Performance reviews are critical for employee growth, team alignment, and business success. Done right, they offer an opportunity to celebrate achievements, identify challenges, and set clear development goals. Done poorly, they can create tension, confusion, or disengagement.

Here’s how to make them effective:

1. Prepare thoroughly.
Collect data from multiple sources: KPIs, project outcomes, peer feedback, and self-assessments. Avoid basing reviews solely on recent events (known as recency bias).

2. Make it a two-way conversation.
Encourage employees to reflect on their performance, goals, and challenges. Ask open-ended questions like: “What are you most proud of?” or “What could we improve together?”

3. Be specific and objective.
Use concrete examples when offering praise or critique. Vague comments like “needs improvement” aren’t actionable—clarity builds trust and understanding.

4. Focus on growth.
Reviews should include a development plan. Discuss career goals, skill gaps, and resources needed for improvement. Offer ongoing coaching, not just annual feedback.

5. Set SMART goals.
Specific, Measurable, Achievable, Relevant, and Time-bound goals help employees focus and stay accountable.

6. Follow up.
A review shouldn’t be a one-time event. Schedule regular check-ins to revisit progress and support your team throughout the year.

Performance reviews, when done with honesty, empathy, and structure, turn into powerful tools for motivation, engagement, and continuous improvement.