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

Summary: Most employees and managers are unhappy with performance reviews, but not because of the feedback itself. The real problem is poorly designed processes. Use these five steps to build a performance review system that feels fair, inspires growth, and improves engagement across your organization.

Why are so many employees unhappy with performance reviews?

Career-focused millennials and their younger counterparts in Gen Z crave feedback, but most are unhappy with how it’s dealt with in their companies. Deloitte’s 2025 Global Human Capital Trends survey revealed that 61% of managers and 72% of employees lack trust in their organization’s performance management process.

The stakes are high. Employees perceive fairness in performance reviews as critical to their satisfaction with their jobs—nearly half of the difference in job satisfaction can be attributed to fairness in the review process. And since job satisfaction closely predicts higher engagement and lower turnover, investing in fair, transparent reviews isn’t just right, it’s business-smart.

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 to evaluate their reports effectively.

Step 1: Determine your goals for performance reviews

The first step is alignment. Senior leaders and HR should clarify: Why do we have reviews?

Common purposes include:

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 preventing unpleasant surprises for employees. 
3. Predictive: To gather insights about themes and L&D needs.
4. Analytical: To determine compensation and promotion.

At LifeLabs Learning, we’ve found that reviews work best for the first three purposes. For compensation and promotion, weigh the risks carefully—tying pay to reviews can overemphasize individual achievement and create unhealthy competition.

Step 2: Choose the right performance review type

There are 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 The traditional method of a survey with numbered scales and subjective questions is now outdated and largely considered ineffective and inaccurate. Although it provides a quantifiable measure, it can sometimes oversimplify complex human behaviors and dynamics. 

Consider these more effective alternatives:

Qualitative reviews

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.

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.

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 review template

Start by gathering feedback on your current process, then create a template that works for both managers and employees. Ask:

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

Tips for effective design:

Combine self-evaluations with written peer/manager reviews. This helps both the direct report and manager aggregate information and prepare for both performance and development conversations.

Ask for specific examples of behaviors and their impact. 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.

Link questions to clear role competencies and expectations. 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, but it also provides guidelines around what will be the most helpful feedback to provide.

At LifeLabs Learning, we’ve created a Performance Review Template for managers, direct reports, and self-reviews that incorporates elements we’ve seen work well, with an eye towards simplicity and reducing bias.

Step 4: Create a predictable review schedule

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 and development conversations. Both are equally important to an employee’s growth. 

• 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 wish 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 process

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 for fair, effective performance reviews

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 is particularly 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. 

2. Include lag measures as well as lead measures.

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

Lead measures are behaviors that should lead to those outcomes. These answer questions like “How did you accomplish that?”

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, only 22% of employees think their performance review process is fair and transparent. 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 to help you determine how inclusive your review process is. 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? 

Want to upgrade your performance review process? Download The Performance Review Playbook

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