Performance Review: Definition, Benefits, and How to Conduct

Every certain period, usually quarterly or semester, companies hold performance reviews to evaluate their employees’ performance in the past months. 

For the companies, this determines how far the employees’ contribution. For employees, they know their performance, their impact, and their plan for the upcoming months.

Employees who reach a certain target or results on the performance review will receive a bonus, salary increment, or even promotion. 

In this article, you will learn in detail about performance review, including the utilization, how to do it, etc.

What is a Performance Review?

A performance review is a formal process where a manager evaluates an employee’s work over a specific period. It is a balanced discussion about achievements, areas for improvement, and plans for future growth. The goal is to celebrate employee’s successes, provide constructive feedback, and set goals to support the employee's development within the company.

Typically conducted annually, semi-annually, or quarterly, performance reviews can take many forms, from filling out evaluation forms to open discussions about strengths, challenges, and career aspirations. 

The process often begins with HR outlining the review's structure, then the manager meets with the employee to discuss their performance. This conversation aims to recognize achievements, address growth areas, and set objectives. Managers assess task quality, meeting deadlines, skills, teamwork, problem-solving, and reliability.

Overall, a performance review helps employees understand how their work aligns with company goals, recognize their strengths, and find opportunities to improve, ultimately contributing to individual and organizational growth.

Why are Performance Reviews Important?

Performance reviews play a key role in both company success and employee growth. When conducted effectively, they bring benefits for both employers and employees while also carrying legal importance in the Malaysian context.

Benefits for Employers

• Boost productivity by recognizing top performers and identifying those who may need additional support.
• Align individual employee goals with the company's objectives, ensuring everyone is working towards the same targets.
• Provide a fair basis for decisions on pay raises, bonuses, and benefits, helping to reward excellence and retain talent.
• Highlight areas where employees may need further training that can be provided by the employers, guiding professional development, and improving employer hiring strategies.

Benefits for Employees

• Gain clear feedback on work performance, so employees understand their strengths and areas for improvement.
• Motivate employees to stay engaged and grow by showing how their work contributes to the company’s overall success.
• Open up communication between managers and employees, fostering trust and stronger working relationships.

Legal Importance and Considerations in Malaysia

In Malaysia, performance reviews also have a legal aspect. Properly documented reviews can support decisions related to promotions, raises, or even terminations, reducing the risk of disputes. 

Companies have to carry out reviews fairly, without bias, and with transparency, ensuring they comply with labor laws and maintain a clear record of each employee’s performance journey.

How to Conduct an Effective Performance Review?

Performance reviews have a long-lasting impact, helping employers understand what support employees need and allowing employees to see what they are doing well and where they can grow in the future. 

That is why it is a must to conduct performance reviews properly, from preparation and execution to follow-up. So, how can you make a performance review effective?

Prepare for the review

Before diving into the review itself, preparation is crucial. Start by reflecting on the employee’s work throughout the review period, gathering specific examples of both their successes and areas where they could improve. This means revisiting the goals set in the previous review, evaluating their progress, and considering any obstacles they may have faced. 

By doing so, you approach the review armed with clear examples that provide constructive feedback. Remember, the goal is to make the conversation meaningful, so taking the time to understand the employee’s role, responsibilities, and individual goals is essential to tailor your feedback effectively.

Create a comfortable environment

Performance reviews can be stressful for employees, so make sure you set the right tone from the beginning. Choose a private, relaxed space to make the conversation comfortable and free from distractions. A good environment allows both parties to speak openly and fosters trust. 

Kicking off with a positive note, such as acknowledging the employee’s hard work or a recent achievement, helps ease any tension and makes them more receptive to the discussion. The idea is to create a space where the employee feels valued, supported, and ready to engage in the conversation.

Lead a two-way conversation

A performance review should not be a one-sided lecture from the manager. Instead, it should be a balanced, two-way dialogue. 

Ask open-ended questions to encourage the employee to share their thoughts on their own performance. Questions like, "What do you think went well this year?" or "What challenges did you face?" invite self-reflection and help you understand their perspective. 

This approach also makes the employee more open to feedback since they are actively involved in the discussion. Listening actively to their responses shows respect and allows you to pick up on any insights or concerns they may have, fostering a more meaningful conversation. 

The conversation is not just about what you have to say but also about understanding their viewpoint.

Be honest and constructive

When delivering feedback, aim to be honest yet constructive. Explaining actionable feedback is far more valuable than vague comments. 

For example, instead of saying, “Your work has been okay,” you might highlight specific examples, such as, “Your initiative in leading the team project last month really demonstrated your leadership skills.” 

Similarly, if discussing areas for improvement, frame it constructively, like “I noticed there were some delays in project deadlines. Let’s explore ways to manage time more effectively.” 

The key is to ensure the feedback is clear and highlights how the employee's actions have impacted the team and company. Balancing criticism with recognition of achievements allows the conversation to be constructive and supportive, rather than purely corrective, and helps keep the focus on growth and improvement.

Set clear objectives and development plans

After discussing past performance, the next step is to look forward. Collaboratively setting clear objectives and development plans helps the employee know what to aim for in the coming months. The goals should be realistic, actionable, and aligned with both the company’s objectives and the employee’s personal growth. 

This is also a great opportunity to discuss any support they might need, whether it is further training, resources, or mentoring. When employees have a clear roadmap and understand how their growth fits within the company’s vision, it increases motivation and accountability.

Follow-up and continuous feedback

A performance review should not be a once-a-year event that fades away. The impact is greater when the conversation is followed up with regular check-ins to track progress on the set goals. 

Scheduling follow-ups allows for ongoing feedback and adjustments as necessary, keeping the goals top of mind and providing consistent support. Additionally, providing feedback throughout the year builds a culture of continuous development and avoids surprises during formal reviews. 

Regular feedback not only keeps communication open but also reinforces the employee’s growth, making the next review easier and more impactful.

These steps provide a solid foundation for conducting performance reviews effectively, leading to productive discussions and positive outcomes. However, to make the most impact, Malaysian employers should keep these best practices in mind:

1. Consider Cultural Sensitivities

Tailor your feedback to how the employee prefers to receive it. While some employees may appreciate a straightforward approach, others might respond better to gentler feedback. 

In Malaysia, where respect for authority is key, keep in mind to balance honesty with empathy to ensure feedback is well-received.

2. Use Performance Management Tools

Utilize tools to streamline the review process, document conversations, and track progress. Incorporating technology not only makes the process smoother and more transparent but also provides a reference for future discussions.

3. Be fair and objective

Focus on providing feedback based on role expectations rather than comparing past performance or colleagues. Gathering input from various sources, such as peers and clients, can help ensure a well-rounded assessment and reduce any unintentional bias.

4. Encourage reflection and improvement

Give employees space to process feedback, ask questions, and reflect on their progress. Keeping an open-door policy encourages them to seek guidance and support throughout the year, fostering continuous growth and development.

Performance Review Structure: What should it include?

When creating a performance review for an employee, there are a few key things to keep in mind. This includes setting objective criteria, using measurable metrics, gathering feedback from collaborators, and more. 

By incorporating these elements, the performance review becomes more well-rounded and provides constructive feedback to help employees improve in the future. So, what exactly is needed in the performance review?

Objective performance criteria

A good performance review starts with clear, objective criteria that relate to the employee’s role. Instead of general comments, focus on specific aspects like quality of work, attendance, and teamwork. 

The idea is to set a transparent baseline for how the performance will be judged. So, employee can have a  clear understanding of what is expected from them.

Measurable goals and targets

To have a more tangible assessment, measurable goals and targets should be part of the review. These can include Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs), which are widely used to evaluate both short-term achievements and long-term objectives. 

KPIs allow you to track the employee's progress with specific metrics, while OKRs give a broader perspective on their contribution to overall team or company goals. Having these measurable targets ensures that the review is grounded in facts, not opinions.

Self-assessment and employee input

Including self-assessment encourages employees to reflect on their own performance and contributions. Asking them to share their perspective on their achievements, challenges, and areas of improvement provides valuable insights that a manager might not be aware of. This also makes the review feel like a two-way conversation rather than a one-sided evaluation, promoting better engagement and ownership from the employee.

Feedback from peers, supervisors, and subordinates

Gathering feedback from multiple sources, such as peers, supervisors, and even subordinates, paints a more well-rounded picture of the employee’s performance. 

Known as 360-degree feedback, this approach ensures that different viewpoints are considered, reducing any potential biases and making the review more comprehensive. It also fosters a culture of openness, where employees feel their efforts and behavior are noticed by those around them.

Action plans for improvement

An effective performance review does not just evaluate past work but also looks forward. Based on the discussion, managers and employees should collaboratively create action plans to address any areas of improvement. 

The plans should be practical, with clear steps and timelines to help the employee develop their skills and overcome challenges.

Employee development and career growth opportunities

The performance review is also a chance to discuss the employee’s future within the company. Talk about development opportunities, such as training, mentoring, or new responsibilities that align with their career goals. 

Highlighting possible paths for career growth not only motivates the employee but also demonstrates that the company is invested in their long-term success. This focus on development helps retain talent and builds loyalty.

How to Handle Poor Performance During Reviews

There will be possibilities that the employee you are evaluating has had poor performance recently. Employer needs to communicate this carefully, as the employee may be facing personal challenges that are affecting their work, which the employer may not be aware of. 

So, how can you handle poor performance effectively?

Addressing performance gaps with a clear improvement plan

When an employee’s performance not meet expectations, address these gaps clearly and constructively. Avoid vague statements like "You need to do better", but be specific about the issues, such as "You have missed multiple deadlines this quarter, which has affected the team's progress." 

Once the gaps are identified, outline a clear improvement plan together. This plan should include concrete steps the employee needs to take, such as developing certain skills, meeting new goals, or improving time management. Always make sure the plan is achievable, with a clear timeline for when progress will be reviewed.

Setting up Performance Improvement Plans (PIPs)

For more serious or recurring performance issues, a Performance Improvement Plan (PIP) may be necessary. A PIP is a formal document that outlines specific areas of improvement, the actions required, and a set period in which the employee needs to show progress. 

PIP is not a punishment, but a supportive tool for employees. Communicate openly about the expectations and goals, and ensure the employee understands the process. 

A successful PIP should motivate the employee to improve, with clear milestones that can be tracked over time. The ultimate goal is to help the employee get back on track, not to create more pressure or anxiety.

Supporting employee development with training and resources

Improvement does not happen overnight. Employee needs support to bounce back. The support can be in a form of training to boost skills, mentorship to offer guidance, or access to resources that will help the employee overcome their challenges. 

Supporting an employee’s growth shows that the company values their development and commit to support their success. If the poor performance occurs because of a lack of certain skills or knowledge, offering targeted training can be particularly effective. 

Regular check-ins are also helpful, as they provide encouragement, track progress, and allow for adjustments to the plan if necessary.

Linking performance reviews to salary increments and promotions

As mentioned before, performance reviews result will impact to the salary increment and promotions, as long as the result is good. Then, how to effectively link performance reviews to compensation and career advancement?

How performance reviews affect salary adjustments and promotions in Malaysia

In Malaysia, performance reviews are often directly tied to decisions on salary increments and promotions. A well-conducted review highlights an employee’s achievements and contributions, providing a solid basis for rewarding them through a salary raise or promotion. 

Consistent top performers are generally more likely to receive higher salary adjustments or advance in their roles. The employee who has underperforming reviews may see minimal or no salary increments until they improve. 

Linking reviews to compensation helps maintain a performance-driven culture, where employees understand that their efforts have a direct impact on their career progression.

Best practices for aligning compensation with performance

To effectively link employee performance to compensation, use structured approach that aligns pay and rewards with clear and fair criteria. Here are some best practices to consider:

• Set clear performance criteria and metrics

Use transparent, measurable goals like KPIs or OKRs to ensure employees know exactly how their performance is evaluated. When employees understand what they need to achieve, they can align their efforts towards both meeting their personal goals and contributing to the company’s success.

• Reward consistently based on achievements

Ensure that salary increments and promotions are based on consistent performance and aligned with the employee’s contribution. Develop a structured system is important where those who excel and exceed targets are properly rewarded and those who are meeting expectations know what they need to do to progress further.

• Use a balanced approach

While individual performance is key, consider a mix of factors like the employee’s potential for growth, teamwork, and leadership qualities, not just task-based achievements. This balanced view helps reward those who contribute positively to the company culture and support others, rather than focusing on hitting targets.

Transparency in explaining salary decisions and promotions

Employees should understand how their performance ties into their compensation and what factors were considered in the decision-making process. Clearly communicate the criteria used for raises or promotions, providing specific examples from the employee’s review to support the decision. 

For those who did not receive an increment or promotion, offer constructive feedback and a clear roadmap on what they need to achieve to qualify in the future.

Conclusion

Performance reviews are crucial for both companies and employees, offering opportunities to reflect on performance, celebrate achievements, and plan for growth. Typically held quarterly or semi-annually, performance reviews help employers assess contributions and allow employees to understand their progress, strengths, and development areas. Rewards like bonuses, salary increments, or promotions often follow good performance.

Ultimately, performance reviews are not just evaluations but a way to encourage continuous feedback, development, and stronger alignment between individual and company goals. A transparent and fair review process fosters a positive work environment and drives overall success.

---

 

Are you urgently seeking candidates to hire?
Look no further! AJobThing offers an effective hiring solution with our instant job ad feature. Hire in just 72 hours! Try Now!

 

Read More on AJobThing:

• SOCSO Contribution Table in Malaysia
• Public Holiday Malaysia 2025
• Foreign Worker SOCSO Rate Table
• The Hidden Costs of Staff Turnover
• E-Invoicing Malaysia: A Comprehensive Guideline for Business