In an increasingly competitive business world, the need to maximize performance and leverage talent has become a priority for organizations. In this sense, conducting a performance review is crucial to measure and improve employee performance.

In fact, performance reviews go beyond reviewing job performance. In essence, it is a strategic process that provides a 360-degree view of each employee’s performance and gives you the opportunity to drive their growth, foster their engagement and build a stronger, more motivated team. 

But what is a performance review, and why can this practice boost the growth and success of your organization? Pay attention, because in this article we will discover its importance through 10 objectives for a performance review.

What is a performance review

A performance review is a fundamental procedure in team management. It is a systematic process that allows measuring and evaluating the work performance of an employee in relation to the objectives and performance standards established by the company. It is a tool that provides a clear and objective view of the performance of each employee, identifying their strengths and areas for improvement.

But this evaluation is not only to analyze hard skills, it also includes the measurement of the so-called soft skills. These skills range from teamwork, time management, leadership and adaptability to problem solving, critical thinking, empathy and resilience. The truth is that all of them have an impact on your people’s success in the workplace.

Some companies perform these evaluations on an annual basis, while others do so more frequently for constant and effective feedback.

Performance reviews provide information on employee performance. This will help you make more informed decisions, such as promotions, compensation and development plans.

In addition, performance reviews foster a culture of continuous improvement within the organization. By identifying strengths and development opportunities, you can set clear goals with the objective of contributing to both the professional growth and development of each individual, as well as the growth and success of the organization as a whole.

Why are performance reviews important

As we said before, performance reviews are fundamental in team management. But why are they so important?

Here are some of the reasons why a performance review is beneficial for both the company and its employees:

  • Improves individual performance: performance reviews allow employees to understand their current level of performance, what is expected of them and how their work contributes to the overall success of the organization.
  • Identifies top performers: performance reviews allow you to distinguish employees who are ready to take on more challenging roles and new responsibilities.
  • Boosts motivation and engagement: positive feedback messages included in reviews are a great opportunity to recognize an employee’s job well done.
  • Improves working relationships: thanks to honest and constructive feedback, an atmosphere of trust and respect is created.
  • Make decisions strategically: HR professionals can make data-driven decisions about employee performance and potential.
Imagen de ordenadores portátiles, folios y manos escribiendo a lápiz en papel.

10 Objectives for a performance review

Before designing your performance review, you need to define objectives.  Here are the 10 most common objectives when launching a performance review:

  1. Evaluate individual performance.
  2. Establish clear goals and objectives.
  3. Foster a feedback culture.
  4. Identify areas for improvement.
  5. Facilitate decision making on promotions.
  6. Encourage engagement and motivation.
  7. Evaluate the adaptation of workers.
  8. Improve communication and teamwork.
  9. Identify problems and resolve conflicts.
  10. Establish fair and transparent salary policies.

1. Evaluate individual performance

Evaluating the individual performance of each employee seeks to fully understand their contribution to the overall success of the organization. This practice involves assessing their level of knowledge, skills and competencies. This will provide insight into their ability to meet expectations and achieve established objectives.

This information can be obtained through different performance reviews formats, such as peer reviews, 360 and 180 feedback, manager-report review and self-reviews. But why are these procedures useful?

  • Peer reviews: co-workers who regularly interact with the employee provide feedback on their contributions and behavior with the rest of the team.
  • 180 Feedback: collects feedback from managers and close co-workers. This implies that the review focuses on the employee’s direct relationship with their manager and closest peers.
  • 360 Feedback: is based on the idea that multiple perspectives provide a more complete and objective view of an employee’s performance. It includes not only managers and co-workers, but any other relevant person in the work environment.
  • Report-manager review: in this process, the manager is evaluated by their employees. It can provide information on leadership, communication skills, problem-solving skills and other aspects of managerial performance.
  • Self-reviews: allow employees to reflect on their work, identify their strengths and areas for improvement, and contribute to a more complete and enriching evaluation process.

With data-driven information, you can guide your employees to increase their performance by setting goals that are easily achievable.

2. Establish clear goals and objectives

Performance reviews have the power to shape and refine employee goals, further aligning with the organization’s strategic goals. An effective way to fine-tune employee goals and objectives is to bring the results of the review to a one-on-one meeting. This is the perfect setting for managers to strategically redefine what is expected of each employee.

These meetings should allow the employee to have a clear understanding of what they need to achieve in terms of job performance. Only in this way can they channel their efforts to achieve their goals. In addition, you can take advantage of this context to motivate employees to evaluate their own progress, thus cultivating a greater sense of responsibility and empowerment.

3. Foster a feedback culture

Feedback is a necessary process in every organization. In this context, it helps you provide detailed information to employees about their work in an assertive way. By using the right type of feedback, you can highlight employees’ achievements and strengths, as well as communicate identified areas for improvement and opportunities for growth.

Keep in mind that a performance review should never be oriented to detect only errors. Much less punish the employee. In this sense, use constructive feedback to highlight positive aspects and guide the employee on how they can improve.

In addition, it is important that feedback is two-way. This means not only that the employee understands the comments provided by his manager, but also that they are given the opportunity to express their point of view.

4. Identify areas for improvement

During the review, it is important to analyze the strengths and weaknesses of each employee in relation to their job responsibilities. From this information, areas for improvement can be identified.

Once these needs have been identified, you can design specific career development plans to address these areas for improvement. These plans may include training courses, workshops, mentoring or special projects to help employees acquire the skills and knowledge necessary to perform their jobs effectively.

The ultimate goal of investing in skills and knowledge development is to improve employee productivity and retain talent, as employees see a promising future within the company.

5. Facilitate decision making on promotions

Identifying those employees who excel in key areas is crucial in any organization. A very simple way to identify top performers (or any other type of profile) is through 9-box evaluations, a method also known as performance matrix.

The performance matrix is a table with two axes: one for the employee’s performance and one for their growth potential. Both can be low, medium or high. By combining these dimensions, nine boxes are obtained, hence the name “9-box”.

Imagen del 9-box de Nailted.

You can use Nailted’s 9-box to classify employees into different categories according to their performance and potential. In this way, you can identify those employees who are having high performance and growth potential, as well as those whose performance should be improved.

A 9-box allows you to identify skill gaps by visualizing the location of each employee in the matrix. For example, those located in the high potential and low performance boxes may indicate that they need attention to improve their performance. If you are able to identify these gaps, we recommend designing a specific development plan detailing each employee’s career goals.

6. Encourage engagement and motivation

This objective is the result of a well-planned and implemented performance review. Providing employees with a clear view of their performance, recognizing their achievements and giving them feedback for their professional development contributes to improving their commitment and motivation to their work and to the organization.

However, there are other reasons why encouraging engagement and motivation is an objective in a self-respecting performance review. These include increasing productivity, leveraging job satisfaction and boosting quality at work.

7. Evaluate the adaptation of workers

Worker adaptation refers to how employees integrate into the work environment, organizational culture and job responsibilities. In this sense, knowing the level of employee adaptation in terms of competencies and alignment with company values is important because it determines whether they are achieving a successful evolution within the organization.

What happens when you detect that an employee is not adjusting properly to their job?

In these cases, consider whether job duties or responsibilities need to be redefined and offer additional support. You may even explore the possibility of internal relocation that matches the employee’s skills and strengths.

8. Improve communication and teamwork

The purpose of this objective is to identify whether there is open and effective communication among team members so that relationships among them can be strengthened. This involves encouraging employees to share their ideas, solve challenges and collaborate constructively.

It is about adopting a reflective approach, where employees value their peers by providing thoughtful feedback with the intention of contributing to mutual growth. This promotes deeper and more meaningful communication, where each voice is valued to contribute to the strengthening of teamwork.

9. Identify problems and resolve conflicts

Through the performance review, you can identify any type of conflict or problem that is negatively affecting the employee. This may include interpersonal conflicts, differences in the way they work with their teams, or any other obstacle that is hindering good performance.

Once these problems have been identified, how can they be resolved? Encourage managers to take the results of the reviews to a one-on-one meeting to discuss the problem and try to find a solution with the employee.

10. Establish fair and transparent salary policies

Remember that objectively evaluating individual performance helps you identify those employees who have demonstrated a high level of performance.

With this information you will be able to establish salary policies that appropriately reward outstanding performance. This means offering salary increases, bonuses or other forms of financial recognition to those employees who have demonstrated exceptional performance.

It is important that these salary policies are transparent, i.e., that employees understand how financial rewards are determined and under what criteria they are offered. In this way, employees understand that their effort and contribution will be fairly rewarded.

If you are designing a review for the first time, we recommend taking a look at examples of performance reviews that can help guide you through the process.