Employee Performance Evaluation Process: Definition and Benefits

What is performance evaluation?

Performance evaluation (also known as performance review or performance appraisal) refers to the process of systematically assessing an employee’s performance.

It is especially useful for understanding each employee’s individual abilities and limitations in order to calibrate training, determine compensation, and calculate suitability for advancement.

What are the benefits of a performance evaluation process?

In addition to identifying an employee’s strengths or weaknesses, performance evaluations provide additional benefits. For employers, this process informs strategic planning, protects against possible litigation, and boosts employee morale. For employees, the process improves communication, defines performance goals, and helps with individual and team development.

Performance evaluation stats

The data tells us that feedback is valuable, and employees want to discuss work performance, goals, and career opportunities more frequently with their managers.

7 performance appraisal examples and types

There are many ways to evaluate employee performance, but here are seven common methods:

1. Self-appraisal. Employees set aside time at specified points during the year to examine their progress towards goals, noting successes and failures along the way.
2. Manager appraisal. During this 1:1 meeting, managers discuss an employee’s performance and suggest potential training opportunities. Managers should come equipped with information such as objective-based goals, employee self-appraisals, and peer reviews.
3. 360-degree feedback. Besides manager and self-appraisal, employees who undergo 360-degree reviews are also rated by their peers and/or any external customers or partners they work with frequently. 
4. Objective-based feedback. An objective-based appraisal is based on mutually agreed-upon goals for a specific period. For example, did the employee meet or exceed production goals? 
5. Human resources accounting. HR weighs the cost of hiring, training, and nurturing an employee against the revenue they generate for the company. 
6. Skill assessment. The assessment center appraisal method consists of several standardized tests and exercises. 
7. Behaviorally anchored rating scale. BARS is a series of standardized data points that managers use to appraise their employees. 

Keep in mind that performance evaluation methods aren’t one-size-fits-all. Depending on what you want to measure and how, you can create a custom plan using any of these ways either combined or on their own.

Build a scalable performance evaluation process

The performance evaluation process normally consists of:

• Employee evaluations. The employee evaluates their performance according to pre-established criteria. 
• Manager evaluations. The manager evaluates the employee and their performance according to the aforementioned criteria.
• Feedback meetings. Manager and employee meet face to face to discuss the results of the evaluations, plus compare and contrast the gathered information.
• Action plans. Both parties work together towards developing an action plan to keep/improve the performance results.
• Follow-ups. Employees and managers schedule subsequent meetings to keep track of the goals established on the action plan.

Using the performance evaluation examples and types mentioned in the previous section, it’s time to start building an employee performance evaluation process.

Not sure what’s right for you? Consider this common performance evaluation process example of a performance evaluation: an objective-based evaluation that involves an employee self-appraisal, a manager review, and 360-degree feedback that includes peer reviews. 

Process framework

Once you understand which elements of the employee performance evaluation you’d like to include, use these steps to build out your process:  

• Establish the purpose of the evaluation process to better understand what you want to measure, why, and how. With a clear idea of the process in mind, performance evaluations can go from dreaded to empowering. 
• Set goals, performance expectations, success criteria, and the timeline for giving feedback. 
• Survey employee and team members. 
• Review whether employees met their goals and performed according to the established expectations and criteria. Keep this step interactive and conversational, avoid turning it into a lecture. 
• Evaluate the results and determine next steps. 

Process frequency 

The performance evaluation process is the starting point for employees and managers to create a development plan. For the workforce of yesteryear, the performance evaluations were reserved for the annual review. However, that review frequency is falling out of favor with today’s workers, with many preferring ongoing feedback rather than one big meeting per year.

Investing in continued communication and frequent conversations are extremely helpful to keep everyone on the same page. Also, scenarios in which managers and employees have a strong relationship with frequent communication help make performance evaluations less stressful for both parties.

5 tips to improve performance evaluations

If you’re ready to improve your performance evaluation process, read up on how the best employee management tool can motivate teams. 

Invest in your team’s development with Pipefy 

Pipefy is a no-code solution that makes it simple to design and build performance evaluation processes to build and launch scalable, automated workflows without writing a single line of code. And with customizable dashboards, you can translate raw data — like projects completed, deadlines hit or missed — into visual dashboards for a full picture of how your employees are performing. 

Pipefy also offers a free performance evaluation template that allows you to set up feedback meetings with your employees as well as collect and give feedback, helping them improve their performance as well as overall behavior.

The adaptable template is fast and simple to deploy and can be customized for your unique needs. You can also connect your existing tools and processes with Pipefy to centralize employee data and build an end-to-end HR operation.