A performance review (sometimes called a performance appraisal or employee review) is a structured, formal evaluation of an employee’s performance at work. Performance reviews are typically held between managers and their direct reports once or twice a year, giving both parties the opportunity to:

• Reflect on what’s going well.
• Identify challenges that might be interfering with employee performance.
• Explore ways to develop new skills or strengthen existing ones.
• Set clear, measurable goals and development opportunities for the next review period.

While it’s easy to treat performance reviews as backward-looking evaluations, the most effective performance reviews focus on the future and finding opportunities for improvement, not reasons for punishment.

What is the Objective of an Employee Performance Review?

Performance reviews are all about aligning an employee’s performance with the organization’s expectations and long-term goals. This typically involves the following three objectives:

• Performance Planning: Establishing clear, measurable goals that define what success looks like for both the employee and the organization.
• Employee Empowerment: Celebrating wins and providing positive feedback on performance, making sure to connect individual contributions to the team’s overall success.
• Learning and Development: Identifying skill gaps, training opportunities, and new challenges to encourage continuous improvement and professional development.

Key Performance Review Criteria

Effective performance reviews measure both what employees achieve and how they achieve it. Here’s a look at the typical performance criteria evaluated during performance reviews:

Performance Review Criteria
Competency-Based Skills	Soft Skills
Job knowledge and expertise Quality of work Productivity and efficiency Decision-making and problem-solving skills Leadership	Collaboration and teamwork Resilience, flexibility, and adaptability Creativity and innovation Emotional intelligence Alignment with company values

The Performance Review Process

A good performance review process is structured, transparent, and centered around employee growth and development. Here’s what the annual performance review process typically looks like:

1. Set Clear Goals: Define SMART goals (specific, measurable, achievable, relevant, time-bound) and write them down in the performance review template or form. Make sure to connect each goal to the employee’s job description and overall team/organizational objectives.
2. Track Progress: Use the performance review form throughout the year to note achievements, challenges, and feedback during regular check-ins.
3. Evaluate Job Performance: When performance review time rolls around, assess progress based on the agreed objectives.
4. Discuss and Align: During the review meeting, walk through the form together, making sure to clarify expectations and agree on the next steps.
5. Plan for Professional Development: Use the form to create an action plan of next steps, which should include any new performance goals, continuous learning opportunities, and mentorship plans.

Common Problems in Performance Reviews (And How to Mitigate Them)

Performance reviews can be uncomfortable for both managers and employees. Here’s a look at some common challenges that can arise during performance reviews and how to mitigate them ahead of time.

Common Problems in Performance Reviews and How to Mitigate
	What Happens	How to Mitigate
Unclear Performance Measures	When success isn’t clearly defined, feedback becomes subjective, and employees may not be clear on what’s expected of them.	Set SMART goals. Keep all goals tied to the employee’s job description. Provide specific feedback, with actionable advice on areas of improvement.
Lack of Reliable Evidence	Feedback based on memory instead of data can lead to inaccurate or biased assessments.	Track progress continuously using the review form, notes, and measurable performance data. Document wins and challenges throughout the year.
Manager Bias	Personal preferences or unconscious bias can distort evaluations, which can damage long-term trust and team morale.	Use standardized evaluation criteria tied to measurable goals. Provide bias-awareness training for managers.
Conflict Between Reviewer and Employee	Disagreements can arise if feedback feels one-sided or unclear.	Share the performance criteria in advance. Focus on facts over opinions, using specific examples to keep discussions objective. Encourage two-way conversation by encouraging employees to share their perspective and ideas for improvement.

7 Golden Rules for Conducting an Effective Performance Review Meeting

A performance review meeting can either inspire growth... or create tension. The difference comes down to how it’s handled. When managers come prepared, stay open-minded, and use their performance review template as a guide (not a script), the conversation can become more collaborative instead of confrontational. Here are seven golden rules to make every employee review meeting productive and positive:

1. Come Prepared: Review your notes, employee goals, and the completed performance review form ahead of time to keep the discussion focused.
2. Create a Comfortable, Collaborative Environment: Choose a relaxed, private setting where both parties feel safe to open up.
3. Be Specific and Balanced: Use real examples from the review form, making sure to highlight wins and provide constructive feedback.
4. Stay On Topic: Keep the discussion solely about an employee’s performance and career development, not personal attributes.
5. Address Challenges Directly: Talk openly about obstacles and work together to find solutions. Addressing challenges directly helps build trust and removes barriers to better performance.
6. Stay Forward-Focused: Focus on how to apply feedback going forward instead of dwelling on past performance issues and mistakes.
7. End on a Positive, Actionable Note: Wrap up each performance review with clear, measurable goals and an employee development plan for the next review period.

Final Thoughts: Using Employee Performance Reviews Strategically

The real strategic value of performance reviews comes down to how consistently they’re used to guide, support, and develop employees over time. Here are some best practices for organizations looking to use performance reviews as a strategic tool for employee development and engagement:

• Make Employee Development a Continuous Process: Don’t wait for an annual review to talk about performance. Regular feedback keeps employees engaged within their job role, preventing small issues from spiraling into bigger ones.
• Equip Managers with the Right Skills: Train managers to approach feedback with empathy and optimism, focusing on solutions, not shortcomings. Constructive feedback delivered with a positive attitude and mindset helps employees feel supported instead of criticized.
• Emphasize the Benefits to Both Managers and Employees: Transparency can help prevent misunderstandings and defensiveness. By framing the process around professional growth and development, both sides will be more inclined to engage in open, productive dialogue.

When performance reviews are treated more like an ongoing conversation rather than a box-ticking exercise, they can become a crucial tool for improving employee performance, job satisfaction, and even employee retention in the long-term.

Frequently Asked Questions About Performance Reviews

1. How many performance reviews should an employee have each year?

   Most organizations hold one or two formal performance reviews per year. However, it’s considered to be a best practice to keep feedback continuous with quarterly or even monthly conversations to help keep performance on track.

2. Are performance reviews conducted by the human resources (HR) department?

   HR typically oversees the performance review process, providing structure, tools, and training for managers. However, the actual review conversations usually happen between the employee and their direct manager, since they work together daily and can provide the most accurate feedback.

3. What are some performance review examples?

   Performance reviews can take several forms, depending on company culture and goals. A few specific examples include:
   • Annual Reviews: Formal evaluations covering performance over an entire year.
   • Quarterly Reviews: Shorter, more progress-focused check-ins.
   • 360-Degree Feedback: Evaluations that involve input from peers, subordinates, and other supervisors.
   • Project-Based Reviews: Evaluations after major projects or milestones.