7 Reasons Employee Performance Evaluations Are Important

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Employee performance evaluations

7 Reasons Employee Performance Evaluations Are Important

When it comes to routine employee evaluations, the pros vastly outweigh the cons.

When handled poorly, employee performance evaluations can feel like busywork, creating stress in the workplace and even instilling a sense of dread in employees. This makes some employers hesitant to implement them at all.

However, when properly implemented, employee performance evaluations are a crucial part of maintaining a healthy workspace and cultivating a culture of openness. While you should never implement performance reviews halfheartedly or haphazardly, you should work toward having top-notch performance reviews regularly.

Here are seven reasons why employee performance evaluations are critical to the success of your organization.

Transparency is essential for a healthy workplace

Workplaces will often succeed or fail based on how efficient and open their channels of communication are. This means that transparency is crucial in maintaining the well-being of your company.

Employee performance reviews create channels of communication between employees and key company managers. Performance reviews aren’t an obligation to put someone’s work under a microscope; they’re an invitation to conversation between low- or medium-level employees and management.

We’ll point out here that this conversation should be two-sided. Allow your employees to speak candidly – and even vent if they need to. Don’t make them feel like doing so could jeopardize their job.

Transparency is vital, and this means that sometimes upper management will need to listen to and acknowledge the concerns of their employees, even when those concerns might be uncomfortable to hear.

Employees want feedback to know where they stand

To piggyback on top of the previous point, employees don’t want to be left in the dark about their status with the company. Quite often, employees who experience stress over their performance are your top performers, so you should create a formalized process for letting them know they’re doing well.

Employee performance evaluations are a great way to initiate these conversations. Let your employees know exactly where they stand, for better or for worse. We’ll touch on both of these later on, but if an employee is doing well, they should know about it, and if an employee is doing poorly, they should be given a goal-oriented path toward success.

Employee engagement improves when performance evaluations are effective

Performance evaluations create a shift in how an employee thinks about their work. Some employees are strong independent workers who hide in the background and are very rarely recognized for their contributions. Evaluations cause these types of employees to rethink their performance from the perspective of how they are contributing to the greater goals of the company.

Understanding the importance of the work you are doing is a critical step in feeling more engaged in the company as a whole. When a person goes to work with the understanding that their tasks are an important piece of a larger puzzle, it makes their responsibilities feel more interesting and more rewarding. When that same person goes to work with the idea that they’re just doing a repetitive set of uninspired tasks, their performance begins to suffer.

Allow your employees to see the greater picture and help them find their place inside of it.

Performance evaluations help you recognize when an employee needs additional training

We mentioned this briefly earlier in this list, but we wanted to talk about it in greater depth. When an employee is underperforming, oftentimes the thing that’s missing is a clear path to success.

Oftentimes, companies place too much personal responsibility on an employee without giving them the tools they need to succeed, then they blame that employee for their poor performance. Don’t let this happen in your organization. If an employee is underperforming, there’s a good chance that they’re a great employee who’s not been given the tools they need to do their job. We’re not necessarily talking about physical tools here; a tool might be a level of clearance to access key components of a project or a clear channel of communication.

When you have regular employee evaluations, it becomes much easier to separate those who are trying to succeed in a hopeless situation and those who simply don’t care enough about their jobs to put in the effort. A vast majority of the time, underperformance is due to the former rather than the latter. Don’t punish your employees for the mistakes your company is making; have open conversations with them and make sure they have everything they need in order to be successful.

Punishment shouldn’t ever be doled out until a clear path to success was created and ultimately ignored by the person in question. Otherwise, you might be punishing someone for something they had no control over. When you do that, you’re creating disgruntled employees, and when you create disgruntled employees, your entire workplace suffers.

Employees who do good work deserve recognition

On the flipside of this, there are employees who constantly go above and beyond their expectations. Sometimes, managers approach these employees with the mindset that “If it ain’t broke, don’t fix it,” letting the person continue their work uninterrupted. However, this isn’t the correct approach. Without opening a conversation, it can be hard to tell if that employee is close to burnout or not.

If an employee is regularly exceeding expectations, that person deserves to know about it and be rewarded for it. Performance reviews allow you to talk about these contributions and to discuss what that person sees as fair compensation for a job well done. When you acknowledge someone’s contributions, they feel better about continuing to exceed expectations. This leads to a win-win situation for you and your high-performing employee.

Performance evaluations help your employees set goals

We already mentioned creating a clear path to success. But goals don’t need to just be for underperforming employees. Even your top performers need to have goals in place to keep them focused and engaged.

Give your employees something to work toward, and make sure their expectations are crystal clear. Use employee evaluations as a platform where goals can be established and monitored.

Evaluations improve employee retention

This last point should come as an obvious conclusion to the six points we’ve already gone over. When your employees are given clear goals, open lines of communication, and reward systems that they agree to and participate in, they will be happier, more engaged, and more productive. All of these things lead to higher employee retention.

But let’s look at some data to back up this conclusion.

According to a survey by Reflektive, a people management platform, 92% of respondents said they wanted performance feedback more than once per year. 72% preferred reviews at least once per month, and 49% preferred reviews at least once per week.

Of course, we should also point out that the same survey showed that employee reviews that are mishandled can backfire spectacularly, with 85% of respondents saying they would consider leaving a job after an unfair performance review. This is why we emphasize creating a pathway to success as a better alternative to punishment – you need your employees to feel like their relationship with the company is cooperative and not antagonistic.

Remember it’s not an employee’s responsibility to stay with your organization through thick and thin; it’s the organization’s responsibility to encourage them to do so.


Employee reviews are about establishing communication between employees and their management teams. Evaluations should emphasize rewarding people who perform well over punishing those who perform poorly, and options for improvement should always be considered cooperatively without instilling fear of repercussion.

Engaged employees will stay with your company longer, and evaluations create clear expectations and opportunities to discuss whatever issues might arise in the workplace. When you handle performance evaluations with care, everyone wins.