What are you doing to evaluate your employee’s performance? The most common answers to this question for small business listowners are probably:

  • Nothing
  • Meetings with employees when there is a performance issue
  • Annual performance reviews for all employees at the end of the year
  • Annual performance reviews for all employees on their anniversary date

Evaluating employees in this way has many pitfalls. If performance reviews are done at all they are either not timely (only done once a year) or they only address poor behavior, not what is going well. These styles of performance reviews also often rely heavily on quantitative measurements, ranking employees from 1-5 for example. There is also often subjectivity in the ranking system, so to one manager a 3 would only be given to a poorly performing employee, but to another manager a 3 might represent an employee who is performing their job well, but not going above and beyond.

This subjectivity can lead to frustration among employees. One example given in a recent article in HR Magazine is an issue that Adobe Systems observed after their performance evaluations each year. They found that there was a large increase in the number of people who quit (many of them high performers) right after performance reviews took place.

“We hired the very best, and then we brought them into an organization and on an annual basis said, ‘You were exceptional when you came in, but now, relative to your peers, you’re only average.’ That doesn’t feel good,” says Donna Morris, Adobe’s senior vice president of global people and places.

Adobe Systems found that this type of performance evaluation would not work for their employees. Instead they moved to more frequent and more informal conversations between managers and employees regarding performance. They also no longer ranked employees on a numerical scale. Because a lot of their work was collaborative and knowledge based, they found other ways to track performance a results.

It is important to consider what would work best for your company and your employees given your industry and company culture. Simply conducting annual performance reviews because that is how it always has been done or is “what you are supposed to do” will likely not give you the results you hoping for.

How does your organization review employee performance? Share best practices with us on Twitter using the #APlusInsights.