The performance review process is an essential part of every organization. It’s a useful management tool that helps to give feedback, review and estimate whether an employee's performance is effective, and to discuss areas of improvement going forward. Performance reviews benefit both managers and employees and provide useful information for the company and its people, that can’t be acquired from any other source.
A well-defined performance review process that is built on consistent, constructive feedback will help your company to retain and develop top-class employees. Here are six ways that performance reviews can have a positive impact on your business.
Make your people feel valued
Many employees like to know where they stand in terms of job performance and what else they can do to help the company move forward. Performance reviews clarify the employees’ role and status within a company. People typically need to feel valued and know that they are producing good work - this will motivate them to work smarter and harder.
Celebrating a job well done is the easiest part of a performance review. If your employees receive frequent praise and recognition, you are on the right track to retaining hard-working staff. Remember that amazing employees are hard to find which is why developing your people is so important - and that’s what performance reviews are all about. Even in the smallest start-ups, employees want to know how they are doing. It can be a challenge to give constant feedback, and a formal review can be exactly what employees need to stay on track and bring up questions that they might not be comfortable asking in casual chat.
To improve communication
The main purpose of a performance review is to open up the conversation between employees and their managers. Some problems that arise from a lack of communication can often be solved by a performance review. If you use the review process as an opportunity to describe the criteria that are used to assess performance, the employee will gain a better understanding of the best way to perform their job.
Communication is something that is often lacking. Encouraging discussion can have a positive long-term impact on the manager-employee relationship. Your employees need to feel like they can come to you if they have any problems. If you don’t keep communication channels open, you will lose a lot of control. Therefore communication is key in running a successful business.
Set new goals
A performance review is a perfect opportunity to establish what your employees personal and career goals are, and to set a long-term plan to achieve them. Self-development is the most important benefit for the employee. Employees who are driven and enthusiastic in achieving their goals are of greater value to an organization. Setting goals helps to motivate employees and lets them know that the company supports them.
Those employees who want to grow within an organization are invaluable, and measures should be taken to keep them motivated. Using the performance review to talk big-picture, set goals, and get your staff excited about their work, will have a long-term positive impact on the success of your business.
Training and development
A performance review is one of the best opportunities for an employee and their manager to identify and agree on areas of improvement. During the discussion of an employee's performance, the absence of specific work skills can be discussed, and arrangements can be made to work on developing these skills.
The performance review can be a way to make the need for training more apparent by connecting it to performance outcomes and future career aspirations. Training and development is a key element in building a successful business. You want employees that are continuously growing and developing their skills.
They keep rewards fair and transparent
Allocating pay increases, bonuses, and promotions can be a very challenging task, especially when trying to keep all employees happy. Naturally, they all want to be compensated for their “hard work,” and if one employee receives something that another doesn’t, they will want to know in extreme detail why.
Implementing bonuses and promotions into the performance review can make the whole process a lot easier. Many organizations have found that simply communicating and giving feedback to employees ensures that rewards remain objective.
Lastly, performance reviews are a great way to keep track of progress. Comparing an employee's capabilities from one period to another will provide the employee and company with measurable marks of improvement, as well as lack of improvement, or even regression in work performance. By charting progress, you can identify what’s working, what isn’t working, and what needs more work.
Remember that performance reviews are only as good as the management team that conducts them. Those companies that are only doing performance reviews for the sake of it are wasting their time. But those that use them to implement business goals are on the right path to accomplishing those goals and essentially their strategic plan.