Annual Peformance Review: Definition, Template & Advice

What is an annual performance review? 

The annual performance review is a formal and scheduled discussion between an employee and their manager. Its purpose is to review the past year (results achieved, performance, etc.) and set new objectives. Some organizations take advantage of this moment to discuss expectations, successes, areas for progress and, possibly, career aspirations. 

Are you an employee looking for good advice on how to prepare for your annual performance review? Consult the following article to learn how to better prepare your annual performance review cycles. 

In most places, annual performance reviews are not required by law. Nonetheless, they are commonly used by companies and organizations to provide feedback and manage employee performance. This 1-to-1 exchange is an important part of the employee experience and a key tool in talent management. 

As an integral part of HR strategy, performance reviews should be designed as a development tool, and not just an evaluation exercise. 

5 Reasons to Conduct Annual Performance Reviews

Annual performance reviews serve several purposes. Here, we highlight 5 key reasons to carry out performance reviews each year. 

Assess each employee’s performance  

The main reason to run to performance reviews is to measure the results achieved vs. objectives set. Management by objectives implies regular progress monitoring, ongoing adjustments and a flexible approach. 

Provide structured feedback 

Annual performance reviews allow managers to offer employees formal, documented, and honest feedback on their work. Moreover, they provide an opportunity to highlight successes as well as recognize all the work employees have accomplished. They also provide an opportunity to address difficulties or shortcomings in a constructive way. 

Define new SMART objectives

Good performance reviews open the door to the future. It's the ideal time to redefine priorities and set meaningful SMART objectives, ensuring transparency and aligning expectations between the employee and the company. 

Foster meaningful discussions

An annual performance review lays the foundations for the year ahead. For both managers and employees, it's a real opportunity to discuss both operational and strategic issues. What contributions have they made to the team? What skills or competencies do employees need or want to develop? Are there any potential difficulties that employees or managers should be aware of? Overall, performance reviews are a good way of strengthening the relationship of trust. 

Support additional HR processes 

Finally, annual performance reviews feed key talent management processes: training and development plans, compensation adjustments, strategic workforce planning, internal mobility, and much more. When conducted properly, performance reviews become a gold mine for data-driven HR management. 

In short, annual performance reviews are as much a human management tool as they are a strategic management tool. Its purpose is not to just tick an HR box, but to offer each employee meaningful feedback and insight.  

5 Steps for Successful Annual Performance Reviews  

Organizing performance reviews should not be left to chance. To ensure the process is truly valuable for both the employee and the company, careful planning is important at every step. Here's a step-by-step guide to help you effectively structure your next performance review cycle.  

Preparing the review cycle

Depending on the company, HR departments determine a specific period for their performance reviews. It's also a question of working on the annual performance review framework or template that will be used as a basis for discussion. 

A well-constructed annual performance review includes:

• A review of set objectives

• An assessment of results (quantitative and qualitative)

• A review of skills used by an employee

• A discussion to identify any training and development needs 

• The establishment of new objectives

Involving employees and managers 

A successful annual performance review is far from a one-sided conversation. For discussions to be worthwhile, both parties, managers and employees, need to prepare ahead of time. Employees should take time to review their objectives, reflect on their successes, difficulties and expectations for the future. Meanwhile, managers should spend time gathering the results observed, concrete examples, KPIs, etc. 

By preparing in advance, employees and managers can help limit potential misunderstandings. Involving employees from the outset reinforces employee commitment and a sense of fairness. 

Conducting annual performance reviews: active listening and constructive feedback 

For managers, a good annual performance review is 70% listening and 30% steering. The manager must create a climate of trust to allow employees to express themselves freely. 

For constructive feedback, the ideal is to remain factual (statements must be based on facts) and balanced. The manager highlights strengths and identifies areas for improvement. It's up to the manager to suggest concrete ways forward. 

Objective: Everyone leaves with a clear vision of what has been achieved, what needs to evolve, and the means to achieve it. 

Analyze reports to better manage performance and potential 

Once the review cycle ends, it's HR's turn to roll up their sleeves. Annual performance reviews create value if the information gathered can be put to use in the service of collective performance. HR must therefore...  

• Centralize reports for an overall view 

• Identify trends: commonalities, performance gaps, weak signals, 

• Detect potential: who's ready for promotion, who needs extra support? 

When properly used, performance reviews feed directly into training plans, succession planning, talent reviews, promotion decisions and internal mobility. 

HR Tip: a good HRMS or talent review tool greatly facilitates this process. It transforms thousands of pieces of data into actionable insights. The result is action plans tailored to each individual employee.  

Leverage talent management data

All too often, the summary of performance reviews  lie dormant in a file or drive. The result? Information is lost, and the effort put in by both manager and employee is wasted. 

For performance reviews to have a real HR impact, it must be linked to : 

• Talent review campaigns 
• Skill mapping 
• Budget management (training, bonuses, career development). 

A good practice is to set up a clear workflow between managers, HR and top management to formalize the decisions to be taken after performance review cycles. This will facilitate individual follow-ups (training, mobility, job development, etc.). 

Tip: Annual performance reviews are a gold mine for talent management... provided it is integrated into a global HR approach, equipped with tools and connected to other processes. 

Annual performance review template  

To guarantee the quality and effectiveness of an annual performance review, it is vital to start with the proper template. It structures the exchange and aligns the stakeholders on the same page. 

Here are the essential elements to include in your annual performance review template 

• General information
• Assessment of the past year
• Areas for progress and support needs
• Objectives for the upcoming year or period
• Optional development prospects

 HR tip: Share this template with your employees and managers in advance, ideally via performance review tool integrated into your HRMS. This makes it easier to track, archive and analyze all of your performance reviews. 

👉 Need a template? Download our free annual performance review template to save time and harmonize your practices. 

Best practices for managers and HR 

To get the most of out your performance reviews, here are a few simple practices to follow.  

✅ For Managers 

 “Managers play a key role in developing and retaining talent,” stresses Julien Barone, HR Development Director at DOMINO RH. 

• Anticipate: Reread the objectives, gather concrete facts, prepare your examples to avoid offering vague assessments.  
• Ask open-ended questions: Encourage employees to talk freely and honestly. Performance reviews should not become a one-sided conversation.  
• Recognize achievements before pointing out areas for improvement: Start by acknowledging successes before addressing areas for improvement. Constructive feedback is always more effective than blunt criticism.
• Be clear about expectations: Define SMART (specific, measurable, achievable, realistic and time-bound) objectives together. 
• Write everything down: A good report is factual, proofread and signed by the employee. It's a point of reference for the future. 

✅ For HR 

• Harmonize practices: Train your managers, provide them with a clear framework and guidelines to limit discrepancies in treatment. 
• Allow the necessary time: Ensure performance reviews are not being rushed or postponed due to a lack of time. Set aside a dedicated time in your calendar or agenda.  
• Monitor Progress: Check that 100% of schedule performance reviews have been completed. Centralize reports to identify real HR trends. 
• Leverage data: Connect performance review insights with data from other talent management processes such as training and development, internal mobility, or talent reviews. Insights obtained from performance reviews should actively inform future HR decisions. 
• Communicate: Regularly remind teams of the importance of performance reviews. Highlight the concrete impact this process has on both employees and managers.

Annual Performance Review FAQ

Are annual performance reviews required by law?   

In most countries around the world, annual performance reviews are not required by law.  It is, however, an internal managerial practice, often formalized by the HR department or enshrined in collective agreements. 

Who should lead the annual performance reviews? 

In most cases, it's the employee's direct line manager who conducts this process. They know the field, the context and the actual results. 

The HR department remains responsible for preparation, framing and follow-up: providing the form, training managers, analyzing results, etc.  

How long should an annual performance review last? 

Allow an average of 45 minutes to 1h30 per employee. 

Less than 30 minutes is often too short to get to the important points. More than 2 hours is rarely productive - except in special cases (mobility, return from long absence...). 

What should an annual performance review report contain?

• The objectives set and the extent to which they have been achieved
• Highlights and concrete results
• Strengths and areas for improvement
• Training or coaching needs
• Objectives for the following year