Management best practice of the week: 5.3.6 Performance evaluation

Thoughtful, disciplined and frequent performance evaluations are especially important given the pandemic-driven shift to remote, more independent work. A formal process is essential for evaluating, motivating, and directing employees. It should occur in the context of an employee’s current work plan (which of course everyone has), which specifies responsibilities, goals and deadlines. Together, the work plan and evaluation process are essential to on-going alignment of an employee’s talents and enthusiasm with the goals of the organization.

Definition of performance evaluation: “Providing fair, positive and constructive feedback on an employee’s work, pay and promotions.”

Practice Summary


  • Standard evaluation form for consistency and objectivity – job areas each with a range of pre-determined ratings. Areas: job knowledge and skills, quantity and quality of work, work habits, attitude. For managers add leadership skills.
  • Performance criteria for each job area as basis for ratings– focus on activities that can be measured more objectively
  • Guidelines for feedback to employee – strengths and weaknesses, expectations for improvement, solicit suggestions
  • Explicit disciplinary and termination procedures – sequence: verbal warning; written warning with description of transgression, expected change from employee, consequences if employee fails to improve; brief termination process
  • Strict evaluation schedule
  • Appeals process

Recommended practices for the manager

  • Set employee goals as objectively as possible
  • Give the employee access to the evaluation form
  • On-going documentation of employee performance between reviews
  • Take on the role of a mentor during the meeting
  • Incorporate career development by asking the employee questions regarding their aspirations, thoughts on achieving their goals, and what support they might need.


  • Some companies rate employees relative to others to create a more competitive environment
  • Consistently overrating employees for morale can cause legal difficulties upon termination
  • Consistently underrating employee for excess motivation, better case for termination can cause poor morale and jeopardize the employee’s prospects for promotion.
  • Trust is created by fairness
  • A salary review should be incorporated if some or all of the employee’s compensation is tied to performance.

Key metrics

  • Quality – subjective appraisal, product defects, number of errors
  • Quantity – amount of sales, units produced, handling time
  • Efficiency – ratio of Quality to Quantity
  • Organizational level performance, aggregate of all employees – revenue per employee, return on human capital = profit/total compensation, absenteeism rate, amount of returns and rework

3 Good Questions (to discuss in a management meeting)

  • What’s the best mix of formal and informal criticism?
  • Should employee performance tie to the business plan?
  • Should employees be able to evaluate their supervisors?

You can’t engage people until you’ve thought through how they’re engaged. The Center’s Management Self-Audit tool is a simple, structured checklist for thoroughly understanding both the organization’s and its employees’ strengths and gaps.

Relevant Terms

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