Employee reviews are a sometimes painful, but absolutely necessary tool for evaluating employee performance, providing and receiving feedback, aligning with company objectives, and setting goals. And—like many HR practices—they’re not one-size-fits-all. Understanding the different types of employee reviews and how they can intersect with merit cycles can help you and your organization choose the most suitable approach for your unique needs.
First, since I’ll be referencing them throughout this blog, let’s clarify the difference between a merit cycle and an employee review:
A merit cycle refers to the process of evaluating employees’ performance and determining their merit-based compensation adjustments. It typically occurs on a regular basis, often annually or biannually. Some organizations give promotions and compensation adjustments in separate merit cycles (e.g., promotions may happen at the beginning of the year, but comp increases may happen in the summer). But in general, the goal of a merit cycle is to recognize and reward employees for their contributions to the organization.
TL;DR: Merit cycles happen in tandem with employee reviews, but not all employee reviews include merit cycles.
The merit cycle begins with the evaluation of employees’ performance over a specific period, usually the past year. This evaluation is often based on predefined performance criteria, including goal achievement, skills development, competencies, and overall contribution to the organization.
360-Degree Feedback Reviews
360-degree feedback reviews involve gathering feedback from multiple sources, including managers, peers, direct reports, external benchmarking data, and sometimes external stakeholders. This comprehensive approach provides a well-rounded view of an employee's performance, incorporating perspectives from different angles. It can be particularly valuable for identifying blind spots and areas for improvement that may not be apparent in traditional reviews. 360-degree feedback reviews can also inform merit cycles by providing a holistic view of an employee's contributions and areas for development.
Real-Time or Continuous Feedback Reviews
Real-time or continuous feedback reviews are focused on providing feedback on an ongoing basis rather than waiting for an annual or periodic review cycle. This approach emphasizes immediate feedback, allowing employees to make adjustments and improvements in real time. Real-time feedback can be especially beneficial for addressing issues promptly and fostering a culture of continuous improvement. While not directly tied to traditional merit cycles, real-time feedback can influence performance discussions and merit decisions throughout the year.
Self-assessment reviews involve employees evaluating their own performance against predefined criteria or goals. This type of review encourages self-reflection and accountability, as employees assess their strengths, weaknesses, and contributions. Self-assessment reviews can be valuable for fostering employee engagement and self-awareness. They can also provide valuable input for merit cycles, as employees self-identify areas for development and growth.
Probationary reviews are conducted during an employee's probationary period, typically at the beginning of their employment. These reviews assess whether the employee is meeting the expectations set for their role and whether they are a good fit for the organization. Probationary reviews help organizations make informed decisions about retaining or terminating employees during the probationary period. While not directly linked to merit cycles, probationary reviews can influence decisions about an employee's long-term prospects within the organization.
Project-based reviews focus on evaluating an employee's performance within the context of a specific project or assignment. These reviews assess how well an employee has contributed to the project's success, their collaboration with team members, and their adherence to project timelines and goals. Project-based reviews can provide valuable insights into an employee's strengths and areas for development in a project-oriented environment. While project-based reviews may not directly impact merit cycles, they can inform discussions about an employee's overall performance and contributions.
Understanding the intersection between employee reviews and merit cycles is essential for effective performance management. By considering how different types of reviews align with merit cycles, organizations can develop a comprehensive approach to evaluating and rewarding employee performance, ultimately supporting their employees' growth and development.