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How to measure the performance of employee fairly and effectively

Fair and Efficient Performance Reviews

Suppose you were recently promoted to a supervisory job in a company where you have worked for two years.  You genuinely like almost all your co-workers, who now report to you.  The only exception is one employee,  who dresses more formally than the others and frequently tells jokes that embarrass you and the other workers.  Given your preexisting feelings for the employees, how can you measure their performance fairly and effectively?