For companies, the year-end period is not just about wrapping up the year, but also evaluating the organization and its members. Performance evaluations are a critical process that assesses the performance of both the organization and individuals over the past year and prepares for the upcoming year.

Today, let’s look at key points that HR professionals should consider for successful performance and year-end evaluations.

Just like a well-fitting suit, there is an evaluation system that best suits your company and organization. Every organization has unique characteristics and cultures, depending on factors such as industry, business size, and employee traits. Therefore, it is essential to carefully assess your organization’s unique traits and adopt a method that fits your company.

Common performance evaluation methods include KPI, MBO, and OKR. It’s important to understand the differences between these methods in terms of goals, evaluation periods, feedback frequency, and the scope of goal sharing. Then, choose the one that aligns with the values and objectives your organization prioritizes. For instance, if goal achievement is your main focus, MBO might be the best fit. If quantitative evaluation is crucial, KPI is a good option. For organizations that prioritize the process and frequent feedback, OKR would be more appropriate.

Choosing an evaluation system that fits your organization helps employees achieve their goals more effectively and leads to better organizational performance.

💡 Related article : Learn more about OKR performance management method gaining attention from HR professionals.

If your company has already implemented a performance evaluation system, efforts must be made to build trust with employees and ensure objectivity in the process. According to a survey published by JobKorea in February 2023, 46.3% of office workers expressed dissatisfaction with their company’s performance evaluation system. The most common complaint (71.3%) was that the evaluation was subjective, based on the superior’s personal opinion. The second most common reason (38.3%) was that the company’s evaluation system was inadequate and poorly structured.

So, what efforts can companies make to ensure objectivity in performance evaluations? Some use self-evaluations or introduce 360-degree evaluations to reduce bias and increase trust by regularly exchanging feedback. Recently, some companies have even tried incorporating AI into the evaluation process to ensure objectivity through measurable indicators. However, experts caution that AI alone cannot fully grasp the nuances of human interactions, making it more suitable as a supplementary tool.

Ultimately, it’s difficult to achieve complete “objectivity” in the literal sense when human elements are involved. Instead, “objectivity” in performance evaluations can be thought of as reaching mutual agreement between the evaluator and the employee on the evaluation’s content and outcome.

To reach such an agreement, feedback is crucial. If thorough feedback leads to mutual understanding, there will likely be fewer employees who perceive performance evaluations as subjective. It’s important to assess whether healthy feedback is being sufficiently exchanged between departments within your company.

As mentioned earlier, feedback is just as important as setting up the performance evaluation system itself. Having a proper feedback process not only increases employees' trust in the evaluation system but can also positively influence future performance. According to an article by Erin Meyer published in the September-October 2023 issue of the Harvard Business Review, a 2019 Zenger Folkman survey found that 94% of the 2,700 respondents said their performance improved after receiving corrective feedback.

Netflix’s corporate culture is frequently cited in books as a successful case study. Netflix has two key principles when giving feedback: “aim to be helpful” and “include actionable steps.” In other words, the focus should not be on how the person giving the feedback feels, but rather on how the recipient can grow from it.

In addition to feedback, coaching is also essential. While feedback is more advisory in nature, coaching involves guiding and leading employees toward better results and improvements after feedback is given. The true value of performance evaluation lies not just in exchanging feedback, but in ‘fostering a collaborative relationship where coaching leads to real changes’. Given that managers now have more authority and discretion based on feedback, it's also important to focus on strengthening their coaching abilities.

Evaluations are crucial for talent management and establishing the desired employee profile within a company. While companies strive to create objective and fair evaluation systems, there is no system that can satisfy all employees.

That’s why it’s important for performance evaluations to instill the belief in employees that the system is designed for their growth. Setting the right evaluation criteria, categories, and direction is, of course, critical, but it’s equally important to remember that this belief stems from frequent, active feedback exchanges. Building on this foundation, companies can gradually refine and develop a tailored evaluation system that works best for their unique organization.

Recent trends in performance evaluations are shifting away from traditional hierarchical and comparative performance-based evaluations toward systems that focus on the growth of employees as they work together toward common goals.

Take the time to carefully assess your company’s organizational culture, team structure, and evaluation goals to implement an appropriate year-end and performance evaluation system.

Manage Employee Data with Shiftee