3 Ways You're Doing Performance Reviews Wrong--and How to Fix Them

Employee evaluations are necessary to keep your business growing. Make sure your feedback is actually helpful with these three tips.

As an entrepreneur, you've worked endless hours making sure every element of your business is taken care of. Part of the appeal of working for yourself is being able to take control over every aspect of your company. But, as your business grows, you'll need to start relying on employees for more and more (yes, that means delegating!). It's important to figure out an effective way to keep your staff on the right track without being an overbearing boss.

Yearly employee performance reviews seem like a good way to achieve this. They are intended to acknowledge employee successes while also bringing attention to areas that could be improved on. However, what is meant to inspire employees to approach upcoming work with renewed enthusiasm often backfires, resulting in lowered self-esteem or even resentment toward the boss after receiving what's perceived as a negative evaluation.

Your ability to hold performance evaluations in a way that doesn't provoke resentment from your employees is entirely dependent on your approach and intention. Try these tips to get positive results from your performance reviews this year.

1.  Don't just offer feedback once a year.

It's pretty much standard practice to hold employee performance reviews once or twice a year at predetermined intervals. However, this formal evaluation can be a highly stressful experience for employees and bosses alike. While most people fear being criticized, it's up to the leader to present feedback in a way that actually encourages an improvement in productivity and overall performance.

Rather than allowing anxiety and anticipation to build up as review time draws closer, create an environment where feedback is provided throughout each quarter. This way, employees will be used to receiving your advice and are less likely to take it personally or feel that they have failed if you offer constructive criticism. It's much more effective to have an open line of communication so that there are no big surprises when official evaluations come around.

2.  Tell it like it is.

While it's important to keep your performance reviews professional and make an effort to avoid needlessly hurting feelings, don't waste everyone's time by being overly complimentary. When you offer praise where it isn't deserved, you end up hurting not just yourself and your company but the employee, too. If your team is being told that everything they do is great, especially when that isn't the reality, they will likely see no reason to attempt to improve.

Instead, try to have frank and honest conversations happening between the leader and each employee. This way, your employees will gain insight into the areas they need to work on, and might even feel inspired to renew their efforts as a result of your advice tailored to their specific situation.

3. Ask the employee where they could use additional support.

When you focus reviews purely on data, like how the employee performed that quarter, you could be missing out on a lot of important information. This isn't an opportunity for them to vent or complain but to let you in on their experience. You never know, there could be gaps that need filling that you just weren't aware of from your position as CEO.

Early on in my career, I started preparing for employee performance reviews with my sales team by taking a look at how much revenue each staff member brought into the company.  From that data, it looked like certain employees were outperforming other members of the team, who seemed to be lagging behind.

However, when I asked those employees what their perspective was, I found out that the reason behind this apparent inconsistency was that some of the staff who were making fewer sales had been having to take on more administrative tasks to support the entire team. With this knowledge, I was able to restructure their tasks so that all of the work was spread around more consistently, resulting in happier employees all around.