For most of us, our interaction with a performance review goes something like this: once a year, our boss gives us a form and asks us to “grade” our effectiveness, and, because we must, we fill it out and turn it in.

However, in the back of our minds, we all suspect that these so-called “performance reviews” will simply disappear into a basement filing cabinet somewhere—unopened—and never to be seen again.

And in some cases, this is how some companies actually conduct their employee performance reviews. This is a shame because performance reviews, when done right, might just be one of the most valuable internal processes a company can allocate time towards.

To help employers learn more about performance reviews and their importance, we’ve put together this great article that covers everything from how performance reviews are conducted, to how employers can leverage these reviews to improve their hiring practices.

What is a Performance Review?

As you might’ve guessed, an employee performance appraisal is an evaluation of how well, or how poorly, an employee is achieving in their current role.

While performance reviews are often bemoaned by both employees and managers for being a waste of time, they’re still an invaluable tool that can provide some important insights for everyone involved.

For starters, an employee performance review can be a great tool for reiterating the responsibilities of the position to the employee, along with any specific expectations that a manager or supervisor may have.

Additionally, in the case of self-evaluations, performance reviews are an opportunity for an employee to highlight their accomplishments to their superior, which is important because managers and supervisors often need a little help remembering important events.

Types of Performance Reviews

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Objective-Based Reviews

Objective-based reviews are designed to include employees in the goal-setting process, as opposed to goals and objectives being simply handed down by a supervisor.

This means that for an objective-based review to work, the employee and supervisor must determine the exact performance criteria that will be evaluated in a future review.

This sort of collaboration takes the guesswork out of annual performance reviews, as the employee will have a clear understanding of how they will be evaluated, which should hopefully mitigate any hard feelings that may come if they’re given a bad performance review.

After all, with this sort of performance review, the employee should already have a clear idea of whether they’ve met their predefined goals or if they came up short; therefore, there should be no surprises when the time comes to conduct the performance review.

Developmental Reviews

Tying in closely with objective-based reviews are developmental reviews.

With development-based reviews, the idea is to not only define a clear set of goals that the employee should strive to accomplish, but to also define how the company will facilitate the development of the individual’s skillset so that they can become a more productive and efficient employee.

Whether companies recognize it or not, the workforce is changing, which is especially true when it comes to millennials.

On average, the typical millennial employee cares a great deal about “purposeful” work, which also means that they are acutely aware of when their employer isn’t dedicating time to their personal development and success.

This wasn’t necessarily such a big deal in the past, as most employees would just tough it out; but now, employees are simply packing up and looking for employment elsewhere.

To help mitigate these issues, companies are now looking to utilize development-style performance reviews where the discussion goes beyond just workplace performance. Now, the discussion will also aim to include things like work-life-balance, development classes taken onsite or at an external learning facility, and a clearly defined roadmap by which the employee can grow into.

Numerical Rating Reviews

A numerical rating review is probably the most common type of performance review conducted in the workplace.

Using this method, a supervisor or manager rates an employee on a numerical scale (typically 1-10) for a defined set of performance criteria (e.g., work ethic, leadership, teamwork, etc.).

Once a numerical value has been assigned to every item, the numbers are then averaged, and the employee is given an overall performance grade.

As such, this form of a performance review can be found in most workplaces because it is simple, fast, and relatively effective at determining the performance of an employee.

However, because this type of test is so simple, there is a good chance for an employee’s accomplishments and achievements to get missed or misrepresented; as numbers don’t always reveal the whole story when it comes to performance in the workplace.

Therefore, reviews based on a numerical rating system typically only work if the supervisor and the employee can agree upon both the criteria and how the numbers are weighted.

For example, if an employee achieves an average score of 7, does that mean they do or do not qualify for some sort of compensation increase? Or, does the employee need to score between 9-10 for a significant raise?

These sorts of questions will need to be answered ahead of time to prevent any misunderstandings during the performance review.

360-Degree Performance Review

Touted as one of the most laborious types of performance reviews, the 360-degree review involves getting feedback from nearly every party that interacted with the employee being evaluated.

This means that managers and supervisors will need to interview colleagues, other supervisors, clients, and anyone else that might have some insight on the employee’s effectiveness.

As you can imagine, this sort of process can become painstakingly long; however, it does offer many benefits that make the process well worth it.

By collecting data from so many sources, managers can obtain the clearest possible picture of the overall effectiveness of the employee, without the innate biases that are present in a self-evaluation or an evaluation conducted on a numerical scale.

Critical Incidents Review

While many reviews focus on the “day-to-day” performance of an employee, the critical incidents review looks specifically at “high-leverage” moments that go beyond daily routines and examines how the employee was able to react.

This sort of performance review is especially valuable in jobs where the average day consists of mundane or trivial tasks, but there are times when quick and effective decision making (e.g., a production supervisor in a shipping warehouse) is an absolute necessity.

As such, conducting a critical incidents performance review in these sorts of situations will give managers a better understanding of the effectiveness of the employee, as evaluating the day-today will often reveal very little.

How to Use Performance Reviews to Improve Future Hiring

No matter what type of performance review your company chooses to implement, one of the most important performance review goals is to conduct the evaluation in an earnest fashion so that accurate data can be collected and utilized for other company endeavors, such as hiring.

Companies who take their reviews process seriously will have a competitive advantage over companies who don’t; such as being able to better evaluate a candidate’s readiness for a new position.

By conducting regular performance reviews, managers can obtain a clearer picture of why an employee is succeeding or failing, which can be instrumental during the hiring process as the manager can use this data to make a better, more informed decision on a new candidate.

The idea is to match the characteristics of a candidate with that of a current employee who is succeeding, and by doing so, the hope is that the candidate will achieve in a similar, if not better fashion.

Likewise, if the candidate possesses certain traits exhibited by an employee who is underachieving, that candidate can likely be scratched off the list.

Now that you are ready to review your current employees, get acquainted with how to make the process of hiring and on-boarding new employees as easy and stress free as possible.

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