Introduction
Hiring great people is the first step to building a successful company, but keeping them around is just as important. Here are some best practices for reviewing your employees to help you retain your strongest people in the long run.
Performance Review Frequency
It doesn’t help to create a better performance review process if it only gets used once a year. High performers don’t want to work for companies that can’t give them periodic feedback, review goals, and take note of their accomplishments. Some organizations choose to review their personnel once a year, and some don’t even conduct formal performance reviews at all. If you want to keep your strongest people, you cannot afford to forego performance reviews.
How frequently you conduct performance reviews depends on the role and the individual. We suggest starting with a review every 6 months (but this can vary depending on the industry/role). For example, if your employee is a salesperson who generates revenue for your company on a quarterly basis, they may need more frequent feedback than an administrative assistant whose work is more stable and predictable.
In general, we recommend that you keep performance review frequency consistent. This means holding the performance reviews on or as close to the intended dates as possible, and in the same manner across different roles. If you do this, employees are less likely to feel neglected or left out of important conversations about their development plans.
If you happen to miss a review date and an employee is to receive a raise in compensation, be sure to backdate the raise to the day in which the review was supposed to take place. Things happen, and you cannot always hit the target dates exactly, but if you give someone a raise several weeks (or even months) late, you’ve essentially short-changed them. It’s unwise to treat a high performer this way, they will figure it out and it opens the door to dissatisfaction and resentment.
Understand Their Role
If you want to create better performance reviews, it's important to understand the roles of your employees and how they fit into the larger picture. That way, you can create performance plans that give them responsibilities specific to their roles and help them accomplish their goals.
Clearly Communicate Responsibilities
Clearly communicating responsibilities will help employees understand their role and how it fits into the bigger picture of the department, organization, and industry as a whole. It's also important to clearly communicate what success looks like for both employees and their supervisors. You can do this by making sure your expectations are clear and concise, as well as providing examples of behaviors that demonstrate those expectations.
Measuring Productivity
While it's important to measure employee performance across a variety of metrics, productivity is a major key to success. Productivity is defined as the ratio of output to input:
Output (how much you produce) divided by Input (how much you use).
For example, if an employee works 40 hours per week but produces only 30 hours' worth of work, his or her productivity would be 0.75 or 75%. In this case, that employee would need to improve his or her output by 25% before he or she could truly be considered productive and successful.
As you can imagine, gauging productivity can seem subjective without having the proper expectations outlined and in place. If you can quantify what is expected of each employee, it makes things much easier come review time.
Going over metrics together removes some of the “gray areas” and emotional aspects of employee performance reviews. With metrics, you are able to determine whether they did what they were supposed to, or if they fell short. Then you just have to communicate the next steps to course correct or if they are to be let go, at least there are concrete data-driven reasons which offer protections against lawsuits.
In order for your employees to become more productive at work, they will need frequent opportunities for growth and development. This can include formal training programs as well as informal learning opportunities such as mentorship and networking sessions with industry leaders in their fields. By providing these types of programs throughout the year—not just during review season—you'll ensure that your best employees stay motivated while continuing their professional development.
Goals
Goals are paramount when it comes to gauging employee performance. When goals are created and expectations are outlined and communicated properly, employees can demonstrate how valuable they are to the company. Your goals should be aligned with your company's vision and values: If a goal doesn't align with the company's vision and values, then it won't be motivating to your employees or help them grow as professionals.
Improper goal creation can also come back to haunt you during performance reviews in the form of disagreement and debate. So be sure to make them SMART.
If you are unfamiliar with SMART, it means making goals specific, measurable, achievable, relevant, and time-bound.
Specific: If a goal is not specific, then it won't be motivating to your employees. The more clearly defined the goal, the easier it will be for employees to understand what is expected of them. They'll also know if they are on track or off track with respect to completing their tasks.
Measurable: quantifying your goals makes it easier to track progress and determines if success has been achieved when you’ve reached the finish line.
Achievable: If a goal is not achievable, then it won't be motivating to your employees. They might even feel like they are being set up for failure. The goal needs to be at a level that will challenge your employees but not overwhelm them.
Relevant: A goal must be worthwhile. It must be the right time for this goal, and it needs to match the company’s other efforts and needs. They must be the right person to reach the goal.
Time-bound: The goals should have a timeline so that employees know when they need to complete the task and how much time they have in order to do it.
The goal should be challenging but not overwhelming: A challenging goal will motivate employees because it makes them feel like they are achieving something, even if the task is difficult. If a goal is too easy, then it won't be motivating to your employees. It might even make them feel like they've accomplished nothing at all.
KPIs
Goals are essential for reviewing quarterly productivity, but if you want to have a pulse on what is happening in between, you need to have metrics that can be monitored on a weekly basis. These weekly metrics are key performance indicators (KPIs).
KPIs are important for employee development and career progression. They can be used to measure an employee's success in the function or processes they own. If an employee is in charge of sales, you can see how well they are doing on a constant basis by setting a weekly target and measuring the revenue brought in against it. This way, you don’t have to wait an entire quarter to find out something is off.
Another perk of having KPIs is they are measurable and quantifiable—so you can give them weights if they should count more or less than other goals when it comes to time for the performance review.
Ownership
Ownership is the ability to take responsibility for your actions and results. It’s important to understand what the concept of ownership means in your organization, as well as how it affects employee engagement and performance.
In order to drive stronger performance, ownership needs to be promoted throughout the organization. Leaders especially must take ownership of their own performance if they expect employees to perform well.
To create better performance reviews, ownership should be instilled in some way shape, or form within your company values. It is a key component of cultural alignment. This means that you need to make sure that your employees understand what ownership looks like in the context of your company’s culture, and how those behaviors affect their ability to produce high-quality work.
Performance reviews aren’t just to look back at employee productivity through metrics and goal achievement, they are also to ensure the people within your organization are still the right fit culturally.
Core values are the beliefs that your company holds dear. You might think about them as the qualities you want your employees to embody when they’re working for you, but they’re also something that every organization needs to make sure is present in its culture.
If core values aren't already a part of your performance review process, it's time to add them.
Cultural Alignment
Many companies have a culture that is either not aligned with their values, or it’s not clear what their values are. When the team isn’t sure about the company’s culture, it can lead to confusion and conflict.
You need to take time to assess your organization's current level of cultural alignment by asking yourself these questions:
What are our core values? Do I know them? Do my direct reports know them? How often do we talk about them?
Are we living our core values as a team or as individual contributors at work every day? Is there anything that would prevent us from doing so (e.g., lack of resources, unclear direction)?
What specific behaviors do I see in my direct reports that support the core values of this organization on an ongoing basis (e.g., persistence)?
How often do we talk about the importance of our core values in a team setting?
Do I know how to articulate the core values of this organization out loud? If not, what will it take for me to learn?
How well do I know my direct reports’ personal values and how do they align with the company's culture?
What are some examples of behaviors that support our core values as an organization (e.g., “We have a no-bullying policy at work”)?
It’s the job of leadership to make sure the company culture is strong, protected, and adhered to. Keeping everyone in alignment with culture is a continuous process and issues need to be addressed in real time for the good of the company. Don’t be fooled that the culture is strong and alive just because there is a lack of issues. Periodic performance reviews should trigger a deeper dive into the employees' alignment with core values so no one flies under the radar until it’s too late.
16-box Talent Matrix
If you're looking for a better way to evaluate your employees, consider using a 16-box matrix (as shown in the fourvision example above). This tool can help you identify which competencies each person possesses and where they need to work on improving their skills. By knowing what skills are needed for each role in your company, you'll be better prepared when it comes time to promote someone into leadership positions.
Performance Plan, Disciplining Employees, and Termination
When it comes to employee discipline and termination, there are a few things you can do. If you have an employee that is not performing up to par or who has violated company policy, then you may want to consider reprimanding them. This can be done in a variety of ways depending on the severity of the offense.
If an employee is not performing up to par, then you may want to consider a verbal warning. This will let them know that their performance has been subpar and that if they do not improve, further action may be taken. A written warning can also be used for this purpose. You can use these as a way of documenting the problem and showing that you have given the employee multiple chances. In either case, there should be a performance plan clearly outlining expectations and what constitutes a turnaround. If they cannot meet the turnaround parameters, there are further options at your disposal.
You can always issue a suspension if you need a way of temporarily removing an employee from their position while they are being reprimanded (or until their performance improves). If the problem persists and cannot be fixed, then you may want to consider termination. This is often frowned upon but in some cases it is necessary.
Sometimes the partnership between an organization and an employee doesn’t work out. The key to a smooth separation is having these consequences clearly conveyed and written in the employee handbook. Underperforming employees should not be caught off guard when terminated. If they do need to be let go due to poor performance, they will have already received multiple communications and been offered the opportunity to turn things around.
Conclusion
A robust and thoughtful performance review process will help you retain your strongest employees. However, just having a good performance review process is not enough, you must conduct reviews frequently and consistently. You should conduct performance reviews on or as close to the day as you say you will avoid dissatisfaction and resentment. By understanding the roles of all employees, you can create the right goals and monitor KPIs to expose weaknesses and communicate areas of improvement.
Cultural alignment is required to drive productivity, especially as the organization grows, and it is the leadership’s responsibility to ensure everyone is adhering to the company’s core values. The key takeaway from all this? Have regular conversations with each person about their progress on the job—and don't be afraid to give constructive feedback!
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