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How to Handle Annual Performance Reviews in Your Small Business

December 1, 2019 | posted by Abacus Payroll

Annual performance reviews provide, in theory, a welcome check-in and debrief period for employees and employers alike. Unfortunately, arbitrary rating criteria and a lack of communication between employers and employees can lead to annual performance reviews becoming nothing more than busy work that’s dreaded by everyone involved. While critiquing an employee’s performance never gets easier for either parties, here are a few ways you can make performance reviews relevant again.

Updating Annual Performance Reviews

Annual performance reviews date back to World War I factory conditions in which employees received check-ups to ensure that no spots in the factories were going to waste. While these reviews forced turnover at an alarming rate, they did keep the pertinent businesses running like clockwork; however, it’s hard to argue the relevance of a system that came into play almost a century ago, especially when that system revolves around a potentially combative scenario.

Perhaps the most important change you can make to your annual performance reviews—without changing much at all—is focusing on constructive, actionable feedback. Rather than detailing employees’ failures or accomplishments using a rubric, share your personal notes on the employees’ highlights and areas of improvement before moving into the “things you can improve” segment—all the while using terminology and metrics understood by the employee in question.

Simply focusing on constructive feedback in a conversationalist format will do wonders, but it isn’t the only thing you can do to improve your reviews.

Making Stellar Reviews

Fantastic performance reviews typically go above and beyond in their efforts to support the relationship between you and your employees, but they also focus strongly on building up each individual employee’s weak spots. Some crucial aspects of any successful, modern-day performance review include the following:

  • Open communication throughout the year, not just during the review
  • Dialogue rather than an employer-based monologue
  • Employee comfort
  • Employer protection

Of course, there are easily as many arguments against performance reviews as there are for them. Some employers view these reviews as nothing more than corporate busy-work—an attitude that, while understandable, does nothing to help the employees subjected to the review. For their parts, employees tend to fear performance reviews inherently, making them a largely negative draw on morale as the review date draws near.

Nixing Numbers

If you truly want to improve your annual performance reviews, you should strongly consider doing away with any form of rubric, assessment, or automated scoring material. Having anything other than a frank, human conversation with your employees will serve only to confuse, alarm, and upset them, leading to miscommunications, lacking morale, and possible outbursts. Unless your employees are all well-read on your scoring guide, steer clear altogether.

Another reason to avoid rubrics is that implementing them—even when your employees are on board with their contents—only encourages employees to aspire to your specific criteria, leaving plenty of gaps in their overall performance. Communicating this to them can lead to confusion, so either leave your criteria broad enough to encompass all possible job responsibilities or avoid rating employees at all.

If you absolutely must perform an assessment of some sort, consider allowing employees to self-evaluate and then going through their evaluations with them. Doing this will ensure that you’re delivering the necessary assessment while leaving the agency firmly in the hands of the employees.

Other Criteria

Making sure your employees know exactly what you expect of them from the beginning is the most important thing you can do up-front if you want your end-of-year performance reviews to go smoothly. If employees know how to meet your expectations at the start of the year, you can use their knowledge to form the basis of your assessment once performance review time rolls around.

Encouraging employees to set their own goals is another way you can ensure that both you and your employees are meeting expectations. For example, if you have an employee who wants to work their way up to a management role, knowing their aspirations ahead of time will help you formulate both a plan and some form of feedback to accelerate their growth.


Performance reviews are incredibly stressful for everyone involved. For more information on how you can turn your dreaded annual performance review into a more positive experience for both you and your employees, consider signing up for our monthly HR Help Center. Contact your Abacus Payroll specialist for more details at (856) 667-6225 !

About the Author: Abacus Payroll

Abacus Payroll, Inc. is a leading provider of payroll solutions for businesses of all sizes. Whether yours is a family-owned small business or a national corporation, we provide payroll, tax and other financial services on time and at an affordable price. Unlike other payroll providers, Abacus Payroll will assign your very own payroll specialist who will understand your payroll needs inside and out. So no more speaking to a different person each time, no more sitting on hold for hours and most importantly no more missed deadlines! Contact us today to see how we can help your business. You can count on us.