As a leader of a company, it is most important to establish an annual employee performance for each employee, and manage employee performance. Performance appraisal is very important to the career of every employee. They are used in a variety of critically important ways.

For example: A performance rating will be a factor in making promotion selections and in determining who will receive a performance award. Consequently, establishing an employee performance evaluation, and appraising employee performance is a job that must be taken seriously.

The performance rating that you give an employee can have a major impact on the employee's career. Further, employees have a right to know how they are performing.

Step One: Be Prepared.

Don’t begin an employee performance review without preparing. Careful notes should be very necessary for something that needs to be involved. There should be both the positives and the negatives of the employee performance. Know exactly what it is you want to involve, and how you want to say it. This is also important because you need to have a complete record of any issues in the human resource file that was discussed with the employee about employee performance.

Step Two: Keep it Real.

You should avoid detailed reviews which are too complicated and mechanistic; it may leave the employee feeling like a drone rather than a human being.

Step Three: Listen to Your Employees.

If the employees also have an opportunity to express their concerns, too, the evaluation process will seem fairer to them. Ask employees what they enjoy about their jobs and about working at the company. Also ask about any concerns or problems they might have. You'll gain valuable information, and your employees will feel like real participants in the process.

Step Four: Be Consistent.

Make sure to handle performance reviews in a consistent manner. Top performers should hear affirmations from you regarding their exemplary efforts; weak performers need to hear that their performance requires improvement. A simple approach to review criteria is to evaluate work based on quantity and quality relative to the job requirements. Secondary considerations might be employee attitude, willingness to help other personnel with their work when appropriate, and the ability to get along with others.

Step Five: Be fair to all your employees. 

That means that you recognize the positive and negative performance indicators from everyone. Try not to make one failure overshadow the employee's entire performance. Or conversely, because one employee is very good in one area, recognize that he may need to develop in other areas and give him tips and advice on how to accomplish this improvement.

Step Six: Address what’s important to the employee.

Since job satisfaction is the most important factor affecting an employee’s attitude (and therefore his or her level of performance and value to your company), an effective review should delve into areas that include issues most important to that employee.

Step Seven: Evaluate Performance, not Personality.

You should focus on how well (or poorly) the worker does the job, but not on the worker's personal characteristics or traits. For instance, don't say the employee is "angry and emotional." Instead, focus on the workplace conduct that is the problem, for example, you can say the employee "has been insubordinate line managers twice in the past six months. This behavior is unacceptable and must stop."

Step Eight: Discuss Work/Life Balance.

The performance review is a good chance to show your concern for the employee’s work/life balance, and actively try to improve that balance. It’s also a right time to create a plan for the employee’s career advancement and discuss what future opportunities might exist for them.

Step Nine: Design a Legally Valid Performance Review Process.

Performance appraisals should be based on a thorough analysis of the job and it should be standardized for all employees, but not biased against any race, color, sex, religion, or nationality. Be sure to build in the process, a route for recourse if an employee feels he or she has been dealt with unfairly in an appraisal process, e.g., that the employee can go to his or her supervisor's supervisor. The process should be clearly described in a personnel policy.

Step Ten: Nothing Should Be Surprising to the Employee During the Appraisal Meeting

If your employee is surprised by your performance appraisal report during the review ,it means that you are failed. If you have had regular feedback sessions with your employee they should know exactly what you think of their performance. Any performance issues should have been addressed as soon as those issues occurred. Surprises will appear to the employee as if the supervisor has not been doing his/her job and/or that the supervisor is not being fair. Remember the "no surprises" rule during the year and the reviews will be much more productive.

Step Eleven: Be Sure to Give Employees Feedback on an Ongoing Basis on the Job.

It means that you proactively correct behaviors through retraining as needed and reinforce positive or superior performance regularly. The person should never hear about a problem with his performance for the first time during the review process. He should be well aware of issues from the coaching he has received on the job.