5 Steps to Creating a Performance Review Process Your Employees Will Love

Career-focused, ambitious millennials and their younger counterparts in Gen Z crave feedback, but most are unhappy with how it’s dealt with in their companies. Less than 20 percent of employees feel inspired by their reviews according to Gallup, and another study showed only one-third of employees felt their efforts were evaluated fairly. And it’s not just employees. 95% of managers are dissatisfied with their organization’s review system.

Aside from the fact that taking feedback is hard, why is everyone so unhappy with performance reviews? A big factor is the review process itself and how it stacks up in the context of the feedback culture in the organization. 

A good process leads to a good feedback culture, which ultimately positively impacts employee engagement. In this article, we break down how you can create a performance review process that empowers your employees and provides managers with the right tools that they can use to evaluate their reports.

5 Steps to Creating a Performance Review Process Your Employees Will Love

How To Create a Performance Review Process

STEP 1: DETERMINE YOUR GOALS

The first step to designing a great performance review process is to align with decision-makers (such as senior leaders and those on the HR team) on the overarching purpose of your performance review. It’s a necessary precursor to designing the performance review itself. Ask: Why do we have reviews? What purpose do they serve for our organization? 

The most common reasons named are: 

  1. Developmental: To provide a predictable format for managers and direct reports to have conversations about their development. 
  2. Corrective: To aggregate performance feedback all in one place, making it easy to access and prevent unpleasant surprises for employees. 
  3. Predictive: To gather insights about themes and L&D needs.
  4. Analytical: To determine compensation and promotion.

When designed well, we’ve found that performance reviews are best suited for the first three purposes above.

As for the fourth reason, we invite you to deeply consider the pros and cons of using performance reviews to determine compensation and promotion. While tying employee performance to financial reward can be a motivation, it can also overemphasize individual achievement and lead to unhealthy competition among employees.

STEP 2: CHOOSE YOUR PERFORMANCE REVIEW TYPE

There are many, many ways you can structure your performance review. The traditional method of a survey with numbered scales and subjective questions is now outdated and largely considered to be ineffective and inaccurate. Although it provides a quantifiable measure, it can sometimes oversimplify complex human behaviors and dynamics. 

Here, we present some alternatives that better encapsulate employee and manager performance in a more holistic way.

  1. Qualitative Reviews
    Contrary to the data-first approach of numerical scales and yes or no questions, the qualitative review allows for a more in-depth understanding of performance and fosters a developmental approach. Managers provide written or verbal feedback (usually following a template), taking the time to reflect on the employee’s performance, highlighting strengths and areas of improvement, and making suggestions.
  2. Self-evaluation
    In this technique, employees turn their gaze towards themselves and evaluate their own performance, which is then discussed with their manager. It can follow a framework like STAR (Situation, Task, Action, Result) or remain open-ended. Employees should leave with a growth or professional development plan that outlines their next steps. This promotes self-awareness and empowers employees to take charge of their growth.
  3. 360-Degree Feedback
    Rather than the traditional top-down approach where managers rate their direct reports, in this method, feedback is gathered from multiple sources – peers, direct reports, managers, and sometimes even clients. This provides a holistic and comprehensive view of an employee’s performance from different perspectives. It helps mitigate the impact that unconscious bias can have on the employee’s review.

STEP 3: DESIGN YOUR PERFORMANCE REVIEWS

Chances are, at this stage, you have decided to employ a mix of strategies. Consider conducting a survey to get feedback on the current review process: 

  • What do reviewees think about it? What do they feel could be improved? 
  • What do managers need in order to provide good feedback? Do they need training? Are they happy with the tools they have?

Performance Review Template
Many reviews consist of a self-evaluation and written portion that reviewers (managers, peers, direct reports) complete. This helps both the direct report and manager aggregate information and prepare for both performance and development conversations. Put together the materials they will need for the performance review.

Performance Review Template: We created a Performance Review Template for managers, direct reports, and self-reviews that incorporates elements we have seen work well, with an eye towards simplicity and reducing bias.

Design your questions to solicit specific and actionable information. For every piece of feedback, prompt reviewers to reference examples (observable behaviors) and the impact. Most tools allow you to adjust the instructions or the format of the question accordingly. View our template for an example. 

Link to the stated goals, competencies, and expectations outlined for the role. The reviewer should have access to these, either directly in the review itself or in a linked resource. Not only does this reduce bias by removing subjective comparisons, it also provides guidelines around what will be the most helpful feedback to provide.

STEP 4: CREATE A PREDICTABLE SCHEDULE FOR PERFORMANCE REVIEWS

Why is a schedule essential for employees and performance development?

A schedule is essential for employees and performance development because it provides an organized, predictable structure. When employees know the dates ahead of time, they can prepare in advance, minimizing anxiety.

Further, regularly scheduled reviews create a positive feedback culture, where constructive feedback is sought, given, and received as a natural part of the growth process.

We recommend creating a predictable schedule for performance conversations (evaluation of performance) and development conversations (discussion around developmental goals). Both are equally important to an employee’s growth. 

What’s the difference?

  • Performance conversations are about the individual’s performance in relation to their current role. The manager typically drives this. The opportunities discussed should be acted on in the near or immediate future. 
  • Development conversations are more future-oriented, focusing on how the individual wants to grow their career, what skills they want to develop, and what strengths they want to build upon. The employee/report typically drives these and often pulls feedback from other internal and external stakeholders as part of this process. For example, some people incorporate 360s as part of their development conversations. 

Some organizations combine both conversations into the same step in the cycle, and others separate them. Below are sample schedules for each option. The goal is for employees to have clarity and predictability around how they perform in their roles and guide their development. 

Sample Review Schedule 1

  • Performance feedback + development conversations every 6 months (e.g. Jan/July)
  • 1-1s weekly or bi-weekly for feedback, development checks, and coaching

Sample Review Schedule 2

  • Development conversations every other quarter (e.g. March/September)
  • Performance feedback aggregation and conversations every other quarter (e.g. December/June)
  • 1-1s weekly or bi-weekly for feedback, development checks, and coaching

Pro tip: Plan to train (or refresh) all employees in Feedback Skills 1-3 weeks prior to performance reviews.

STEP 5: PILOT YOUR PERFORMANCE REVIEW

Once you’ve got your performance review designed and the cadence figured out, pilot your review process with a small but diverse sample of employees from a mix of departments, roles, seniority levels, and locations (if applicable). 

Clearly communicate the rationale, goals, and specifics of the pilot to everyone involved, and use surveys, focus groups, and one-on-one interviews to understand the experiences of participants as they navigate the new process.

Make the necessary adjustments, and then let your new performance review process take flight. 

Your performance review process is never “done.” It will have to be refined and iterated periodically to better meet the needs of your employees.

Best Practices 

Your process is the scaffolding, but the quality of the feedback delivered is everything in a performance review. Here are a few tips to ensure that feedback is constructive and fair:

1. Share examples of high-quality vs. poor-quality feedback.

At LifeLabs, we’ve designed our Playing Cards(™) method to give an easy-to-remember framework for distinguishing between the two. Clubs are non-specific critiques and Hearts are non-specific praises, neither of which are super helpful for adjusting behavior. On the contrary, Spades (helpful tools for digging ourselves out) and Diamonds (bright, strong, gems) refer to high-quality feedback that is specific and actionable, making it easy to implement and receive. 

5 Steps to Creating a Performance Review Process Your Employees Will Love - Club

CLUB: Blurry, critique

You came across as rude

5 Steps to Creating a Performance Review Process Your Employees Will Love - Heart

HEART: Blurry, praise

You crushed that sales call.

5 Steps to Creating a Performance Review Process Your Employees Will Love - Spade

SPADE: Specific, critique

I noticed you rolled your eyes in the meeting. I mention it because I didn’t feel comfortable sharing my perspective. 

5 Steps to Creating a Performance Review Process Your Employees Will Love - Diamond

DIAMOND: Specific, praise

I liked how you asked about the clients’ concerns. It helped us come up with an idea that met her needs. 

2. Include lag measures as well as lead measures.

Lag measures focus on outcomes. These answer questions like “What did you accomplish?” business won) 

Lead measures are behaviors that should lead to those outcomes. These answer questions like “How did you accomplish that?” (e.g. for sales: number of calls made, negotiation skills, etc.)

It’s important to measure both because lag measures are dependent on factors outside of one’s control. Acknowledging these elements goes a long way in helping employees feel like they are being evaluated fairly.

3. Increase fairness and reduce bias

According to Gallup, 71% of American employees thought their evaluations had fairness problems. When employees find reviews unfair, they’re less likely to feel the process is a good use of time and act on the feedback.

Run a FAIR check on your review. A FAIR check will help you determine how inclusive your review process is. To run a FAIR check, ask yourself:

  • Forthright: Are we making processes and criteria explicit and clear to all?
  • Accessible: Are we setting up each person for success and checking for unintended consequences on all groups?
  • Involved: Do we get input from all those impacted before making decisions and to continue iterating? 
  • Rigorous: Have we put consistent measures in place to mitigate bias? 
5 Steps to Creating a Performance Review Process Your Employees Will Love - Fair Framework

Improve Your Performance Review Process Today

Employee engagement and retention is a tough game, and your performance review process can be a key player in it. If you do not provide feedback in a sustained, constructive manner, it can cost you some of your most driven talent. 


Ready to talk about improving your review process? Speak to a LifeLabs Learning consultant today!

Mackenzie Hesler
Mackenzie Hesler
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