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Chapter 8 of 10

Manage employee evaluations

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Small business guides > A complete guide to hiring staff > Manage employee evaluations

Manage employee evaluations

As a small business owner, it feels good to have an employee or two, or an entire team behind you. You can rely on them to get things running smoothly and support you in growing your business.

But your employees need your support too. They need to know if they’re on the right track to achieving the goals you set out for them when they started. They also need to know what they’re doing well and the areas they can improve on. Employee evaluations help with that.

What is an employee evaluation?

An employee evaluation, also known as an employee performance review or employee appraisal, is a way to assess your employee’s performance. Employee evaluations help you get the best out of your employees by giving them feedback on what they did well and how they can perform better. A good employee evaluation process can make your employees feel happier and more secure in their job, leading them to stay longer with your business.

Why do employee evaluations matter?

Your employees are your most valuable investment. Supporting them in their work journey will benefit your business and help you achieve your objectives.

Here’s why employee evaluations are important:

  • to set clear, achievable goals for your employees

  • to check if goals are being met or exceeded

  • to find out what employees need to improve on

  • to document employee performance and progress

  • to use as a factor in pay increases or promotions

  • to gauge employee job satisfaction and understand their career goals

When to do employee evaluations

Employee evaluations are usually done once a year, either at the end of the year or during an employee’s work anniversary. But it’s good practice to do it more often, such as once every two months or quarterly. It’s better to give employees ongoing feedback on their performance rather than meeting with them only once or twice a year.

Catch up with your employees weekly, every two weeks, or monthly. Talk about what they’re currently working on and address any issues or challenges they’re facing. These regular discussions also give your employees a chance to provide feedback about your business.

Employee evaluation in action

So how does employee evaluation work? It’s an ongoing process that takes a lot of reflection and careful judgement. It’s about listening and providing constructive feedback. It’s also about giving employees the opportunity to grow in their job rather than dwelling on past mistakes.

Here’s what you need to do when evaluating employees.


Be prepared

Schedule each employee evaluation in advance so you and your employee have enough time to prepare for it. Book a private area within your workplace or do it in a more relaxed environment such as a coffee shop to make your employee feel comfortable.

To prepare for the evaluation, look at your employee’s job description and the notes you’ve taken during your regular check-ins. Get feedback about your employee from their manager, teammates, or even customers they’ve interacted with.

Use this sample employee review form to help you organise your thoughts:

Employee review form

Ask your employee to complete the same employee review form beforehand to assess their own performance.

When completing the form, be as specific as possible. Include concrete examples and exact details if you can. So instead of listing something generic such as ‘Delivers on time or even earlier’ as an achievement, put in ‘For project X, Jess submitted the design document three days earlier than the due date. Because of this, the production team worked on the designs immediately and delivered the project a day before the deadline.’

Encourage a two-way conversation

Use the employee review form as a starting point. Discussing employee performance is a two-way conversation, so encourage your employee to share their point of view. Ask for their ideas and input around:

  • Successes: What parts of their job are they doing well? What are their greatest achievements so far?

  • Improvements: What areas can they improve on? What do their priorities need to be? What do they need to focus on? What needs to change so they can do better?

  • Challenges: What do they find difficult about their job? What other issues are they facing? How can you help them address these difficulties or issues (like providing training or other equipment)?

  • Job satisfaction: Are they happy with their job? Do they want to take on new challenges or additional responsibilities? Are they struggling with work-life balance?

This is also the time to have an honest and open discussion about pay and promotion. Talk to your employees about any pay increases or bonuses and how they can move to another role or position.

Outline future goals

Set achievable goals for your employee and give them a say on what their goals need to be. Work with them to discover the best ways to reach those goals. Go back and update their goals during each employee evaluation, and on your regular catch-ups, check in with your employee to make sure they’re on track to achieving those goals.

Document the discussion

Take notes during your discussion and write down everything you’ve agreed on. Share these notes and other documents with your employee to remind them about their goals and remind you about what you need to do to help them. You’ll also use them as a starting point for the next employee evaluation.

Five tips for more effective employee evaluations

Effective evaluations help your employees perform at their best. Here are five tips to get the most out of employee performance reviews:

  1. Give constructive feedback
    Recognise your employee’s efforts and focus on how they can do better. Give them feedback they can act on and steer them to the right information.

  2. Be objective
    Try to remove any bias when evaluating employees. Focus on the complete picture of their performance instead of one past mistake or a recent achievement.

  3. Explain why employee evaluation matters
    Take some time to let your employees know why you’re doing performance reviews. Explain to them why it matters to you that they perform well and what the impact is on your business if they don’t.

  4. Don’t catch them off guard
    Don’t wait until the employee evaluation to raise any issues. Bring them up at the time they happen so you and your employee can resolve them immediately.

  5. Show your appreciation
    Thank your employee for anything they’ve done that goes above and beyond what you would expect. Reward them for their success, even if it’s something small such as a thank you note, buying them a cup of tea, or mentioning them in your next team meeting. A little positive reinforcement goes a long way.

Chapter 9: How to grow your team after the first few hires

Taking your team from zero to hero is a challenge. We’ll help you get there with some tips and tricks on how to successfully grow your team.

Read chapter 9
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