Performance reviews create a structured moment to step back from day-to-day execution and talk openly about performance, expectations, and what comes next.
In reality, performance processes often end up becoming a proxy for compensation and promotions. Many employees come into these conversations focused primarily on the bottom line – what bonus they will receive or whether they are being promoted?
In the process, something essential gets lost. At its core, a strong performance cycle is an opportunity to invest in people through meaningful constructive feedback; to gain honest reflection on leadership, culture, and ways of working; and to create alignment and shared ownership around priorities and goals for the year ahead. When done well, it’s not just an evaluation mechanism, but a tool for growth, trust, and cohesion across the organization
To make this conversation meaningful, useful and honest, the manager’s preparation is critical. In this section of the playbook, we focus on how managers can prepare effectively for a performance review conversation – before, during and after the review.
Before the Performance Review Conversations:
1. Start by asking yourself about the purpose of the conversation
- What am I hoping to achieve through this process?
- Do I want to identify and retain key team members?
- Do I want to signal to lower performers that improvement is expected?
You should be able to justify your managerial decisions. For example, why did employee X get one reward and employee Y got another? Why did employee Z get promoted and A not?
2. Next step: Collect important information about your team
Create a list of all team members and map them out. You can use the basic structure below (and feel free to add columns like total years of experience or education level for context). It’s helpful to keep this data year over year.
Columns to include:
| Options | Raise % | Bonus | Current Salary | Start date | Title/seniority | Name |
You can rank employees from strongest to weakest in the group. This step is especially useful in organizations where the manager has allocated a fixed budget and must decide how to distribute it between the team members.
Look for:
- Employees with unique skills or institutional knowledge critical to the team
- Employees who may be underpaid (you can use salary benchmarks from recruiting agencies -it’s not always accurate, but it gives an estimation )
- Who made an exceptional contribution or effort this year?
- Any “at-risk” employees? (showing signs of dissatisfaction, requesting promotions, discussing raises, etc.)
3. Prepare for Tough Conversations
- First, prepare mentally:
- Expect reviewed employees to be defensive. That’s how we’re wired, and it’s human. Don’t be surprised when it happens. It will. In many cases, once people have had a chance to get that initial defensiveness out, there’s room to talk about a different way forward.
- Remember: Honest, candid feedback builds trust.
Trust is what keeps people loyal to the organization.
- Next, try to anticipate questions, concerns, or pushback.
Things that you might hear from an employee:- “I’m not happy with how you handled…”
- “I’m not satisfied with the team…”
- “I’m frustrated with the company because…”
- Be prepared to explain to the employee how internal decisions are made.
This will help your team understand how their strengths influence the responsibilities they receive.- How are tasks assigned? Randomly? First come, first served?
- Why do some employees choose certain tasks over others? Interest? Ease? Recognition?
4. Prepare your feedback thoughtfully
Performance Assessment Questions
The following questions are designed to help you formulate meaningful, well-rounded feedback. They highlight the key aspects that typically influence strong performance and team contribution. You don’t need to answer each one formally, but reflecting on them will make it easier to identify patterns, strengths, and areas for growth in a way that’s clear and actionable for the employee.
- Does the employee improve workflows or suggest optimizations?
- Do they show curiosity and depth in their core areas?
- Are they open to feedback and willing to improve?
- Do they prioritize effectively?
- Do they deliver high-quality work?
- Do they work independently, end-to-end?
- Are they creative and able to solve problems?
- Do they collaborate well with peers?
For more ideas: 👉 Performance Review Phrases – MyHub
During The Performance Review Conversation: Less Awkward Than You Think
It’s tempting to rush to the conclusion during the evaluation meeting. But that misses a valuable opportunity. Use this meeting to:
- Set expectations clearly
- Explain how decisions are made (e.g., why someone else got the project)
- Highlight strengths
- Point out areas for growth
- Re-align the employee with current team goals
💡 If someone isn’t eligible for a raise, be honest about the gap and suggest concrete 6-month goals, with the promise of an off-cycle review. This helps reduce frustration and keeps motivation high when they see short-term progress is possible.
Goals should be measurable (quantitative or qualitative). If not, you risk misaligned expectations and frustration.
You can reuse the performance assessment questions above during the conversation.
Question Bank for Deeper Dialogue
Use follow-up questions to promote thoughtful discussion:
- You mentioned time as a blocker. Could this actually be a prioritization issue?
- Do you think working on task X is more valuable to the team/company?
- What would you do differently?
- Which of your current goals excites you the most?
- How well do you understand your goals?
- Do you feel you have the tools and support to achieve them?
Click here for more information about performance review process
If your review process contained a questionnaire, add these questions:
- What did you mean when you wrote…?
- Why did you rank X with 80% and not 100%?
- How satisfied are you with that level of goal completion?
Reflecting on Last Year’s Review
It’s important to revisit the goals or aspirations the employee expressed last year and reflect on how they played out.
- Last year you set X as a goal. How close do you feel you came to achieving it?”
- “What helped or held you back? (Lack of opportunity, change in interests, manager support, etc.)”
After: The Performance Review Conversation
1. Tools for Recognition and Retention
Consider how can you compensate your employees:
- Stock Options: Low immediate cost for the company and helpful for long-term retention.
- One-Time Bonus: Can be equal to a month’s salary or a flat amount.
- Pros: Has a strong short-term impact, creates a “wow” moment
- Doesn’t increase long-term payroll costs
Salary Raise: In large companies, this is typically 3–5% annually. In startups, it’s more variable.
💡 Important: Giving a 15% raise in a single year may set expectations for similar raises in the future, so be mindful of how you frame it. Tie the raise to specific accomplishments or increased responsibilities.
💡 You can combine multiple mechanisms (e.g., a significant bonus + small raise). If the budget is tight, focus on one impactful gesture rather than spreading the budget too thin.
2. Write It Down or It Didn’t Happen
You can use this template to document performance reviews.
It’s helpful to revisit last year’s records before starting the new review cycle. What you granted last year sets a baseline for expectations.
Disclaimer: This playbook is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Employment laws vary by jurisdiction, and founders should consult a qualified employment attorney before acting on any hiring, termination, or other HR decisions discussed here.