Skip to main content

How do I implement an employee evaluation scheme? How do I implement an employee evaluation scheme?

1st October 2021

Information Icon

This article was written and originally published by The Productivity Group (trading as Be the Business). Be the Business is an independent, not for profit organisation set up to help business owners and leaders improve the performance of their business. © Copyright 2021 The Productivity Group. All rights reserved. Everything we publish on Business Talk is provided as general information only. It isn’t advice or an insight into the views of TSB or any of our Partners. This is for information only and should not be relied upon as offering advice for any set of circumstances. Please think about getting independent financial advice if you want help with your personal situation. While we make every effort to make sure the content is accurate and up to date, no liability is accepted by TSB Bank for any loss or damage caused by relying on any statement or omission. Links to external content are provided for information purposes only and not a TSB recommendation of any brand or service.

How do I implement an employee evaluation scheme?

October 2021

An employee evaluation scheme gives businesses the opportunity to assess and review individual performance. It’s something you should do at least once a year.

Every business owner should know whether their employees are working productively, achieving goals, and coping with the demands of the job. However, this is easier said than done.

Employee evaluations (also known as performance reviews or appraisals) are tough. As Dick Grote, author of How to Be Good at Performance Appraisals puts it:

“What a performance appraisal requires is for one person to stand in judgement of another. Deep down, it’s uncomfortable.”

Even if you have a strong relationship with your staff, the fear of being judged can create a tense atmosphere. Some employees will become guarded or defensive, making it difficult for managers to give negative feedback.

When you’re introducing employee evaluations, it’s crucial that staff know what to expect. In this article, we’ll look at how to create an evaluation scheme, the criteria for judging employees’ performance and some alternative methods that businesses can consider.

Structure employee evaluations to fit your business

There’s no one-size-fits-all approach for employee evaluations – what works for one business might not work for another. Think about what you want to achieve from your evaluations.

Do you want to:

  • Give employees greater clarity about goals and expectations?

  • Have a better understanding of who your top performers are?

  • Improve training and personal development opportunities?

  • Identify employees who are underperforming?

Choosing criteria for judging employees’ performance

It’s important to set out the qualities you want to measure, because each of your managers will probably have different opinions on what employee strengths and weaknesses are. For example, the same employee could be “ambitious”, “aggressive”, “driven” and “not a team player”.

Providing structure will help to define the characteristics you’re looking for. Here are some areas to consider:

  1. Leadership. How well does an employee manage or mentor other staff members?

  2. Organisation. How does your employee approach new tasks and deadlines?

  3. Problem solving. How do they deal with challenges? What creative or innovative solutions have they used?

  4. Communication. How well does your employee interact with colleagues? What is their attitude to work?

  5. Impact. What impact has the individual had on the business overall?

  6. Career. What training or development does your employee need to progress in the future?

It’s also common for businesses to base employee evaluations around company values. In values-based evaluations, employees are rated (from 1 to 5) on how well they demonstrate the company values.

This can be an effective way to get staff to think about your values on a daily basis. However, it’s crucial to check that your values are still clear and relevant before going down this route. Vague buzzwords like “innovate” can be awkward to convert into action.

How to measure employee performance

The last step looks at how to measure employee performance. It’s best to use a mix of quantitative and qualitative measurements to capture how well your employee is performing.

Quantitative measures could include:

  • The percentage of sales calls that resulted in actual sales

  • The number of customer support tickets that were solved

  • The percentage of goals or objectives met

These quantitative measures are useful because they give you a clearer understanding of performance across the business.

Qualitative measures, on the other hand, allow you to comment on characteristics like creativity and attitude. They’re also important for a simple reason: employees just want to know what you think of them.

  • Are you pleased with your employee’s work?

  • What does their future look like at the business?

  • Do they have fresh and exciting ideas?

  • Are they great at resolving conflict?

Communicate your expectations to staff

Once you’ve decided the areas you want to focus on in your evaluation, it’s essential to communicate expectations to staff. Your employees need to know:

  1. What they’re being evaluated on

  2. How and when you will evaluate them

  3. The consequences of the evaluation (for example, is there a salary raise or bonus for the best performers?)

If you are holding evaluations at the end of the year, arrange a planning session with each employee at the beginning of the year.

Discuss the employee’s goals and their personal ambitions with the company. Let them know what your expectations are, both for their personal and professional development. For example, you might want an employee to:

  • Improve their public speaking skills

  • Get more involved in team projects

  • Learn how to use new technologies

  • Take on new responsibilities

This meeting should provide each employee with clarity around what the evaluation will involve. It can go a long way to minimising some of the fear around being judged.

Give staff the time to self-evaluate

A few days before your evaluations, ask each employee to make a list of their biggest achievements over the last year. For example, they might have received great client feedback on a project or helped to mentor a new member of staff.

This task gives each employee the chance to self-evaluate and think critically about their performance over the last 12 months.

It also helps to ensure you don’t miss any moments that are important to them. It’s common for some people to play down their achievements or let others take credit – this gives you the chance to understand each individual’s achievements.

Be honest and constructive

In your employee evaluations, try to use specific examples as much as possible. Rather than telling your employee you value their creativity, say: “I was really impressed with the creativity you showed in X project, by doing X, Y and Z”.

If you need to give difficult feedback in your employee evaluation, the same rule applies – try to give specific examples of areas that could improve. Don’t sugar-coat it either. The evaluation process is designed to give you the chance to confront underperformers and discuss areas of improvement.

If you try to hide the negative feedback between praise, the gravity of the situation probably won’t sink in. Worse, your employee might feel like their current performance has been validated – making the next conversation even more difficult.

Alternative options for employee evaluations

If an annual employee evaluation feels too infrequent, there are a number of different approaches you can take.

Arrange monthly evaluations

Some businesses use monthly evaluations whereby each employee has monthly self-appraisals, where they meet with their manager to review performance against their objectives.

One SME leader said “It’s an opportunity for engagement. It also helps to build relationships with the employee and focus on their development within the company. These regular conversations provide a greater opportunity to hone skills, identify training or learning opportunities and stay connected to the team”.

“We ask our people to tell us how they think they’re performing, and we ask what we could do better or smarter. This makes it easier for us to track improvements and spot issues before they have a negative impact.”

This regular evaluation scheme gives managers peace of mind that employees have the opportunity to communicate regularly. They can share successes and recognise great performance every 30 days, which is important for morale and personal development.

Separate performance and pay

It’s common for annual appraisals and pay reviews to fall into the same meeting. But if your employees are hyper-focused on whether or not they’re getting a pay rise, the evaluation won’t be as valuable.

By moving to a series of short meetings – or separating your evaluation from salary discussions – you can focus the conversation on progress and performance. Your employee will be able to think clearly and talk honestly about how they want to develop, without worrying it will impact their chances of a pay rise.

Show employees you care

In addition to questions around performance and personal development, some companies are using employee evaluations to discuss wellbeing and mental health issues.

There’s now a greater awareness about the effects of stress and anxiety in the workplace. As an employer, it can help to know:

a) How your staff are coping with their workload

b) If there’s anything going on in their personal lives that might affect their work

Checking in with employees gives managers the chance to get ahead of any potential problems or concerns. This can also have a huge impact on retention, since staff will know they don’t need to change their job just to get the support they need.

Employee evaluations give you the chance to improve performance, identify personal development opportunities and build better relationships with staff. There are plenty of different ways that you can structure them – it’s up to you to find what engages and motivates employees the most.

How do I implement an employee evaluation scheme?

An employee evaluation scheme gives businesses the opportunity to assess and review individual performance.

Think about the purpose of your scheme:

  • I want to give employees greater clarity about goals and expectations

  • I want to have a better understanding of who my top performers are

  • I want to improve training and personal development opportunities

  • I want to identify employees who are underperforming

Choose criteria for judging employees’ performance

  1. Set out the qualities you want to measure. For example, the characteristics could include leadership, organisational skills, problem solving and communication

  2. Think about how you could integrate your company values into your evaluation process

  3. Include quantitative and qualitative measurements in evaluations

Communicate your expectations to staff

Your employees need to know:

  • What they’re being evaluated on

  • How and when you will evaluate them

  • The consequences of the evaluation (for example, is there a salary raise or bonus for the best performers?)

During employee evaluations

  • Try to give employees the time to self-evaluate in advance. Ask them to make a list of their biggest accomplishments over the last year

  • Be honest and constructive during evaluations

  • Use specific examples of good or poor performance

  • Don’t sugar-coat bad feedback – the evaluation process is designed to give you the chance to confront underperformers

Alternative evaluation options

Think about how you could make your employee evaluations more meaningful. You could move from annual evaluations to monthly ones, separate out pay reviews or put a greater focus on health and wellbeing.