How to conduct a more effective performance review

How can you make performance reviews a little more effective for your business? Can you link what you learn to the strengths and weaknesses in your business straight away? This overview should help you get more from scheduled review meetings with your team.

Why are performance reviews so challenging?

In a small business, you may be tempted to make performance reviews very informal – even ‘having a chat’ rather than scheduling a meeting and making official notes. Some small businesses try to avoid the stress of performance reviews altogether. But the purpose of a formal performance review is twofold: it helps you as a small business owner, and it helps your employees too.

  • A good performance review can highlight ways for you to help your employee to help your business grow.
  • A good performance review can identify weaknesses and ensure you and your team understand what’s expected from both sides of your professional working relationships.

Approach the performance review with long-term goals in mind

Are your performance reviews working against you, as an annual event? Having performance reviews on a more frequent basis could make them much less stressful.

Regular two-way feedback could have more impact on your business because it can help to remove the ‘shadow’ over the process for everyone involved. It’s less stressful. A regular conversation about challenges, achievements, new goals and next steps could be appreciated and easier to embrace.

Whenever you do schedule the meetings, bear in mind that the most effective small business owners look at their team’s performance all the time, giving praise and coaching as necessary. Even daily or weekly. A formal performance review should have few, if any, surprises and (unless it is exceptionally recent), your team should never hear about performance that’s in need of improvement for the first time at a formal performance review meeting unless it is new information or insight.

  • Start out with an overarching philosophy and mindset: performance reviews are an opportunity to talk about critical triggers for the business’s success.
  • Remember that a well-structured performance review is a great opportunity to acknowledge the team that’s contributing to your business’s success.
  • It’s also a way to identify how you can plan training or action to further support your team’s professional development – further supporting your business.

Before the performance review meeting

A performance review should serve as a point of reference for everyone involved, so it’s important to make good, clear notes that you both agree on. These are best improved by setting out a known framework of points you’d like to cover, topics for discussion together, and questions you’d like to answer.

  • Schedule the meeting with plenty of advance notice. Be understanding if your business’s operations necessitate a delay or postponement.
  • Make it private, and make if comfortable. Set a ‘no phones or interruptions’ rule. If you can, meet outside the normal working environment.
  • Be firm about this being an unhurried discussion. You may reveal topics that need exploration in more detail. Better to over-run, than to miss something important.
  • Set out in writing what you expect to achieve, a) for the employee, b) for the business, and c) how the review will work.

It’s best practice to review any notes you’ve made about the team member's previous performance prior to the meeting. If a self-assessment was completed in advance, bring yourself up to speed on it and make sure you have a clean copy to make notes on in the meeting – emphasising your open-minded approach to the review.

Likewise, if you solicit feedback from other colleagues in advance of the meeting, it is more useful to share that information with the team member prior to the review. This lets the team member take the contents on board, which, particularly if there’s room for improvement, allows for a focus on the facts.

During the meeting

Every review is more productive if it’s a positive, open, two-way conversation about expectations and performance. Talk about the business in general and recent events first. Are there successes you can celebrate together? Are there immediate plans that could be impacted by the outcome of this review?

Start with an open discussion that gives honest feedback, and think about how you’ll share this information – if it’s appropriate – with the team member’s manager. In a small business, this may mean you’re taking feedback about your own performance.

  • Use your notes as guidelines. Be prepared to be flexible.
  • Begin by talking about the team member’s role and responsibilities.
  • Review the goals that were set for the previous performance period.
  • Be constructive in feedback on areas for improvement: specific and objective.
  • Focus on professional development, not poor performance.

If you set SMART goals during a meeting, make sure your conversation covers how you can measure progress towards them. Talk about timelines, what’s possible on a day to day basis – and what this could mean for the business overall. Remember, it’s important to approach each review with an open mind. This way, you may discover hidden value that you can harness for your business’s overall benefit.

Four common mistakes in performance reviews and how to avoid them

Asking, bluntly, ‘what have your key achievements been?’

If you’re depending on an annual performance review to establish what your team member did well recently, then you’re probably not as engaged with your workforce as you could be. It’s also hard to remember what happened six or even eight months ago, so it may be difficult to be objective and accurate in a 45 or 60-minute meeting.

  • Instead, try: ‘let’s talk about the business, do you think we’re doing well’? This leads more naturally to a conversation about your employee’s input.

Asking, bluntly, ‘what could you be doing differently?’

People are generally motivated by praise, but most of us find it more challenging discussing our development areas. Many performance reviews are also linked to a compensatory reward, so there’s a natural reticence to gloss over such discussions and talk vaguely about general business performance.

  • Instead, try, ‘what could we be doing differently as a team?’ As an honest and pragmatic conversation, you can then also talk about individual contributions.

Asking, bluntly, ‘how do you show the business’s values in your work?’

Try to be clear, in advance, around what is expected of your employees such as the behaviours or approach you are looking for. Ask questions that show you’re working as a team – as a group of people with common goals.

  • Instead, try, ‘how can we improve the way we work with each other?’ This opens up a far more natural conversation about approaches, values, and ethos.

Asking, bluntly, ‘what are your strengths – and weaknesses?’

These are vague questions that don’t link to the team member’s role in the business in a productive way. Your team could detail any parts of their role, and single out the parts most relevant to ‘looking good’ overall. It is more useful to be specific about a project or programme of production, and ask the employees to think about their contributions to the team.

  • Instead, try, ‘what could we do to help the team / department more?’ This prompts a broader conversation about the employee’s views on strengths and weaknesses.

After the review is over

You’ll discuss personal goals and any changes in behaviour during the meeting. It is always more productive to agree on those aims together. Make it clear what you’re looking for, from your team member, and how the business can try to support personal and professional development.

Summarize what you’ve discussed and formalise the new goals in writing. Ask for a signature on that document from your team member. That document can serve as a reference for the next performance review – but it can also serve as a backdrop to interim feedback and assessment.

Set clear, actionable goals that are deliverable and, if it is possible, empower your team to take responsibility for monitoring their own progress in the interim. This builds trust in the relationship.

  • TIP: Use appropriate, motivating language in your reviews. A commercial goal is not the same thing as a personal and professional goal: well-chosen personal aims are motivating, but they also need to be achievable.

Employees are far more likely to be motivated by goals they’ve helped to create rather than ‘out of the box’ targets. Ask your team to iterate what those goals are, confirming that they’ve been understood and accepted their ‘mission’ – and agree on measurement of that progress.

Employees who understand how their progress can be measured are more likely to self-review in the interim and take independent corrective action when it’s needed.

It is just as important that an employee drives and takes ownership of their own performance and development as well as receiving the relevant support from the business/line manager.

Promote discreet channels for mutual feedback in the interim

In a small business, the flow of information should be in both directions . Your team needs to feel trusted, and be able to express ideas about their own individual performance – and how to improve it – on an ad hoc basis.

Be accessible to your team, and make sure your management team is accessible on a daily basis. Think about encouraging ‘skip meetings’ on a quarterly basis, or more frequently if they prove popular and productive. A skip meeting involves your team meeting with the person one step above their direct manager. This ‘skip’ opens up a dialogue that might identify weaknesses in personal relationships or workplace behaviours that would otherwise be missed.

In a small business you may not have extensive access to human resources’ expertise or experience. It is a good idea to make a record of the review meeting’s content in enough detail. If you are a small, close-knit team, you may fall into the trap of ‘giving regular praise’ against ‘passing on constructive feedback’, as if this is a way to correct behaviours. Make praise special. Use positive feedback advisedly. If you do not, then it could become hollow and not be as effective.

As workplace expectations and practices continue to evolve, the benefits of feedback should be a major element of the relationships between managers and employees. By following these steps, companies can ensure feedback continues to strengthen the organisation and its people.

Top takeaways

  • The key to a good performance review is preparation and open-mindedness.

  • Focus on honest, pragmatic, positive feedback.

  • This is a confidential meeting. Be open to discussing more detailed aspects of the business and how they relate to your team member’s personal career aspirations.

  • Make clear notes and get agreement on agreed aims.

  • If you can, discuss and set targets or agree changes in behaviour together.

  • Try to facilitate interim feedback – ongoing opportunities to talk about improving the way you all work together, in between official performance review meetings.


Please note that these guides are provided for information purposes only and not as advice or recommendations. Before deciding to undertake any course of action you may wish to seek independent professional advice.