How to Run a Performance Review That Actually Motivates

Introduction

Performance reviews are one of the most powerful — and most misused — tools in a manager’s toolkit. Done well, they build trust, align goals, and drive growth. Done poorly, they can demotivate teams and lead to disengagement. For small business owners, team leaders, and HR professionals, mastering performance reviews is critical to keeping teams aligned and productive.

In this post, we’ll explain why performance reviews matter, what makes a great one, and offer a step-by-step guide for conducting reviews that inspire your employees — not just evaluate them.

What Is a Performance Review, and Why Does It Matter?

A performance review is a structured conversation between a manager and employee about how the employee has performed over a specific period. It often includes goal-setting, feedback, and planning for development.

But it’s more than just a report card. Great performance reviews clarify expectations, celebrate wins, uncover roadblocks, and open up dialogue. In fast-growing businesses or remote/hybrid teams, these check-ins are vital for building trust, correcting course, and investing in long-term employee development.

When performance reviews are clear, fair, and future-focused, they can:

• Improve employee retention

• Align individual contributions with company goals

• Boost morale and motivation

• Help identify leadership potential

• Strengthen communication across the organisation

How to Run a Performance Review That Drives Results

1. Start with a Clear Purpose

Before scheduling the review, define what you want it to accomplish. Is it about evaluating progress, planning for the future, addressing concerns — or all three? Let the employee know in advance so they can come prepared with questions or reflections.

Pro tip: Don’t make it just about past performance. Focus on growth and the future.

2. Gather Well-Rounded Feedback

Use a combination of self-assessments, manager observations, and (where appropriate) peer feedback. This gives you a more complete view of the employee’s performance and avoids bias.

Bonus tip: Consider using 360-degree feedback for more senior roles.

3. Use a Structured Review Template

Don’t wing it. Use a consistent template to ensure fairness and clarity. At minimum, include:

• Key accomplishments

• Challenges or blockers

• Skill development

• Goals for the next period

• Support or resources needed

4. Create a Two-Way Conversation

Performance reviews shouldn’t feel like a lecture. Ask questions like:

• “What accomplishment are you most proud of?”

• “What’s one thing you’d like more support with?”

• “What’s your ideal next step here?”

This helps the employee feel heard and more invested in the outcome.

5. Set SMART Goals Together

End the review by setting 1–3 SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals. These should tie directly to both the employee’s career growth and business outcomes.

Example: “Increase customer renewal rate by 10% by Q4 through personalised onboarding improvements.”.

6. Document and Follow Up

Capture notes from the conversation and send them to the employee. Schedule a 30- or 60-day follow-up to check in on progress. This keeps accountability high and shows you’re invested in their success.

Don’t let your review live in a drawer — it should be a living roadmap.

Final Thoughts

Performance reviews are more than a checkbox. When you approach them as opportunities for growth and connection, they become one of the most impactful leadership tools available. Whether you lead a small team or an entire department, learning to run effective reviews can transform your culture and results.