August 25, 2023

The Ultimate Performance Review Process: 6 Steps for Success

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Key takeaways

  • Performance reviews facilitate fair promotions, salary increases, and workplace modifications while ensuring employees with comparable job roles are evaluated similarly.
  • Developing a successful performance review process involves establishing a rhythm that motivates staff to enhance their skills and excel in their duties.
  • Performance management software can help regulate your performance review cadences, establish consistency, and measure employee development over time.

Aug. 25, 2023: Reviewed information for freshness and accuracy. Rewrote most of the article and updated formatting to improve readability and the visual flow of information.

How to create a performance review process in 7 steps

Adopting performance review processes in your company can optimize your workforce’s skills to stay ahead of your competitors. Successful companies like Amazon, Google, Meta, and Salesforce use performance evaluations to maintain profitability. However, an effective performance review process can also help your employees develop professionally.

Performance reviews are just one part of overall performance management, but they do not have to cause stress or annoyance across your organization. By following the steps below, you can create an efficient and effective process while motivating employees to continue their professional development.

Check out our Performance Management Software Guide and performance review templates to start implementing a performance review process.

Or watch our video overview of the performance review process below.

1. Determine the type of performance review process

There are various types of performance reviews to choose from, but the most common include top-down reviews, self-evaluations, 360-degree reviews, and ratings.

TypeDescription
Top-downSupervisors provide feedback to direct reports.
Self-evaluationEmployees rate their own performance.
360-degreeSelf-evaluations are combined with feedback from managers, indirect managers, peers, and customers/client.
RatingA grading system, such as BARS, BOS, or Likert scales, measures employee performance.
TypeBest for
Top-downTraditional, hierarchical companies with already established processes.
Self-evaluationStartups or companies with a clan culture.
360-degreeTeams where employees interact with multiple internal and external people regularly.
RatingRetail, restaurant, manufacturing, or companies wanting quick, consistent ways to monitor performance.
TypeBenefits
Top-downConnects performance to overall company goals, like productivity or profitability.
Self-evaluationIncreases employee ownership; provides insight into the employee’s career goals and daily wins/struggles.
360-degreeProvides a holistic view of employee performance; reduces the chance of bias.
RatingStandardizes evaluation metrics by role; reduces risks of bias; faster to complete; easier to track.
TypeDrawbacks
Top-downReduces focus on employee’s career goals; increases risk of bias.
Self-evaluationOften lacks objectivity.
360-degreeRequires more time to compile; amount of feedback can be overwhelming.
RatingLess nuance/context than other types of reviews.

Generally, the best performance review process combines all four types for a more holistic and nuanced view of your employee’s performance and development. For example, involving multiple stakeholders can prevent performance reviews from becoming too one-sided, while quantitative measurements can help you easily track and visualize performance over time.

While combining these types can yield more constructive performance review results, incorporating all of them may not work for you.

2. Choose the performance review frequency

When determining how often a performance review should occur, consider a cadence that gives you enough data to make strategic company decisions — such as promotions or layoffs — without causing major disruptions to day-to-day operations. You may want to use multiple performance review frequencies or different performance review schedules by role, department, or location.

For example, your U.S.-based manufacturing headquarters might want a quarterly performance review cadence to identify top performers quickly for promotion and upskilling. Meanwhile, your new U.K.-based team might choose annual reviews as it builds out its team and learns the objectives of various roles.

Software can help with the administrative upkeep of multiple performance review cadences and timelines. PerformYard, for instance, offers various review cadences, including continuous feedback, semi-annual reviews, quarterly conversations, or project-based reviews, which you can mix and match to fit your preferred performance management workflow.

Types of review cadences

According to 2021 data from XpertHR, annual reviews are the most common performance review frequency.

These reviews occur once a year, and although it is the most common performance review frequency, it isn’t always the most effective. Matt McFarlane, Senior Director of People Experience at Oyster HR, explains that annual performance reviews can create more work for you and your employees as you try to recall relevant information over 12 months.

“Oftentimes so much has changed that it’s difficult to distill [performance appraisals] into something that can be meaningful as you try to look forward to the needs of the business and the role,” says McFarlane. As a result, McFarlane advocates for ongoing performance review cadences so employees get immediate feedback when it’s most important.

Employees seem to agree, with 92% preferring feedback more than once a year in a 2019 Reflektive poll. Despite the trend away from annual feedback frequencies, they can still be the most practical if you are a newer business just developing your HR department, workflows, or role objectives.

Semi-annual reviews are the second most common performance review frequency, occurring twice a year. The reviews strike a good balance between annual and quarterly intervals, allowing enough time for employees and managers to assess recent performance changes without repeating feedback.

Moreover, the increased frequency also means the likelihood of forgetting important feedback is lower than in annual reviews. Nevertheless, running performance reviews twice a year may be too much for smaller businesses that lack the time and resources to devote to this frequency.

Quarterly reviews are the third most common performance review frequency, occurring once every three months. Quarterly reviews are great for measuring an employee’s progress on specific goals. For example, you may want to adopt a quarterly review cadence for new hires to monitor their progress and quickly address any concerns as they acclimate to their role.

However, quarterly reviews may require more time for businesses to complete. For tenured employees, a quarterly review may not yield any new feedback from the previous review cycle. Therefore, you may only want a quarterly review cycle for particular instances, such as project progression.

Ad hoc performance reviews take place on an “as needed” basis. If you’re a brand new company, you might want an ad hoc performance review frequency until you have the staff to orchestrate a more consistent schedule or an idea of how you will evaluate various positions.

Generally, however, an ad hoc performance review’s inconsistent frequency can be offputting for employees who want an orderly cadence to prepare for their reviews. Therefore, it’s better to maintain a consistent schedule and regulate ad hoc reviews to specific situations, such as evaluating employee performance upon completing a project.

Continuous performance reviews occur more than once a month, typically weekly or daily. The purpose of continuous feedback is to evaluate employee performance as it happens so employees can instantly receive recognition for good work or correct any problems immediately.

Continuous feedback does not have to replace other performance review cadences. In fact, you may decide to pair informal continuous feedback with formal performance reviews. This helps motivate and encourage employees daily while tracking bigger-picture milestones during your formal review sessions.

3. Run a calibration meeting to select evaluation criteria

To determine performance evaluation criteria, start with a calibration meeting. These meetings with other managers and HR departments can assist in determining the appropriate criteria for evaluating each role, ensuring consistency, and minimizing the risk of bias.

Calibration meetings also help you determine appropriate performance rating scales for different role functions. For instance, you can use an ordinal, 1-5 rating scale to determine if an employee completed a core duty satisfactorily. Rating scales are also useful for assigning numbers to hard and soft skills, allowing you to compare employees across the organization and identify skill gaps. Beyond rating skills, calibration meetings can also determine what portions of performance reviews should be quantitative, qualitative, or both.

Quantitative evaluations use measurable metrics, such as key performance indicators (KPIs), to judge employee performance. For example, you may rate a customer service representative’s performance based on whether they met the following KPIs: answered and resolved 60 calls per day and maintained an average customer satisfaction score of three or higher out of a five-point scale.

Quantitative evaluations can also help monitor metrics like employee attendance or progress toward professional development goals. Focusing most of your performance reviews on quantitative feedback is a great way to move your organization to a results-only work environment.

Qualitative evaluations rate employee performance on intangible criteria you can’t measure directly. For example, using the customer service representative from before, a qualitative review may involve evaluating the employee on soft skills like:

  • Initiative.
  • Adaptability.
  • Teamwork.
  • Demonstration of company values.
  • Time management skills.

A good way of remembering the difference between quantitative and qualitative evaluations is that the former focuses on numerical feedback, while the latter focuses on descriptive feedback.

Combining qualitative and quantitative evaluations ensures you can track employee productivity and provide the necessary context for their performance, especially in roles with “less tangible outputs,” like financial analysts or sports coaches.

“For roles with clear metrics, prioritize quantitative feedback but don’t ignore the qualitative aspects of their work,” says Jenny von Podewils, co-CEO of Leapsome, a performance management platform. Therefore, most performance reviews should include a mix of quantitative and qualitative evaluations.

Running a calibration meeting and choosing what evaluation criteria to focus on for each role can be daunting, but leveraging performance management software can streamline the process. Culture Amp, for example, offers templated review questions and shareable calibration views to simplify the collaboration effort among all performance review stakeholders.

The Culture Amp platform displays notes from a calibration meeting for an employee named Nick Woodhull.
Culture Amp offers calibration views to share between managers or HR departments to manage performance questions asked to employees within similar assessment groups. Source: Culture Amp

4. Construct your performance review workflow

Your performance review workflow determines the order in which actions for your performance review cadence will occur. Ideally, your workflow should take into consideration the following:

  • Participants: Who is involved in an employee’s performance review?
  • Deadlines: When does the review cycle start and end? How long does each stakeholder have to complete their review portion? Is there a reasonable time for each participant to provide critical feedback by the deadline?
  • Training: Do recent new hires or managers need training on how to complete performance reviews? Where in your employee review process will you offer this training?
  • Post-review actions: What happens after the review cycle? Do certain results trigger promotions, raises, or objectives and key result (OKR) adjustments? Will there be feedback surveys to measure review effectiveness?

Performance management software automates most of these actions, so you don’t have to manually create workflow timelines or remind stakeholders to complete their portions. For example, Leapsome centralizes performance workflows in one place and creates customized workflows. By switching from Google Sheets and Docs to Leapsome for its performance reviews, the German company started seeing 100% of its employees complete their reviews each cycle.

Using performance management platforms eliminates the need to navigate between multiple platforms to operate your review cycles, making it easier for you to manage.

5. Complete performance reviews

Have all review participants complete their review portions according to your workflow. If you or your employees need help to complete the evaluation, consider using the STAR method for self-evaluations and critical feedback.

STAR, or Situation, Task, Action, and Result, is a framework to outline a project or issue faced, what actions you or your employee took to resolve it, and how the outcome positively affected the company. The STAR method can help you briefly explain your or your employee’s contributions and tie them to company objectives.

If you still struggle to write constructive feedback, generative AI like ChatGPT or Google Bard can help you develop constructive feedback from employees based on the parameters you provide. SAP SuccessFactors even includes a writing assistant that lets you write feedback for your employees on particular competencies without discouraging them.

The SAP SuccessFactors platform displays suggestions for performance review quotes.
SAP SuccessFactors lets you click on performance areas where an employee shines or needs improvement, and its writing assistant provides a quote to insert directly into your performance review. Source: SAP SuccessFactors

6. Conduct a performance review meeting

Most performance review meetings take place between an employee and their direct supervisor. Because these meetings involve sensitive topics like critical feedback, these meetings tend to remain one-on-one conversations. HR representatives or indirect managers may attend, especially if these meetings include discussions on promotions or demotions, transfers, pay raises, or management changes. Managers conducting these meetings should prepare for the following:

  • Provide specific feedback on areas where the employee excelled or needs improvement, with examples or documents for support.
  • Outline both role and professional goals to achieve before the next review period.
  • Advise on how to improve in weak areas.
  • Listen and take notes on the employee feedback.

Remember, the performance review meeting is just as much about optimizing your workforce as it is about the employee’s career progression. According to MacKenzie Krantz, Employee Success Generalist at Quantum Workplace, it’s best to consider them “coaching” sessions instead of “judging” sessions. It reduces employee anxiety during these meetings since they become opportunities to discuss their career goals.

7. Follow-up after the review

Your performance review process continues even after you’ve held your one-on-one with employees. Crucially, you need to follow up on any promises you made to employees during the evaluation and learn how to optimize the employee review process for future cycles.

Typically, post-review actions include the following:

  • Salary adjustments: If you run your compensation review process alongside your performance reviews, complete the necessary procedures to adjust the employee’s salary.
  • Rewarding top performers: Traditionally, these include raises or promotions, but you may also reward employees for a job well done with recognition awards, public shoutouts, performance bonuses, gift cards, or company swag.
  • Helping underperformers improve: For struggling employees, provide them the resources to help meet performance targets, such as extra training, productivity tools, one-on-ones, SMART goals, or performance improvement plans.
  • Correcting underlying issues: Take measures to fix problems employees reveal during their evaluations, such as workflows, communication cadences, or employee experience.
  • Completing post-performance review surveys: Gather feedback from employees after performance appraisals to learn what worked, what didn’t, and how to improve the process in the future. Survey platforms, like Officevibe, can automate the process and track responses over time.
  • Analyzing performance review results: Performance review evaluations provide a treasure trove of data to help you plan strategic company initiatives. Using software like Lattice, for example, can help you uncover insights on pay equity, skills progression, and succession planning.

Performance review FAQs

A performance review, or performance evaluation or appraisal, is a formal assessment of an employee’s productivity, growth, development, and impact on a company. Most are two-way conversations between employees and managers that happen semi-regularly throughout the year. It can also involve feedback from additional stakeholders like peers, clients, or customers.

Performance management consists of strategies to monitor and improve an employee’s impact and success within a company. Companies use various tools to track employee performance over time, including performance evaluations, goal tracking, pulse surveys, coaching, and recognition.

Effective performance management strategies use data to help inform larger company initiatives, such as promotions or succession planning.

  • Measures employee performance over time.
  • Solidifies role expectations.
  • Promotes performance standard consistency across the company.
  • Encourages transparency between managers and employees.
  • Fosters skills and professional development.

  • May not address poor performance fast enough, depending on frequency.
  • Has a tendency toward recency bias.
  • Takes time away from day-to-day work.
  • Only 1 in 4 North American employers (26%) find such performance management effective, according to WTW’s 2022 Performance Reset Survey.

Generally, most performance reviews contain the following steps:

  • Employee self-evaluation.
  • Manager/peer/customer evaluations.
  • Manager and employee review meetings.
  • Post-review follow-up actions, such as raises or goal realignment.

Only some companies follow these exact steps, and you may include additional steps to meet your particular needs. Plus, if you’re just starting a review process, you’ll need to determine the structure of your performance appraisals and hold a calibration session to establish consistent evaluation standards.

There are numerous strategies to ensure your organization adopts and completes performance reviews. At Oyster HR, for example, staff must complete performance reviews in order for managers to nominate them for promotions.

“This created the right amount of pressure to ensure employees knew what had to happen if they wanted to be progressed, and put the pressure on leaders to ensure it was being facilitated,” explains Matt McFarlane, Oyster HR’s Senior Director of People Experience.

However, performance management software may be your best bet to ensure everyone completes your review process. Beyond centralizing performance data, it automatically reminds stakeholders to complete their review portions and offers tools to facilitate fair practices.

Check out our video answering your most common performance review questions below.

Start your performance review process

A performance review process helps you retain the best employees possible and move your company toward its bigger-picture goals. More than that, it is an opportunity to keep employees engaged in their professional development.

As von Podewils explains, strength-based development during performance reviews is more important than tackling weaknesses. Crafting a performance review process that encourages employees to grow creates a motivated workforce to rival your toughest competitors.

If you still need help developing your performance review process, explore our Performance Management Software Guide for platforms to get you started.


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Performance Pro

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