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Chapter 7 of 8

Manage employee evaluations

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Small business guides > 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?

Employee evaluations, also known as employee performance reviews or employee performance appraisals, are a way to assess each employee’s performance. They help you get the best out of your employees by giving them feedback on what they did well and how they can perform better.

When to do employee evaluations

Employee evaluations are usually done once a year, either at the end of the year or at 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.

Employee evaluation in action

An employee evaluation is an ongoing process that takes 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.

Archery target board with a circle for each step in the employee evaluation process

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 organize your thoughts:

Sample employee review form with six sections

Encourage a two-way conversation

Ask for the employee’s ideas and input into successes, improvements, challenges and job satisfaction. Recognise their efforts and focus on how they can do better. Give them feedback they can act on and steer them to the right information. Try to remove any bias and focus on the complete picture of their performance.

Outline future goals

Set achievable goals for your employee and give them a say on what their goals need to be. Go back and update their goals during each employee evaluation; and in your regular catch-ups, check to make sure they’re on track.

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.

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.

Regular feedback and recognition

In addition to evaluations, 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. Don’t wait until the employee evaluation to raise any issues.

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 8: Where to next? Tools and guides for your business

Find more guides to help you on your hiring journey, along with handy tools to make it easier. Xero has everything you need to build your best team ever.

Read chapter 8

This guide is intended as general information only. Always check with a professional for advice.

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