8 Tips for Building a Solid and Reliable Performance Evaluation System

The best way to implement performance management and evaluation systems is constantly evolving, making strategy formation more complex. Performance evaluation (PE) systems exist for businesses to measure the quality of work completed by employees, while serving the added benefit of helping them recognise their value to the organization. 

But it is incredibly easy to get the evaluation strategy wrong, leading to employees feeling desensitized and devoid of any motivation. Highly engaged employees are 87% less likely to leave their roles. So when this evaluation strategy does go wrong, business and team performance takes a huge hit. 

With this in mind, it’s in the best interests of HR and L&D teams to ensure their performance management strategy matches organisational goals from the outset. In this article, we share why you need to establish a performance evaluation system, the benefits of doing so, and eight tips to help you build a reliable process. 

Why establish a performance evaluation (PE) system?

Thankfully, more companies are recognising the importance of establishing effective PE systems, and the resulting advantages they can provide. Companies that give feedback consistently report 16% higher retention rates, compared to companies that do not extend this courtesy to their employees.

The first step towards achieving this is understanding the need for performance evaluation within your company. PE systems are there to hold employees and managers accountable based on a person’s expected responsibilities, and how well they are upholding these duties. The system is usually reserved for documenting regular evaluations (usually quarterly or 6-monthly), and the strategy for how these reviews are conducted. 

Accurate and regular performance evaluation is vital for both employees and companies. From the employee’s perspective, evaluations help them honestly evaluate their skills, strengths, weaknesses or desired areas for improvement. For example, a web developer in a marketing agency may express a desire to pursue other areas like graphic design, social media, photography or videography. 

The system allows them to highlight these desires to management. Meanwhile, managers can evaluate each employee’s contributions to the company and bridge any gaps in assessment. If they decide that an employee is not meeting expectations, they can outline steps and agree on how the employee can improve, and by when. 

So, what are some of the benefits of establishing a performance evaluation system?

4 Benefits of establishing a performance evaluation system

Now we understand the importance of performance evaluation, let’s take a look at some of the advantages. Here are four main benefits of performance evaluation systems:

1. Inclusivity and reassurance: It helps employees feel more comfortable at work, knowing that they are meeting or exceeding expectations, particularly if the system accounts for any difficulties or biases they may be facing knowingly or unknowingly.
   
2. Improves communication: Evaluations can be structured to allow for constructive and valuable feedback to flow between employees and managers. When managers and employees engage in open dialogue, it eases tension and helps break down communication barriers, ultimately leading to stronger relationships.
   
3. Motivates employees to do better: Managers can understand where employees need improvement and what is preventing them from achieving their fullest potential (if anything). If these are addressed with clear goals and KPIs, and a training plan, employees will likely feel more inclined to develop or upskill.
   
4. Facilitates growth: Managers can use PEs to highlight personal and business development opportunities. Employees can highlight their career goals and find ways they can achieve them, and managers can find ways to align this with business growth plans. When all are aligned, it sets the company up for continued success.

With the benefits of performance evaluation systems set, how can you get started with building such a system? Read on to uncover eight helpful tips.

8 Tips for building a solid and reliable performance evaluation system

From reviewing the existing system to building a culture of collaboration with PE systems, here are eight tips HR and L&D teams can use to build a solid and reliable performance evaluation system.

1. Review the existing system

Understanding how employees are currently evaluated ‌is the first step for building a system that aligns with the company culture and long-term goals. 

Ascertain how regularly employees are evaluated and how extensive that review process takes, and consider taking honest opinions from longstanding employees to see whether they had seen any resulting benefits from the reviews. Use this information to optimise the current system or find new avenues entirely.

2. Set appropriate performance measures

Performance measures are there to pinpoint how employees should perform. Every company sets different, unique performance measures based on its industry and on employees’ given roles.

For example, when evaluating a sales advisor’s performance, one measure could be assessing how many closed sales were made within a given month or quarter. However, these sales enablement measures would not be appropriate for someone working in the company’s customer success department, who may need to be measured on the number of successful complaints resolved.

3. Factor in employee training

If employees have already expressed a desire to undertake continuous training, you can take these into consideration when evaluating them. While this should not detract from the MO of evaluating their work quality and performance, acknowledging any training that they’ve taken can help you understand their level of engagement and motivation.

4. Identify competencies and gaps

Whilst you want your new evaluation system to meet the needs of your team members, you also need to ensure it addresses the competencies that make the most sense for each employee. By creating competency frameworks for the roles within your organization you can identify the key behaviours and performance required. This could involve such areas as the necessary service skills, attendance, initiative and leadership qualities attached to a role.

When reviewing employee progress against these frameworks there is then the opportunity for the employee to set specific goals for themselves and address any other important gaps in their knowledge or progression.

5. Create a performance evaluation form

Once you have established the measures to assess, the aim is to create an evaluation form based on them. The form should account for job knowledge, skills and training, as well as quality and quantity of work, attitude, habits, difficulties, and other elements. 

The important thing is to let employees review themselves without them feeling like they are being examined. A good idea is to distribute the form to ‌employees first and give them sufficient time to complete it before it is returned to you.

6. Allow feedback 

Feedback is a crucial goal of any performance evaluation, so it’s vital that everybody knows what kind of feedback to provide and how it should be administered. You can provide feedback that balances praise and acknowledgement of any areas for improvement, with no ambiguity or vague comments. 

Employees should also be granted the same privilege to say what they think of their evaluation and if they have any further avenues they want to pursue.

7. Establish an action plan

In some cases, employees just aren’t the right fit for a company, and vice versa. It’s unfortunate when that’s the case, but it’s practically unavoidable. If an employee is not hitting their goals or adhering to company values, you may need to initiate an action plan of performance improvements. 

Additionally, as part of your action plan, you can set the regularity of your performance evaluation schedule. Consider the availability and resources that you have and whether it’s feasible to evaluate employees more frequently, for example, every quarter. You may prefer to initiate shorter and more regular feedback sessions in your company calendar. The choice is yours.

Now that you understand the importance of establishing an effective performance evaluation system, it’s time to put it into action. Do not expect to have all of this mapped out instantly; take your time and build a system that works for the organisation you are representing. Equally, recognise the value of the system and the role it can play in the long-term success of your company.

8. Building a culture of collaborative learning into PE systems

For employees and organisations alike, continuous professional development is fundamental in maintaining high-performing teams. Employees are expecting to learn—and it’s imperative you meet these to successfully create learning habits that fuel performance.

Collaborative learning methods can compliment a continuous development culture by: 

• Making it easy for employees to declare their learning needs 
• Empowering any team to publish courses quickly
• Encouraging subject-matter experts to contribute their skills, share - their knowledge, and iterate learning content over time
• Using a continuous feedback loop to keep learning content current, accurate, and engaging
• Fostering a shared sense of connection and belonging through making every step of the learning process as interactive as possible

Interested in finding out how you can maintain high-performing teams through collaborative learning? Feel free to get in touch with one of our learning experts to find out more.