5 Performance Appraisal Best Practices for Managers and HR

This article on performance appraisal best practices was originally published in December 2019. It was updated in September 2020 and July 2024.

According to SHRM, about 49% of companies give annual or semiannual employee performance reviews. If your company is included in that statistic, do you have a goal for your employee evaluations? Does each role have standardized criteria for performance ratings? Are managers and employees having conversations about performance outside of reviews, or is that the only time employees hear about how they’re doing?

We’ve long known that some traditional methods of evaluating employees are less effective, but that doesn’t mean you should abandon the performance appraisal process altogether. Formal performance evaluations are a necessity for employees to achieve their goals and grow professionally. They’re a valuable time not just to see where your people have been, but to coach them toward where they want to go.

Performance appraisals are for much more than just looking back at months of work, especially if they take place on a semiannual or quarterly basis. Well-executed reviews are productive conversations during which:

• Managers evaluate employees’ progress toward performance goals.
• Employees ask managers questions and offer their own perspectives on their performance.
• Managers recognize employees’ achievements and motivate them to keep up great work.
• Managers give constructive feedback, coaching employees on how to improve.
• Employees give their managers feedback, building communication and trust and helping leaders improve, too.
• Managers work with employees to set new performance goals that align with company goals.
• Managers and employees discuss opportunities for growth and advancement in their roles and at the organization and set personal and/or professional development goals.

If that sounds like a tall order, don’t worry — you’re in the right place. We’re sharing a list of five performance appraisal best practices that will help you upgrade your performance management process, evaluate employees fairly, identify and reward high-performing employees, and enable business success.

📝 Effective performance appraisals start here! Discover the top 5 best practices for managers and HR:

1. Combine Continuous Feedback With Traditional Reviews

Performance review statistics show that in general, the typical annual performance evaluation is ineffective and unpopular:

• 92% of employees want feedback more than once a year
• 77% of HR leaders do not think annual performance reviews are an accurate appraisal of employees' work
• 95% of managers are dissatisfied with how their companies conduct annual performance reviews
• Less than 20% of employees are inspired by their performance reviews

It’s no surprise that most people are less than enthused about cramming their entire year’s worth of work into one hour-long conversation. If you only check in after goals are due, there’s no way for employees to ask questions or apply your feedback to their work. So little insight into how they’re doing can leave employees feeling unsupported and unmotivated.

While we recognize that once-annual formal performance reviews just aren’t enough feedback, we don’t recommend doing away with them. Your formal review system serves many purposes:

• Standardizes performance criteria and ratings to ensure every employee is held to the same standard
• Gives a birds’-eye view and maintains an ongoing record of performance on individual, departmental, and company-wide levels
• Helps highlight strengths and weaknesses and identify skills gaps both among individuals and company-wide
• Serves as evidence when making cases for performance improvement plans, terminations, training, promotions, salary increases, learning opportunities, and more
• Gives employees the chance to zoom out and reflect on their own performance
• Provides evidence of performance improvements over time
• Shows employees how their goals are aligned with and contributing to business goals
• Opportunity to plan for the upcoming year, including goal-setting and resource allocation

Instead of replacing them, supplement your traditional review cadence with regular conversations about performance. Performance appraisal best practices indicate that shorter check-ins every week are the best complement to annual or semiannual reviews. Weekly one-on-ones reduce the preparation stress managers feel and ensure your employees get more accurate, up-to-date discussions about their own performance.

When employees get to discuss their performance more often, you’re not just helping them get better at their jobs —you’re building engagement. Gallup research shows that engagement is four times higher among employees who said their manager gave them meaningful feedback in the past week. That level of engagement translates into employees who care about their work, put in more effort, and are in it for the long run.

🚀 Boost employee performance with these 5 best practices for performance appraisals:

2. Make Goals the Foundation of Performance Appraisals

When you learn that performance review best practices indicate that annual reviews should be supplemented with continuous feedback, your first instinct may be that more frequent meetings are going to lead to less time and more stress. That could very well be the case — unless goals are at the foundation of your performance management strategy.

First, that means defining your performance management goals. In addition to static goals like increasing revenue, here are a few examples of dynamic goals that can be adapted as your company’s needs change:

• Company X is creating a new highly skilled role and plans to leverage its performance review process and data to identify internal candidates for the role.
• Company Y operates in a high-turnover industry and wants to use performance reviews to identify traits of its engaged, seasoned employees so it can nurture these among its current workforce and look for similar traits in candidates.
• At Company Z, many employees complain that they don’t understand how their work fits into the big picture. Performance reviews give Company Z the chance to increase the alignment between individual and organizational goals.

Now that they understand the why behind performance management strategy, managers can take direction from overarching business and performance management goals to set individual goals. During weekly check-ins, these goals serve as the foundation of the conversation. Rather than meeting just for the sake of meeting, performance conversations based on employee goal updates help guide the conversation and keep employees on track to achieve them.

When review season rolls around, performance goals are even more crucial. They’re like a summary of everything the employee has accomplished over the past six to twelve months and a blueprint for the performance review. When you use performance management software, it’s easy to set aligned goals and keep track of their progress. Team members can post updates visible to everyone or share private notes with their managers.

3. Don’t Wait on Tough Conversations

Negative feedback or conversations focused on mistakes are just as difficult for managers to conduct as they are for employees to hear. That’s why the conversations have often been put off or the error noted in a file to be discussed at a later performance meeting. But that doesn’t mean your people don’t want to hear this kind of feedback —in fact, it’s the opposite. 72% of employees say that constructive feedback is vital for them to grow in their careers.

It might be tempting to let the dust settle on a tough situation, but that doesn’t help employees improve or move the needle toward achieving their goals. You might even alienate employees who are struggling but don’t know what they’re doing wrong or how to ask for help. Fortunately, a process for handling mistakes both large and small can be built into your performance appraisal process.

Weekly one-on-ones can play an important role in giving less-than-stellar feedback for less serious mistakes and at the first sign of potential issues. These frequent performance conversations are employees’ opportunity to solicit feedback and ask questions about tasks or projects they’re struggling with. They give managers a chance to address issues and provide coaching long before formal appraisals take place or more serious action needs to be taken.

If this approach is successful, managers can build trust with their direct reports and help improve their productivity and performance ratings. When more serious issues arise or significant mistakes are made, performance appraisal best practices recommend scheduling a series of meetings.

The first meeting should occur as soon as possible after the incident with the intent to find a solution that leadership and the responsible party can agree on and act on right away. Whether it’s a performance improvement plan (PIP) or extra training, start on the next action items immediately.

The next meeting should be scheduled for the next week when the solution is in full swing. It should focus on how the action items are progressing and how to avoid similar mistakes in the future. The last meeting should happen after the problem has been solved and will serve as a progress check for the employee and manager. Whether the issue persists or is resolved, ensure that managers’ feedback in the next formal performance appraisal accurately reflects that.

The goal of prioritizing these tough conversations is to address issues head-on and before they become bad habits or big, bottom-line-affecting problems. It also spreads out the negative feedback so that it doesn’t permeate every performance conversation. This process also ensures that repeated mistakes and large missteps are thoroughly documented in the event of a termination.

4. Request Your Own Feedback

Performance reviews are only as effective as the relationship built between the participants. Trust between employees and their managers is non-negotiable if you want employees to share their struggles honestly. Of course, that trust isn’t built overnight.

To build and strengthen trust, encourage managers and anyone in a leadership position to be open to hearing honest feedback from any employee, new or tenured. The perfect time to do that is during those weekly one-on-ones we’ve mentioned, as well as during performance appraisals. This shows employees that your company cares about what its people have to say and is committed to enabling their success.

If managers are struggling to get useful feedback from their employees, we’ve got pointers for starting the conversation. During weekly one-on-ones, managers can use these 10 essential factors of engagement to dig into how employees are feeling:

• Recognition
• Feedback
• Happiness
• Personal growth
• Satisfaction
• Wellness
• Ambassadorship
• Relationship with managers
• Relationship with colleagues
• Goal alignment

If you use integrated performance and employee engagement software, you can add to managers’ insights with the plethora of templated and customizable employee surveys at your fingertips. You can effortlessly send out a survey to employees, gather their feedback (anonymously, if they prefer), and analyze the results with management teams. Acting on these insights is invaluable for building trust with your people — and improving your performance management strategy.

5. Communicate the Process and Your Expectations

When a performance review program has been developed and agreed on by your leadership team, you need to outline how it works and the expectations for employees. Explain what’s changed about performance appraisals, including any new tools you’re using to give reviews or a change in the review cycle cadence. Create an FAQ for your employee handbook or company intranet to make the process accessible and less confusing.

This is a great way to set expectations for performance from day one on. If the structure of performance reviews changes at different levels, the employee will always have a place to reference the process, no matter their career path. It also creates a system of balance for managers, empowering employees to take ownership of their own progress and goal development. With a defined process and clear expectations, no one will be unprepared for a performance review.

9 HR Resources for Giving Better Performance Reviews

Performance reviews are a necessity, but when you stick to a traditional approach, you risk leaving your employees unsatisfied and less productive. We put together a bundle of HR resources to help you break the mold and make reviews more effective and productive.

Find everything you need to boost productivity and motivate your people in ClearCompany’s Performance Resource Megabundle:

• Launch impactful performance reviews with ready-to-use templates
• Learn how to set and achieve SMART goals that drive results
• Visualize and create your unique company culture
• Get tips on how to give specific, actionable feedback to employees
• Spark meaningful discussions around employee performance and goals

Take the first step toward better performance appraisals —download your Performance Review Resources now.