4 min Read

The Best Method to Manage Employee Performance Reviews

Team GoodFlow

An employee performance review is very important for every business and but their effectiveness depends on how they are conducted. It will enhance employee performance in the work to reach new heights. A great review can help the employee in identifying growth opportunities and potential areas of improvement without damaging employee-manager relations, writing a review isn’t easy.

Employees also have the opportunity to give feedback to their manager as well and can ask questions on their feedback. Performance management is very important, not only because it will determine employee’s wage rise and promotion but it can evaluate employee’s skills and strengths. Performance appraisals in most of the company are still an annual process but it comprises of some continuous feedback and discussion loop to ensure the way an employee’s performance and productivity is evaluated is top-notch.

Best Methods to Manage Employee Performance Reviews

Unlike the traditional process that propels unrealistic long goals for employees, modern performance reviews take a more productive approach. The best methods for performance review processes ensure a stress-free, informal discussion between employees and managers allowing them to come up with realistic, short-term goals that are future-focused.

Management by objectives

During a specific appraisal period managers and employees together identify plan, organize, and communicate objective this is basically management by objectives method. After setting goals managers and employees discuss and debate the feasibility of achieving those set objectives.

Employees are judged by their reviews at the end of the review period (quarterly, half-yearly, and annually). If the performance results are great than the employee is rewarded with the promotion and a salary hike whereas if they fail then they are transferred or further training is given. This process is laid more stress on tangible and intangible aspects like interpersonal skills, commitment, etc. are often brushed under the rug.

Management by objectives method is ideal for measuring quantitative and qualitative output management like managers, directors, and executives. For a successful MBO program, every manager must have 5-10 goals expressed in specific and propose them in writing. Each goal must include a goal description and a clear plan. Always ensure that goals at each level are related to organizational objectives.

360-degree Feedback Mechanism

It is a multidimensional performance appraisal method in which employee is evaluated using feedback collected from the employee’s circle of influence namely managers, peers, customers, and direct reports.

This method has some integral components:-

  1. Self-appraisals

Self-appraisals need to be done so that the employee can have a chance to look at their performance and understand their strength and weaknesses. If self-appraisals are performed without structured forms or formal procedures, it can become lenient and biased.

  1. Managerial reviews

Performance reviews are always done by the managers are the basic form of appraisals. These reviews must include employee ratings awarded by the supervisor as well as an evaluation of a team or program that is done by the senior manager.

  1. Peer reviews

Coworkers get a unique perspective on the employee’s performance making them the most relevant evaluator. Peer reviews are often good because it determines the ability of the employee to work with the team, take up initiatives and be a reliable contributor but the friendship between the peer may end up distorting final evaluation results.

Assessment center method

This method enables the employee to get a clear picture of how others observe them and the impact it has on their performance. The main advantage of this method is that it will not only evaluate today’s performance but it will also predict future performance. During the assessment, employees are asked to take part in activities like informal discussions, decision-making problems, role play, and other exercises that ensure success in a role.

The assessment center method is ideal for manufacturing organizations, service-based companies, educational institutions, and consulting firms to identify future organizational leaders and managers.

Psychological appraisal methodology

This method is to determine the hidden potential of the employee. It focuses on employees’ future job performance and not on their past work. These appraisals are used to analyze seven components of an employee’s performance such as skills, cognitive abilities, intellectual traits, leadership skills, personality traits, emotional quotient, and other related skills. A qualified psychologist conducts a variety of tests to access employees effectively.

Psychological appraisals are ideal for large enterprises for an array of reasons including the development of leadership pipeline, team building, conflict resolutions, and more.

Human-Resource (Cost) Accounting Method for Startups

The human resource accounting method analyzes an employee’s performance through the monetary benefits he/she makes for the company. In this method, the outcome comes by comparing the cost of retaining an employee (CTC) and the monetary benefits (contributions) an organization has make out from that specific person.

This method of employee performance evaluation is ideal in startups and small businesses where the performance of one employee can make or break the company's success.

Choosing the right performance appraisal method is very important as it reflects how you treat your employees and also how much you would like to actually care and enhance the process of evaluating employees.