What is Performance Review?

A performance review — also known as a performance appraisal or evaluation — is a formal process in which a manager assesses an employee's job performance over a specific period, typically a quarter, half-year, or full year. Reviews generally cover goal achievement, competency demonstration, behavioral alignment with organizational values, and overall contribution. They produce a documented record that informs decisions about compensation, promotion, development, and succession.

Traditional performance reviews focused on rating employees against predefined scales and ranking them relative to peers. While ratings still exist in many organizations, modern reviews emphasize narrative feedback, forward-looking development conversations, and manager-employee dialogue rather than one-directional judgment. Many companies now combine self-assessments, manager evaluations, and peer input to create a more complete and fair picture of performance.

Common challenges with performance reviews include recency bias (overweighting recent events), halo and horn effects (letting one trait color the entire evaluation), leniency or severity bias, and the tendency for reviews to feel like administrative chores rather than meaningful conversations. Organizations that invest in manager training, provide clear evaluation criteria, calibrate ratings across teams, and connect reviews to ongoing feedback see significantly better outcomes.

Performance reviews formalize the accountability loop between goals and outcomes. They provide employees with clarity on where they stand, validate strong contributions through recognition, and identify development needs before they become performance problems. When done well, reviews strengthen the manager-employee relationship and build a culture of transparency. When done poorly, they erode trust and create cynicism. Getting reviews right is essential for fair talent decisions.