Top 7 Employee Evaluation Criteria Every Manager Should Know

Key takeaways

• Traditional performance reviews fail due to unclear business alignment and poor measurement, costing organizations billions in lost productivity.
• Companies with effective evaluation systems are 4.2× more likely to outperform competitors and achieve 30% higher revenue growth.
• Successful evaluations balance measuring both results and behaviors while providing regular feedback.
• Organizations must train managers to conduct meaningful evaluations that connect directly to development opportunities.
• Moving to continuous feedback with clear criteria directly impacts business success and competitive advantage.

Traditional criteria for employee evaluation often fail to boost performance or develop talent, creating widespread distrust among employees (72%) and managers (61%). However, effective evaluations drive real results – companies focusing on employee performance are 4.2× more likely to outperform peers. Here are the key criteria managers must focus on for evaluations that deliver business value.

Why traditional performance reviews hurt your bottom line

Most companies have evaluation systems that simply don’t work. According to the WTW survey, only 26% of companies in North America rate their performance management systems as effective. This creates a chain reaction of problems that directly impact your financial results.

Trust in these systems has collapsed. A significant majority of employees (72%) and managers (61%) don’t trust their organization’s performance evaluation process, while only 2% of Chief Human Resource Officers believe their system truly works. This trust deficit creates a foundation of skepticism that undermines the entire purpose of performance factors for employee evaluations.

The gap between intentions and results is striking. While 93% of organizations aim for appraisals to drive organizational performance, only 44% feel their current process achieves this goal. Similarly, just 31% believe their program effectively supports employee career development, despite 72% listing it as a key aim.

These failures carry a substantial price tag. Poor feedback systems contribute to employee disengagement, costing U.S. businesses an estimated $1.6 trillion annually in lost productivity. Adding to the challenges of performance appraisal, fewer than half of employers (49%) believe their managers effectively assess performance, highlighting widespread inconsistency in evaluation quality.

Essential employee evaluation criteria for business growth

The solution to broken performance management isn’t abandoning reviews – it’s transforming them with criteria that actually matter to business success. McKinsey research reveals companies that focus effectively on employee performance achieve 30% higher revenue growth and 5 percentage points lower attrition than competitors. The secret lies in what criteria for employee evaluation and how you measure it.

Clear alignment with business goals

Employees need to understand how their work directly contributes to company strategy. This means linking individual goals to top-level objectives through frameworks like SMART goals or OKRs. Only 2 in 10 employees currently understand how their work connects to company strategy – creating a massive opportunity for alignment.

Regular check-ins on this alignment are crucial as business needs shift. DBS Bank demonstrated this principle’s power when CEO Piyush Gupta and his team “redefined the meaning and measurement of performance.” By shifting focus to customer-centric KPIs and agility metrics directly tied to corporate strategy, DBS transformed from having the worst customer satisfaction in its market to being named “Best Bank in the World.”

Designing an effective performance management system requires establishing clear connections between individual goals and organizational objectives from the start.

Achievement of KPIs

Measuring results through clear key performance indicators creates objectivity and clarity. Focus your evaluations on the “what” – meeting targets, completing projects, and delivering quantifiable outputs. Use data wherever possible (sales figures, production numbers, customer service metrics) to reduce subjectivity.

This approach addresses a fundamental problem identified by Marcus Buckingham, Head of People & Performance Research at ADP, who notes that “Every single human alive today is a horribly unreliable rater of other human beings.” His research highlights why data-driven KPIs matter – they reduce subjective bias in evaluations and create trusted metrics for performance.

Leveraging strategic performance management KPIs provides the structural framework needed for effective goal-setting, monitoring, and evaluation within your performance management system.

Quality of work and output

Going beyond simple task completion, this criterion assesses how well work is done – not just if it gets done. Evaluate accuracy, thoroughness, adherence to standards, and impact to measure true contribution.

FedEx Singapore demonstrates this approach in practice. According to Managing Director Eric Tan, their evaluation system emphasizes “trust, transparency, and frequent feedback” focused on quality outcomes. “By taking care of our people, they will provide outstanding service for our customers,” explains Tan, directly linking quality standards to business results.

To implement effective evaluations that focus on quality, many organizations turn to expert HR consulting services to design custom frameworks aligned with their specific business needs.

Demonstration of core competencies and behaviors

How work gets done often matters as much as what gets accomplished. Evaluate the “how” – skills like communication, problem-solving, teamwork, and leadership – alongside adherence to company values.

In Vietnam’s hierarchical workplace culture, this criterion requires special attention. Dr. Elaine Chew, Associate Professor of Management at RMIT University Vietnam, notes that “Performance reviews are generally just a mere exercise if supervisors practice a rigid hierarchy that expects obedience.” She advocates blending local cultural values with modern performance appraisal methods to create genuine dialogues about behaviors and competencies.

Collaboration and team contribution

No employee works in isolation. Evaluate how effectively people work with others and consider their impact on team morale and projects. FedEx links evaluations to its ‘People-Service-Profit’ philosophy, emphasizing service and teamwork.

Companies like Home Credit Vietnam have won awards, including “Best Talent Management Strategy,” by incorporating teamwork measures into their digitized performance management system. Their officials note that people-focused assessment enhances both employee performance and work-life balance.

Understanding the core objectives of performance management systems can help organizations better integrate team dynamics into their evaluation criteria for performance appraisal.

Adaptability and skill development

In today’s rapidly changing business environment, assessing an employee’s willingness and ability to learn new skills and adapt to change is crucial for future growth. Link evaluations directly to development plans.

Organizations now expect reviews to cover coaching and career growth, making adaptability assessment essential. Effective talent management requires “building a more future-fit, equitable, diverse and inclusive working environment” – which starts with evaluating adaptability.

Integrating performance management with succession planning creates a strategic approach that helps identify adaptable employees who can fill future leadership roles

Initiative and problem-solving

The most valuable employees don’t just complete assigned tasks – they actively identify issues and propose solutions. Evaluate proactivity, independence, and resourcefulness in overcoming challenges.

Unilever Vietnam credits its success partly to “practical and innovative HR initiatives” that raise standards in many areas, according to Vietnam News. Their comprehensive approach to evaluating employees includes measuring problem-solving capabilities, which helped the company navigate COVID-19 challenges while sustaining high performance.

Review your current criteria for employee evaluation today, train your managers to evaluate fairly against clear standards, and use these evaluations to drive development conversations. This approach is especially crucial for retaining talent in growth markets like Vietnam, where career advancement opportunities significantly influence retention, and becomes even more vital when considering how to support your remaining employees after a layoff. 

Need expert guidance on implementing these evaluation criteria? Our HR consulting services can help you design a performance management system tailored to your specific business needs.