How to conduct performance appraisals in 10 practical steps

Performance appraisals should give employees a chance to understand how they're doing at work and think about what they could achieve next. But are managers making the most of these conversations? According to the CIPD's Good Work Index 2025, 38% of UK employees with a line manager report that they don’t receive useful feedback on their work.

For small business owners and managers, knowing how to conduct a performance appraisal can make a real difference. From preparing for the meeting to giving constructive feedback and setting achievable goals, we'll walk you through 10 practical steps to help you get it right.

 

Skip to:

• What is a performance appraisal?

• 4 types of performance appraisal methods

• How to conduct a performance review in 10 steps

• How to handle difficult performance appraisal conversations

• Take the hassle out of appraisals with Breathe

• FAQs about performance appraisals

 

What is a performance appraisal?

 

A performance appraisal is a formal meeting where a manager and employee review how the employee is performing in their role. Sometimes known as a performance review, the process usually involves checking whether the employee has achieved any objectives that were agreed in the previous appraisal meeting, but also provides a space to discuss what the employee would like to achieve next.

Most small businesses conduct formal appraisals once or twice a year, but there's no set frequency you need to follow. The important thing is to give both managers and employees enough time to prepare, so they can use the appraisal to have a useful conversation about the employee's performance. Appraisals also work alongside regular one-to-ones, where managers can check progress and offer support between formal reviews.

 

 

4 types of performance appraisal methods

 

There's more than one way to assess employee performance. Here are four common methods you could use in your small business.

 

 

How to conduct a performance review in 10 steps

 

Conducting a performance appraisal takes a little thought and planning, but once you’ve created a proper process, it should be straightforward to run each time. Whether you're reviewing a long-standing employee's progress or carrying out your first appraisal as a manager, these 10 practical steps will help you get the most out of the conversation.

 

1. Prepare well in advance

 

A useful performance appraisal starts long before you sit down with your employee. Give yourself enough time to get organised and let your employee know what they need to do beforehand. A little preparation can make the meeting feel much more comfortable for everyone, so try working through this checklist before each appraisal.

 

• Schedule the meeting early. Give your employee plenty of notice that their appraisal is coming up and set aside enough time for an unhurried conversation.

• Choose a private setting. Find somewhere you can talk freely without interruptions or other people overhearing.

• Ask employees to complete a self-assessment. Give them the chance to reflect on their own performance before hearing your assessment. Make it clear that you’re interested in hearing their thoughts and how you plan to act on them.

• Gather feedback from colleagues. Speak to team leaders or others who've worked closely with the employee to understand their contributions.

• Check for any accessibility needs. Ask whether the employee needs any adjustments to participate comfortably in the meeting.

 

Breathe Performance helps you keep previous appraisal records and employee objectives in one place, so you can easily refer back to them when preparing for your next review.

 

2. Use evidence to assess performance fairly

 

When you're reviewing an employee's performance, it's important to back up your assessment with facts rather than relying on your own personal impressions. Clear evidence helps you explain your feedback and lets employees understand how you've reached your conclusions.

 

The evidence you use will depend on the employee's role, but here are some useful examples.

 

• Performance against objectives. Compare the employee's results with the goals and targets you agreed at the beginning of the review period.

• Completed projects and deliverables. Look at the quality of their work and whether they've met your agreed deadlines.

• Customer feedback. Consider relevant customer reviews or satisfaction scores demonstrating how the employee has performed in their role.

• Previous one-to-one notes. Refer to past performance reviews and discussions you've had throughout the review period to see how the employee responds to feedback and has progressed over time.

 

Be careful not to focus too heavily on recent events. This is known as the recency effect, where recent achievements or mistakes can influence your judgement more than events that happened further back. You can overcome this natural bias by reviewing the full review period and consider any circumstances that may have affected the employee's results.

 

3. Share an agenda before the meeting

 

Nobody wants to walk into a performance appraisal without knowing what to expect, so sharing an agenda beforehand helps your employee understand how the meeting will work and the points they’d like to share with you. Your agenda doesn't need to be particularly detailed, but here’s what you can do to make it worthwhile.

 

• Agree on the main discussion topics. Give your employee an overview of what you'd like to cover without scripting the entire conversation.

• Invite their input. Ask whether there's anything they'd like to add or spend more time discussing.

• Allow enough time for each topic. Avoid packing so much into the agenda that you're rushing through important conversations to get to the next item.

• Flag anything requiring preparation. If you need the employee to bring information or think about a particular question, let them know beforehand.

 

Example: Your employee might want to discuss a pay rise or ask about opportunities for promotion. Knowing this beforehand gives you time to check what's possible and prepare a useful response.

 

4. Make the appraisal a two-way conversation

 

An appraisal shouldn't feel like a manager delivering a verdict on someone's actual performance. Your employee knows their role better than anyone, and they'll have their own thoughts about how things are going. Give them plenty of opportunities to speak, and take a genuine interest in what they share with you.

 

Open-ended questions are a great way to encourage employees to share more than a simple “yes” or “no” response; you might try some of the following.

 

• What are you most proud of? This gives employees the chance to highlight achievements you might not know about.

• What would you do differently? Encourage your employees to reflect on any lessons they’ve learned but take care not to make the conversation feel critical.

• Is anything making your job harder? Find out whether any obstacles are preventing them from achieving their goals and how you could help them overcome them.

• What could I do to support you better? Invite them to share ideas about your own management approach and always be prepared to listen.

 

When your employees are speaking, try not to interrupt or jump straight into offering solutions. If your employee raises something unexpected, ask a few follow-up questions to understand their perspective before responding. The aim is for both of you to leave the meeting feeling heard.

 

5. Give specific, constructive feedback

 

It's lovely to tell an employee they're doing a great job overall, but they'll get much more from your feedback if you explain exactly what they're doing well. The same goes for areas where they could improve. Employees need to understand what's expected of them and what they could do differently. Here are a few ways to make your feedback more useful:

 

• Be specific. Instead of saying “You're great with customers”, mention a difficult customer situation they handled particularly well.

• Focus on behaviour, not personality. Rather than calling someone “disorganised”, explain how missing a particular deadline affected the rest of the team.

• Explain the impact. Help employees understand how their work has contributed to the business or affected their colleagues.

• Offer concrete suggestions. If something needs to improve, discuss what the employee could do differently and what support might help.

 

You don't need to balance every piece of constructive criticism with positive feedback. If there's a genuine performance concern, it's important to address it clearly and give your employee a chance to respond. Equally, don't let areas for improvement overshadow the hard work they've put in throughout the review period.

 

6. Find out what’s affecting performance

 

Sometimes, an employee's performance can dip and it’s not always immediately obvious why that’s happened. Rather than making assumptions about what's going wrong, use the appraisal to understand what's happening and how you can help. Here are a few things worth exploring together:

 

• Workload and resources. Does the employee have enough time and the right tools to complete their work to the expected standard?

• Training needs. Are there any skills they're struggling with or tasks they haven't been properly trained to complete?

• Changing expectations. Have their responsibilities changed without you explaining what you now expect from them?

• Health and wellbeing. Is anything affecting their ability to work comfortably or effectively? Always be sensitive and let employees decide how much personal information they want to share rather than digging too far into topics they feel uncomfortable about.

 

It's also important to consider performance capability, which means whether an employee has the skills, knowledge and ability to meet the requirements of their role. Before deciding how to address poor performance, check whether they're capable of achieving the standards you've set and whether additional support could help. Breathe's performance capability checklist for line managers can help you work through these considerations.

Similarly, if If an employee tells you about a disability or health condition affecting their work, you may need to consider reasonable adjustments under the Equality Act 2010. These could include changes to their working hours or providing specialist equipment, depending on their individual needs.

Remember that supporting employee performance is a shared responsibility. If someone needs additional training or a more manageable workload, agree on what you'll do to help rather than leaving them to figure it out independently.

 

7. Make time for career development

 

Performance appraisals are a space to look beyond an employee's current responsibilities and discuss what they'd like to achieve in the future. This is an area where many managers could offer more support, with only 54% of employees confirming that their manager supports their longer-term career development, according to the CIPD's Good Work Index 2025.

Use the appraisal to explore what career development means to each employee and how your small business could help in the following areas.

 

• Career ambitions. Find out whether they'd like to move into a more senior role or explore a different career path.

• Skills development. Discuss what they'd like to learn and whether any training courses could help.

• New responsibilities. Look for opportunities to take ownership of a project or get involved in another area of the business.

• Mentoring opportunities. Consider whether a more experienced colleague could help them build their confidence or develop new skills.

 

Tip: Some employees may be perfectly happy in their current role but keen to develop their expertise, so career development doesn’t always mean a promotion. Instead, give your employees the freedom to decide what the next step looks like for them. Download our career development template to help them.

 

8. Set realistic goals together

 

Once you've discussed your employee's performance and development plans, it's time to agree on what they should work towards next. Involve them in setting their own objectives, so they're comfortable with what's expected and feel motivated to achieve them.

 

SMART goals are a useful starting point. They're specific, measurable, achievable, relevant and time-bound, giving employees a clear idea of what success looks like before they start working towards achieving them. Here’s what you should consider when setting your performance goals:

 

• Connect goals to business priorities. Help employees understand how their specific individual objectives contribute to what your small business wants to achieve.

• Make progress measurable. Agree on how you'll assess success, whether that's meeting a sales target or completing a qualification.

• Check what's achievable. Consider the employee's workload and whether they'll have enough time to meet their objectives.

• Agree on deadlines. Set realistic timescales and decide when you'll review progress.

• Identify the support needed. Discuss any training or resources you'll need to provide to help the employee succeed.

 

With Breathe Performance, you can use Goals & Tasks to record individual objectives and keep track of progress alongside your wider business priorities.

 

9. Document the discussion and agreed actions

 

It's worth making a written record of the appraisal while the conversation is still fresh in your mind. This gives you and your employee something to refer back to and helps avoid misunderstandings about what you've agreed. Your appraisal notes should include:

 

• A performance summary. Record the main points discussed, including achievements and any concerns raised.

• Agreed objectives. Write down the goals you've set together and how you'll measure progress.

• Development plans. Note any training or opportunities you've agreed to explore.

• Manager commitments. Record any support you've promised to provide, along with deadlines where appropriate.

• Employee comments. Give your employee the opportunity to review the notes and add anything they feel is missing.

 

Keep these records somewhere secure and accessible to the people who need them. Remember that appraisal notes contain personal information, so your business must handle them in line with UK general data protection regulations. You can learn more about these data protection responsibilities in our GDPR Training for Employees course.

 

 

10. Keep the conversation going

 

The performance management process doesn’t stop after the meeting has finished. Employees also need regular opportunities to check in and discuss their progress between formal reviews, particularly when they're working towards new goals or taking on unfamiliar responsibilities. You might:

 

• Schedule one-to-ones. Regular catch-ups let you both discuss progress and offer support for any difficulties that have cropped up.

• Give timely feedback. Managers and team leaders should always make an effort to recognise good work when it happens. Equally, timely feedback is also an opportunity to address any concerns promptly, rather than waiting for the next appraisal.

• Review objectives. Check whether goals are still relevant as business priorities change and adjust them where necessary.

• Follow through on promises. Make time for any training or development opportunities you've agreed to provide.

• Ask for feedback. Check whether your employee is getting the support they need and whether there's anything you could do differently.

 

You don't need to turn every catch-up into another formal appraisal. A short conversation can be enough to understand how someone is getting on and help them make progress towards their goals.

 

How to handle difficult performance appraisal conversations

 

Even with plenty of preparation, performance appraisals don't always go to plan. Here are three situations you might encounter and how we suggest you handle them.

 

When an employee disagrees with their appraisal

 

It's natural for managers and employees to have different opinions about how things are going at work. If someone disagrees with your assessment, give them time to explain why and ask whether they have any evidence you haven't considered.

Be willing to revisit your assessment if they've raised a valid point. If you still can't agree, record both perspectives in the appraisal notes rather than pressuring the employee to accept your version of events.

 

When an employee becomes upset or defensive

 

Receiving critical feedback can be difficult, especially when someone has worked hard and feels you haven’t recognised their efforts. If an employee becomes upset, acknowledge how they're feeling and give them time to collect their thoughts.

Avoid getting drawn into an argument or pushing ahead with the agenda if they're struggling. You could offer a short break or arrange another meeting once they've had time to reflect.

 

When an employee's performance is consistently below expectations

 

If an employee has been struggling to meet the required standards despite previous feedback and support, you may need to consider a more formal approach.

Start by checking whether expectations have been clear and whether you've provided appropriate support. If performance hasn't improved, you could consider a performance improvement plan (PIP) before moving to a formal capability procedure. Follow your business's policies and the relevant Acas guidance. We offer this performance improvement plan template to give your employee and your business the best chance of success.

Following a fair performance review process is particularly important with changes to unfair dismissal law on the way. From 1 January 2027, the Employment Rights Act 2025 will reduce the qualifying period for ordinary unfair dismissal protection from two years to six months. Keep clear records of the concerns you've raised and the support you've offered, and remember that dismissal should always be a last resort.

Learn more about the live and upcoming changes to your responsibilities in Breathe’s Employment Law Hub.

 

 

Take the hassle out of appraisals with Breathe

 

Performance appraisals are much smoother to manage when you're not chasing paperwork or trying to remember what you discussed six months ago. Breathe Performance makes organising appraisals and supporting employee development easy. With Breathe, you can:

 

• Schedule appraisals and one-to-ones. Keep regular performance conversations on the calendar so everyone knows when their next catch-up is due.

• Set and track objectives. Agree on individual goals and monitor progress with Goals & Tasks.

• Keep a record of feedback. Store appraisal notes and development actions so you can refer back to previous conversations.

• Celebrate achievements with Kudos. Give employees recognition for their hard work and contributions.

• Listen to your team. Use Polls & Surveys to gather employee feedback and understand what's important to your people.

 

Ready for a brilliantly simple way to conduct performance reviews? Explore Breathe Performance with a free 14-day trial.

 

 

FAQs about performance appraisals

 

What should you say during a performance appraisal?

Start by recognising the employee's achievements and explaining how they've performed against their agreed objectives. Give specific examples to support your feedback and discuss any areas for improvement. Encourage the employee to share their perspective and finish by agreeing on what they'd like to achieve before their next review.

 

How often should you conduct performance reviews?

Most businesses conduct formal performance appraisals once or twice a year, although there's no legal requirement to follow a particular schedule. The right frequency depends on your business and your employees' needs. Acas recommends regular performance reviews, so alongside annual meetings, it's worth arranging more frequent one-to-ones between formal appraisals.

 

How long should a performance review take?

An effective performance review typically takes between 30 and 60 minutes, although there's no fixed rule. Allow enough time to discuss the employee's performance without rushing important topics. More complex conversations may take longer, particularly if you're reviewing several objectives or discussing significant development plans.

 

Are performance appraisals a legal requirement in the UK?

No, UK employers aren't legally required to conduct formal performance appraisals. But businesses must comply with relevant employment laws when assessing employees, including the Equality Act 2010. Keeping accurate appraisal records also demonstrates that you've managed any performance concerns fairly if you need to follow a formal capability procedure later. Learn more in Breathe Growth Academy's Employment Law Essentials for Line Managers course, which includes a module on performance management and capability.