Evaluation is always a part of life. As an individual, you do it for self-growth in order to be a better person every day. As a business owner, it is also necessary to evaluate your business through some aspects, including conducting performance evaluations for your employees. 

Employee evaluation performance can not only benefit business owners. When done correctly, you can also evaluate an employee to motivate them through your positive feedback while at the same time you can also help them improve their skills. 

In this post, we will highlight some tips to evaluate an employee’s performance in a way that it’s easy for you as a business owner, and also beneficial for your employee’s growth. 

4 Reasons Why Performance Evaluation is Important 

To do it effectively, we first need to understand why performance evaluation for your employees is necessary for your business. Employees are the most important asset in any company as they are the make-or-break entity for your success. 

Keeping your team happy and productive is one way to guarantee the well-being of your business. And in order to achieve that, maintaining open communication between employer and their employees is crucial. Performance evaluation is one way to do it, and these are the reasons why it benefits both entities in your business. 

 #1 Performance evaluation leads to a better decision-making process for your business

Making a simple mistake can cost you a fortune in the business. While it is inevitable in the process, knowing your team’s strengths and weaknesses through employee performance evaluation can give you clarity about what you need for your business growth. 

Performance evaluation helps you prioritize the things you need most as an organization. Whether it’s time to upgrade employee benefits or start new employee training programs to improve their skill set, you can be a better decision-maker to identify what’s next for your business. 

#2 Performance evaluation gives employees clarity on what the company expects from them

Getting your employees on the same page as you will take your business to the next level. You can set business goals as detailed as you can make, but it will be hard to achieve if your employees don’t understand the framework and what you expect from them. 

By evaluating your employee’s performance, you can give them clarity on what you expect from them for the next period. As an employee, they carry out your business mission and execute them to get closer to your goals. Holding themselves accountable for your expectation from them will give them some sense of responsibility to achieve your collective goals. 

#3 Performance evaluation helps your employees build their career paths in the company

Career development is essential to enhance employees’ engagement and loyalty toward the company. Knowing there’s a place for them to advance their career with the company is an effective way to keep them motivated and productive, which can also affect your business outcome. 

As for the employee, performance evaluation also helps them grow their career as it allows them to create a career plan for their personal growth. Whether they want to get promoted to a higher level or learn a different aspect of the business, you can accommodate the chance for their career advancement in a way that can also benefit your company. 

#4 Performance evaluation allows all stakeholders to give each other’s feedback

What you need to highlight about performance evaluation is that all stakeholders should get involved in the process. Evaluating employees’ performance is not solely management’s task to review the staff, but also the other way around. 

The purpose of performance evaluation is to focus more on all team members’ strengths and weaknesses, individually and collectively. When you evaluate your employee’s performance, make sure to get everyone involved so you can assess your business as a whole entity. 

How to Evaluate an Employee’s Performance Effectively

Now that you understand why your company needs performance evaluation for the employees, it’s time to find easy and effective ways to evaluate an employee’s performance. 

So, what can you do to evaluate your employee’s performance effectively? 

Step 1 – Set the KPIs for each employee’s role

As a business, you need KPIs to measure your company’s performance. So do the employees. 

There is no question that employees are one of the most critical assets in any business. Engaged employees produce better outcomes for your business, and what’s a better way to keep your employees engaged than setting up the key performance indicators for their role? 

While each KPI can be different depending on each division, there are a few metrics that you can apply to all employees, including: 

• Attendance rate — Absenteeism in the employees directly affects their productivity and engagement, making it an excellent way to indicate their performance in general. 
• Turnover/retention rate — Identifying the turnover and retention rate of the employees in the company will also showcase your employee satisfaction rate within your company. 
• Profitability — With employees being an important asset to your company, their productivity will most likely affect your business revenue. InvoiceBerry makes it easier for you to track your business profitability rate by tracking your payments and expenses. 
• Vacation days used — the best way to indicate the work-and-life balance in your organization. Do your employees take their annual leaves as needed? Is there any indication that they’re overworked that it’s for them to take leaves?

Step 2 – Track your employee’s performance throughout the year

When you evaluate an employee’s performance, you need to make a fair judgment on how they perform throughout the year. Avoid micromanaging your employees, but you can create a file for each employee to track their performance.  

Write down every achievement they get, and take notes whenever they make a mistake to add suggestions and recommendations to improve moving forward. Start an open discussion with your employee, and discuss it periodically to enhance their morale. 

By doing so, you allow your employees to improve their performance from time to time and start a healthy environment by building an honest and transparent relationship with your coworkers in the business. 

Step 3 – Set up the performance evaluation process

Now that you have the KPIs and track your employee’s performance periodically, it’s time to decide how to conduct the performance evaluation process. 

There are at least five methods that you can use to evaluate your employee’s performance, including:

• Traditional performance evaluation is where the superior will be responsible for conducting the assessment based on their employees’ performance. 
• Self-assessment, the company can create a questionnaire to fill out. This questionnaire will enable employees to reflect on their performance and discuss it with their team or superior. 
• 360-degree assessment should involve all the team members, including superiors, colleagues, supervisors, and each individual, to evaluate the team’s performance in every aspect. 
• Group performance evaluation. Conducted by a superior to evaluate the team performance, which allows feedback from each team member to review their peers and the team. 
• Leader assessment. Team leaders and company management must be evaluated to improve your business operation. Use an internal evaluation questionnaire to make it confidential so the staff can share their honest feedback transparently. 

Step 4 – Organize a 1-on-1 meeting to evaluate the employee’s performance

To create a healthy environment in the workspace, you can start by showing some respect to your employees’ boundaries. Instead of conducting an impromptu meeting for performance evaluation, organize the meeting in advance so that you and your employees can be well-prepared for the appraisal. 

Organizing a meeting in advance will give you some time to take notes on the areas of improvement for the employee and the feedback you have based on their performance. Respectively, your employees can also be more prepared for what’s to come and how they can address their concerns regarding their workloads and the company. 

Step 5 – Be honest and firm when you give constructive feedback to the employee

Giving constructive feedback can be tricky in the workplace, so you must be careful when evaluating your employee’s performance. If you need to address some criticism toward them, be clear about it without taking it personally. 

Keep it professional by referring to your employee’s performance files. In addition to that, you can highlight how they can improve and fix the issue moving forward. It’s important to show them that there’s always a room for improvement in the company, and you can show them support in how they can achieve that. 

Step 6 – Focus on the performance objectively

The key to effective management is to stay objective toward the employees. The reason why objectivity is important when you evaluate an employee’s performance is to ensure that the evaluation made is not biased. And you can do this if you maintain your employee performance evaluation based on their track records in their current position. 

Step 7 – Be open to input from the employee’s point of view

One more thing to remember is that performance evaluation applies to everyone, including you as the business owner or manager. You need to grow together to achieve a better outcome as a team, so be open to criticism as you expect your employees to your feedback. 

Being open to feedback can make you a better team, which means you are willing to explore ideas and input to improve altogether. By doing so, you can also maintain transparent communication within your team to create a trustworthy workplace environment. 

Step 8 – Maintain open communication

Don’t stop at performance evaluation to communicate openly with your supervisors and coworkers. Maintain it regularly to create a healthy work culture within your company, as addressing issues promptly can prevent the development of a toxic work culture. Good communication is necessary for your company’s success, and open communication helps your team to stick together through the ups and downs of the business. 

When you maintain open communication with your team members, you can tackle any issues in the earlier stage as it helps your team to move quickly when any opportunities or problems arise. 

Conclusion

Evaluating an employee’s performance is beneficial both ways. For a business owner, employee performance evaluation will help you upscale your team’s performance to achieve a better outcome for your company. It also clarifies what the company expects from the employees and how they can improve their skillset afterward. 

It is necessary to create a synergy among team members, and it is impossible to achieve that without providing a safe space for employees to communicate transparently within the organization. And that’s why employee performance evaluation is vital for any business entity.