Employee performance evaluations are an important part of managing your business. While few managers and probably even fewer employees look forward to these reviews, they can be very useful tools.

The performance evaluation process can force managers to objectively look at the employee’s capabilities, and provide guidance to help the employee improve. Reviews can be used to reinforce good performance and identify poor performance and establish an improvement plan. In addition, the process can provide a forum for employee feedback that can be useful in setting the business’s future course.

Finally, performance evaluations can help guide compensation adjustments.

Ensure employees understand the process

Most businesses use an annual evaluation process. While new employees should be reviewed after an initial period, annual reviews are probably often enough for other employees.

Employees should understand why they are being evaluated. It’s important to let employees know the evaluation process — in addition to helping determine pay adjustments — is designed to help them develop into more capable and valued workers.

Employees should also know the evaluation criteria. The more objective and concrete the criteria, the more likely the process will be appreciated. Here is a list of potential evaluation points:

  • Attendance and punctuality
  • Dependability
  • Productivity
  • Work quality
  • Work consistency
  • Knowledge of job
  • Work skills
  • Managerial skills
  • Attitude
  • Cooperation
  • Enthusiasm
  • Initiative
  • Judgment

A worksheet with 1-to-5 ratings can be a useful tool.

What to cover

The evaluation meeting should be approached like an important business event. Some potential agenda items include:

Accomplishments. Use the meeting to praise the employee for accomplishments since the last evaluation. This can set a good tone and let the person know you appreciate their efforts. It also helps identify what’s important for the success of the business.

Strengths. Let the employee know you recognize what they do well. Try to leverage those strengths with new responsibilities.

Weaknesses. Also tell the employee about areas that can be improved upon. This can be done positively, especially if the process includes a plan to improve those areas.

Problems. If there have been problems or disappointments since the last review, identify them and discuss why they occurred and what can be done to avoid them in the future.

Document the experience

Most employees want to know how they are doing. If the evaluation process is handled well, not only do they learn what you think of them but also how they can become better employees. Be sure to document the process and meeting. While most evaluations can be positive experiences, they can also become the source of legal actions.

This news is provided as a service to you by Marlin Business Services Corp., a nationwide leader in commercial lending solutions for the U.S. small business sector. Marlin’s equipment financing and loan programs are available directly and through third-party vendor programs, including manufacturers, distributors, independent dealers and brokers, to deliver financing and working capital that help build your success.