluation process is a yearly one. But is that the best way to go?

As TINYpulse’s CEO David Niu writes in an Entrepreneur article, a more frequent performance evaluation schedule may be better for both results and morale.

It’s true that the whole thing takes time and effort, as well as a psychological toll. So it’s understandable if your gut reaction to the idea of doing this more than once a year is “heck no”.

Yet, making your performance evaluation system a bi-annual or quarterly affair will be better in the long run.

For one, it normalizes the process: employees know what to expect. It also offers more opportunities for course correction and faster growth. Plus, if employees are performing really well, it’s better that they’re told often — not just once a year.

Still, you may not have the bandwidth or the resources to evaluate employees more than once a year. In that case, try to include shorter, weekly, or monthly feedback sessions in your schedule. These will be more informal, but they will still give employees an idea of how they’re doing and what they can work to fix.

Over to you

By now you understand the importance of an effective performance evaluation system.

To build one, you need to first review what you have and then set up parameters to measure performance objectively. You should allow employees to evaluate themselves, make sure you offer actionable feedback, and have steps in place for when they are not improving. Finally, you need to do all that in a consistent manner — probably more frequently than once a year.

Feeling a bit overwhelmed still? Or would like to see some performance evaluation examples?

This article offers an extensive list of evaluation comments phrased in a way that’s human, actionable — and actually useful to your team.