While performance reviews are massively popular with organizations, most employees hate them. In addition, most performance reviews don’t actually achieve any goals. They simply represent a point in time when organizations take stock of employees and gauge them according to some metric or other.

While performance reviews are “old-fashioned” and often associated with top-down management in waterfall style organizations, they can offer a lot to companies that use them well. Yet, according to a Gallup Poll, just 14% of employees surveyed say performance reviews incentivize or help them improve.

So, what goes into optimizing your performance review? While that largely depends on where your organization is now and what you have set up, the following options are a great place to start for most businesses.

Link Performance Reviews to Competency and Skills Frameworks

Most organizations have or are in the process of implementing skills and competency frameworks. Many fail to link those frameworks to performance review or performance management. This is a wasted opportunity, considering integration allows you to create at closed loop of feedback for the existing framework and for the employee.

Why does it help optimize your workforce? Tracking performance against skills and competencies (providing skills and competencies are correctly registered) allows HR to track performance against what is assumed to result in performance. Therefore, it validates (or doesn’t) the competency framework.

At the same time, aligning performance management and competency frameworks allows HR to see which competencies consistently contribute towards success, which are missing in individuals with low performance, and so on. This can work to improve hiring. You can also use it to contribute towards personal development by working to close skills gaps.

Focus on Improvement and Recognition over Evaluation

The yearly evaluation and scoring, where individuals are given a performance percentile is quickly becoming a thing of the past, and for good reason. It achieves nothing, outside of a few competition-based niche sales industries, but making the top few percent feel good and everyone else feel bad. This is especially true considering 20% of your employees will always be responsible for 80% of your output.

This doesn’t mean others aren’t achieving work or that they aren’t necessary, it just means a small percentage of people are highly motivated and very able to do large amounts of work in short periods of time. They’re your “star” employees, but most people aren’t actually capable of functioning at that level.

What can you do about it? Remove ranking equations (at least public ones) and instead integrate public-facing measures involving constructive criticism, recognition of efforts, and positive reinforcement. If someone truly did badly, apply constructive criticism, empathetically approach the situation to figure out why, and assess additional factors like motivation, team environment, and personal environment.

You can still track high performers, but if the people in your middle 60% are still doing what you pay them to do and doing it well, there’s no reason to make them feel bad or second rate just because someone in accounting did 400% more work. This will happen no matter how good the median employee is.

Integrate Personal Development and Learning

Any performance review should follow up with opportunities to improve. If performance is about learning and improvement, employees see value. You can offer this by implementing competency frameworks, by analyzing work, by recognizing shifts in technology, and by reviewing external factors like home and team environments, motivation, or even commute.

What factors contribute to poor performance

  • Skills Gaps > Train the skill
  • Technology gaps > Train the technology
  • Motivation issues > Figure out motivation or move the individual to another team
  • Team conflicts > Teach interpersonal management, communication, emotional intelligence, etc. Check team balance and leadership styles and reallocate where clashes are problematic
  • Leadership problems > Train leadership and work to address relationship problems for the team
  • Personal problems > Offer flex work and/or stress and relationship management courses

Every aspect of a person’s life will contribute to their performance at work. If you understand why performance is low, you can work to improve that performance, delivering real opportunities for employees to grow, change, and improve with the company.

Offering that also makes performance reviews about learning and growing, rather than receiving a rating, which will make employees that much more incentivized to put in the work. And, of course, you should reward improvement with something they want, like a cash bonus.

Connecting Performance and Individual Contribution to Company Goals

It’s impossible to truly track performance if you don’t link goals that matter. At the same time, you can’t track employee performance in alignment with company goals unless employees are aware of those goals, are given short-term goals aligned with longer-term goals, and are able to autonomously work towards those goals. If someone is simply handed top-down tasks designed by a manager or team lead, you have to judge them based on performance of those tasks.

So, if hierarchy allows, integrating how employees contribute to and move towards company goals, as individuals and as part of a team, can add considerable value to performance reviews. Why? It doesn’t tell you how many tasks someone did or how often (Someone can sit in meetings every single day, day in, day out and achieve nothing), it tells you what they actually do to move the company forward.

This ties into setting company goals as well. Performance reviews should give your organization a very good idea of what it is able to achieve and who is able to achieve it. This allows you to set realistic goals that move your company forward.

Create a Two-Way Conversation

Performance is about how an employee is able to and motivated to function in their work environment. Your organization contributes to employee performance as much as they do. If you don’t make performance talks a two-way discussion, where employees can freely give feedback, discuss their work environment, and actively contribute to how their performance is seen, what changes are made to improve that, and what they are offered, you’re missing out.

A simple discussion with an employee might tell you they’re struggling because the team isn’t getting along, and management isn’t helping. The manager would likely never tell you that. You might also learn that a top employee has been offered a better-paying job and was waiting for performance review to determine if they wanted to make the switch. You’d have the opportunity to offer incentives to stay.

Having discussions would also allow you to help employees find their own ways to improve and to do better in their environment, to set their own goals, and to build their own motivation. That’s a lot more motivational than simply handing that employee yet another to-do-list of things to learn and improve at.

Your organization’s performance management system should ultimately reflect the organization, its hierarchy, and its goals. A good performance management system feeds into training, hiring, development, and setting goals and directions for the organization. If it isn’t, you have to step back and ask where it is adding value and if you actually need it.

About the Author: Jocelyn Pick