Success depends on the strength of the team you’ve built. How do you make sure your team is working at its full potential? An effective tool is the employee performance evaluation, which allows you to review the job that’s been done and plan for the future.

As a team leader, you may be asked to perform such evaluations or to participate in them. While formally evaluating members of your team may be as enjoyable as a trip to the dentist, the more you know about the process, the better you can prepare. And the better you prepare, the more effective you will be. Here are some things you should know before evaluating your team members.

What’s the point?
There’s probably not a more significant communication between employers and employees than the performance evaluation. Important for employee development, routine evaluations also provide documentation in personnel actions, conflicts, and legal judgments.

Performance reviews mean more than a bigger paycheck; in fact, they can serve several purposes. Employee evaluations actually have many objectives—not just determining the amount of a raise. Performance reviews also:

  • Provide a written record of the employee’s performance history.
  • Present a basis for human resource actions, including salary increases and position advancement.
  • Offer a mechanism for communicating goals and objectives.
  • Provide a means of aligning organizational goals with those of the employee.
  • Provide a tool for identifying staffing issues early.
  • Identify training and career development interests and opportunities.
  • Supply a consistent performance evaluation methodology.
  • Present an opportunity for employee motivation.

Possible pitfalls
Evaluations also have a downside. Because evaluations are time consuming and filled with paperwork, many managers view them as a distraction from their daily responsibilities.

And managers aren’t the only ones. The annual review can be a stressful time for the employee, as well. In organizations where evaluations are the only source of employee-management communication, an annual review can be the first indication an employee is given that he or she is performing below average.

Reviews are often tied to pay increases, making it difficult for employees to focus on the personal development aspects of the evaluation. During an annual review, managers will often base performance on recent events or attempt to level the ground by giving a similar evaluation to all their workers.

Evaluations are frequently subjective in execution. Ideally, managers appraise the employee’s performance by using standards developed by the organization. But in the end, it’s the manager who decides how to rate performance indicators. This responsibility allows for the opportunity—no matter how well intentioned—for favoritism and personal bias to affect the results.

Finally, organizations without a consistent standard for applying evaluation parameters leave themselves open to legal judgments.

Choose your path
Performance reviews loom near: How will you evaluate your team members? Here’s a glimpse of some of the types of appraisal techniques used today.

Management by objectives (MBO)
While often panned as outdated, MBO is one of the more common techniques used today. Individuals meet with their supervisors to outline several specific objectives the employee is to accomplish in the next review period. These objectives are usually tied to specific organizational strategic goals. Specific criteria are identified for accomplishment and evaluation during the next review.

Behavior checklists and linear scales
A common technique used today is the behavior checklist or linear scale. In this type of evaluation, a standard form is supplied with a predetermined set of criteria the employee will be evaluated against.

Critical incident technique
When using the critical incident approach, a manager will keep a periodic log of important incidents throughout the year. When the employee’s review draws near, the manager can then summarize significant incidents pulled from this log as a means of evaluating performance.

Essay evaluation
The essay evaluation is a method in which the supervisor writes down his or her impressions of an employee’s performance. Commonly used in evaluating senior managers, the supervisor will usually evaluate an employee’s weaknesses and strengths, suitability for promotion, and development needs.

Distribution ranking
Distribution ranking requires the manager to compare the quality of the work accomplished by employees with similar duties to review performance.

Peer-to-peer evaluation
With a peer-to-peer evaluation, employees review coworkers according to a given set of parameters. This technique is typically used to supplement another method of evaluation.

Many techniques exist to assess an employee’s performance. But it’s important to understand that an evaluation is not a measurement of any one skill. Rather, it’s a subjective evaluation by a supervisor of accomplishments and skills obtained or developed during the review period.

As a result, this process is not immune to error. The best an organization can do is attempt to apply meaningful standards to the evaluation. Tying employee goals to the organization’s strategic goals will help both you and your team members benefit from the process.