How Better Performance Reviews Drive Employee (and Company) Growth

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Done right, performance reviews help employees improve, support a culture of innovation, and increase productivity. But they’re so often done wrong that the negative perception of reviews—and performance management in general—overshadows their potential. In fact, according to HR.com’s State of Performance Management 2021 report, almost a quarter of business leaders call performance management either a waste of time or a necessary evil.

Twenty-four percent! That’s a lot of people missing out on the chance to bring the full value of performance reviews to bear in their organizations. In this guide, we’ll put negative perceptions of performance management to rest and discuss the following:

  • The true purpose and potential of performance reviews
  • How to prepare a quality performance review
  • Pitfalls to avoid when conducting reviews
  • How quality reviews can help your people and company grow

What’s the Purpose of a Performance Review?

The Wall Street Journal recently reported that BambooHR customers completed 530,000 performance reviews in 2022. We’ve been around the block with performance management, and as we’ve developed and expanded our performance management software over the years to help our customers improve their processes, we’ve seen how exclusively quantitative performance appraisals keep companies in the past. Continuous performance management, however, is the philosophy of the future. People want coaches and allies, not taskmasters. And they want regular, development-focused feedback instead of reductive yearly reviews that yield little more than a scorecard. This means the purpose of performance reviews has changed too.

Modern performance reviews:

  • Assess the employee’s strengths and weaknesses with the employee themself.
  • Assist with goal setting, follow-through, and accountability.
  • Provide feedback and direction that will actually be useful in the employee’s development of long-term, mutually beneficial skills.
We want to emphasize the mutually beneficial aspect of a qualitative, career-growth-centric performance management philosophy because approaching performance reviews from this angle can feel like preparing your employees to outgrow you. Don’t be fooled, though. Companies don’t want to stagnate and neither do employees—planning how to grow together keeps you in sync.

Lack of career development and advancement is the top reason people quit a previous job between April 2021 and April 2022.

(Source: McKinsey & Company)

Employees leave and stay for many reasons, but a huge one is opportunity. Workforce and succession planning, continuing education, and upskilling programs are all ingredients for baking opportunity into the career paths available in your workplace. These considerations help you create a virtuous cycle that will bear fruit as both you and your employees work collaboratively to grow.

What Do Companies Really Get Out of Performance Management?

In HR.com’s recent survey, more than half (57%) of HR leaders said their performance management process was meeting all its goals to a “high or very high” extent, meaning they were achieving the following:

Better employee development

Improved employee performance

Increased employee engagement

Increased ability to achieve the business’s performance goals

Leaders with an effective performance management process were almost twice as likely to consider it “crucial to business performance,” whereas naysayers seemed to be trapped in a self-fulfilling prophecy of low performance.

It’s not just that successful performance management practitioners have a different attitude than those who struggled to make their practice produce results. According to the survey, leaders with successful performance management processes get better results by implementing specific tools and methods to ensure maximum benefits across the organization.

  • 2x as likely to use technology to a higher degree than manual processes
  • More likely to have formal or substantial performance review conversations 4x a year or more
  • More than 2x as likely to have a process that was easy for everyone to use
  • More than 2x as likely to use upward ratings of supervisors
  • More than 2x as likely to have deliberate PM training for their managers
As the data shows, performance management practitioners have better outcomes when the following occurs:
  • Buy-in matches effort (i.e., everyone’s on board and committed to continuous improvement).
  • Easy-to-use technology lifts the manual burden and streamlines processes.
  • Manager training prepares leaders to have quality performance conversations.
  • Accountability for performance is a two-way street (i.e., supervisors are as much under the purview of performance reviews as employees).

People want coaches and allies, not taskmasters. They want regular, development-focused feedback instead of reductive yearly reviews that yield little more than a scorecard.

The bottom line to getting the most out of performance management is to implement a process that is consistent, accurate, and purposeful, and to prepare for each performance review. Here’s how.

How Should People Leaders Prepare for a Performance Review?

According to SHRM, increased engagement—a predictor of high productivity—happens when employees “believe that their employer is concerned about their growth and provides avenues to reach individual career goals while fulfilling the company’s mission.”

People want to contribute to a mission they’re aligned with and grow their skills. In order to help them do both, assume your employees want to get the following out of their performance reviews and then prepare for the review with this in mind:

  • Know exactly how their role matters
  • Do meaningful work that has an impact
  • Receive specific, constructive feedback on where they can improve
  • Be acknowledged and rewarded for their efforts and successes

At a high level, your performance review process will follow these basic steps:

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Prepare and send out self and manager assessment questionnaires.
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Employees fill out self-assessments.
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Managers fill out employee evaluations.
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Managers set up meetings with each direct report to go over results and set new goals.
But here are some ways to really give employees what they want in performance reviews—to your mutual benefit.

Set a Quarterly Cadence for Your Performance Review Cycles

Annual performance reviews began falling out of fashion in 2015, when a number of high-profile companies officially dropped the practice in favor of “continuous, real-time feedback.” So if once a year is definitely not enough, then what’s the right frequency? The short answer is it depends on your organization and your employees.

As an example, the top performers in HR.com’s 2021 performance management research were twice as likely than low performers to conduct formal reviews four times a year or more. When project goalposts call for it, it can be useful to conduct check-in style reviews as often as weekly, but the standard we recommend for formal, development-focused performance reviews is once every business quarter.

Build a Performance Review Template that Covers These Four Points

Following a template helps your performance reviews stay consistent and keeps the feedback relevant. And providing one for your people to follow makes it easier to compare apples to apples when analyzing the results to assess engagement, progress, and other aspects of performance.

This doesn’t mean your performance management has to be one size fits all. Alongside the standardized template, managers can take additional ownership of how they coach their departments with questions targeted to on-the-ground concerns. But whatever shape your company’s or individual manager’s performance review templates take, you’ll want to prompt the following feedback:

  • Acknowledge wins and accomplishments
  • Identify areas for development
  • Give high-level feedback
  • Give concrete and specific feedback

Help Set Specific, Realistic, and Actionable Goals

Performance reviews are a chance for managers to check in with employees about ongoing long-term goals, resolve quarterly goals, and set new ones. This goal-setting piece is absolutely crucial to get right—feedback helps employees see how they’re doing, but goals are how you help employees learn and find new ways to grow while becoming more effective contributors in the process.

The goals employees set with the help of their managers should be easy to measure and time-based, and should track with the trajectory of the employee’s career development path. This helps employees feel committed to each goal and motivated to achieve them.

Choose Action-Oriented Over Descriptive Performance Review Phrases

For first-time managers and even seasoned leaders, it can be stressful to know just what to say in a performance review. Being clear, specific, and positive (especially when delivering constructive criticism) should be your approach overall. But another way to provide the most meaningful feedback is to use action-oriented phrases (e.g., excels, demonstrates, possesses, etc.) to describe specific work performance, instead of generally descriptive words like “good” or even “excellent,” in both your written and verbal performance communication. Doing so pushes you to be more specific and keeps the focus on behaviors within the employee’s control.

Dedicate at Least Three Hours of Preparation Time per Employee

Former Airbnb product lead and continuous performance management advocate, Lenny Rachitsky, recommends spending 3 to 5 hours on prep time per employee to ensure a thorough, valuable review. At least a month in advance of the scheduled meeting, he begins gathering data on how the employee performed since the last review through the following routes:
  • The individual’s peers via 360° feedback
  • The individual themself via a self-assessment
It’s valuable to get a number of perspectives to paint a proper picture of how the employee has performed and behaved in pursuit of their goals and projects. (Lenny recommends requesting feedback from 5 to 8 of the employee’s peers.) It’s also important for managers to complete their own assessment and feedback before reading the employee’s self-assessment or others’ feedback. This removes the temptation to use the mental shortcut of reiterating others’ feedback to save time (a.k.a. conformity bias) and undercutting thoughtful performance conversations.

Expect (and Encourage) a Two-Sided Conversation

The employee self-assessment is the first gesture toward facilitating a two-way performance conversation. Managers should review it ahead of the meeting (and after completing their own assessment of the employee). They may provide their written manager assessment to their employee ahead of time as well, so they’re both as prepared as possible to have a constructive conversation in which they both have time to speak and listen.
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Four Performance Review Pitfalls to Avoid

You’re off to a great start, but there are some common pitfalls that can drag down your best efforts if you’re not careful. Here’s what to be aware of.

Don’t Spend Too Long on the Wrong Things

In an exhaustive performance management study conducted in 2017, Gallup’s chief scientist of workplace analytics concluded that organizations across the world were spending “tens of thousands of hours and tens of millions of dollars” on performance management-related tasks that were not only not working but were driving out top talent.

Today, a global pandemic and the rise of remote work has further complicated workplace productivity and the processes meant to track and increase it. In our experience, efficient and effective performance management happens when the systems you use cut out tedious manual work and streamline continuous performance management processes.

Don’t Let Too Much Time Lapse Between Reviews

Infrequent reviews lead to a slew of negative outcomes:

  • A greater risk of recency bias: having recent events color performance perceptions for an entire year, for better or worse
  • Less relevant feedback
  • Emotionally charged dynamics
  • Counterproductive results

When your people walk away from reviews feeling like they weren’t treated fairly or the guidance they received isn’t clearly applicable or actionable, you’ll end up with less engagement, not more. Again, we highly recommend a quarterly formal review cadence.

Don’t Allow Room for Bias to Creep In

We mentioned recency bias and conformity bias above, but these aren’t the only types of biases that can skew performance reviews. We’re all susceptible to a host of biases and the only path to objective assessments involves recognizing and compensating for those biases. Train your managers and team on the types of biases to avoid as they write their assessments and deliver feedback. This will help them be more aware of their own blindspots and encourage everyone to give fair and productive performance reviews.

Don’t Use Performance Reviews Purely for Wage Conversations

Performance reviews should provide an opportunity for growth, so it’s crucial to create the psychological safety needed to be open about weaknesses as well as strengths. However, when companies use performance reviews primarily to justify raises or promotions, the review becomes a high-pressure showcase as opposed to a place where employees, managers, and companies can find better alignment.

Performance intersects with compensation in varying ways, but when it comes to addressing each with your employees, it’s time to separate the two conversations. Your compensation strategy deserves its own procedural track, as does a robust growth and development plan.

How Performance Reviews in BambooHR Set the Stage for Employee and Company Growth

In a 2022 survey of BambooHR customers conducting performance reviews, respondents were more likely to say they had an effective performance review process if they were using BambooHR® Performance Management compared to any other type of review process.

One of the top reasons for this is our system’s intuitive automation of operational tasks like scheduling, feedback submission, data reporting, and more, which makes the meaningful work of continuous performance management less about process and more about purpose for everyone.

How BambooHR Empowers HR

Becky Thompson, HR Director at Gravy Analytics, discovered an employee experience gap at her company. Employees wanted more development opportunities and weren’t getting enough feedback to help them grow. She was able to fill that gap as the first and only HR rep at the growing tech company by using BambooHR Performance Management.

“The more enlightening piece of Performance Management is seeing how we can really identify what are the strengths and weaknesses. We can build upon the strengths and then we obviously still have time for the weaknesses but maybe we approach it in a different way.”

Neil Sharma | VP of Operations | Boston BioProducts

The results Becky has been able to achieve echoes those of over 11,000 other companies using BambooHR Performance Management and their hundreds of thousands of employees, with 95 percent using our advanced goal-setting and tracking feature to help drive engagement and performance.

Here are some other ways BambooHR Performance Management drives results:

  • Double blind assessments mitigate bias and subjective rating systems.
  • Impromptu and skip assessments help managers coach employees when and how they want.
  • Advanced goal-setting with file upload (i.e., sharing, updating, closing goals, etc.) provides structure, direction, context, and accountability for development.
  • Custom Likert rating scale produces clear, actionable data to track.
  • 360° peer feedback paints a multi-perspective picture of an individual’s performance.
  • Up to 10 custom assessment questions let you tailor additional questions to current initiatives or your company’s unique needs.
  • Multiple review cycles provide added flexibility in how you manage performance across teams.

Conduct better, more frequent performance reviews and save time? It’s possible.

See how the director of people and culture at ISTS did just that using BambooHR.

Read Jennifer’s Story

How BambooHR Empowers Employees

Another way Performance Management sets the stage for company-wide growth is by carving out a clear development path for employees and keeping conversations surrounding their progress, efforts, and alignment fresh. And the results have been clear:
Engaged employees feed a virtuous cycle of individual fulfillment, productivity, and shared company success. Where traditional performance management fails to get to the heart of what employees really need to improve performance, modern performance reviews are key to delivering the relevant feedback and development paths that keep today’s employees engaged and growing—for themselves and your company.

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“[BambooHR Performance Management has] just opened up the dialogue, and that’s the most important thing—that people are actually talking.”

Becky Thompson | HR Director | Gravy Analytics

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