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What is Performance Appraisal?

In this blog, we will introduce the concept of performance appraisals, covering their types, methods, and uses. We’ll also provide insights into their practical application and offer valuable tips and techniques for successful implementation.

Table of Contents

What is a Performance Appraisal?

A performance appraisal is a structured, regular assessment of an employee’s job performance and their overall contribution to a company. It may go by various names, such as an annual review, employee appraisal, performance review, or evaluation. This evaluation judges an employee’s skills, achievements, and areas where they may need to grow or improve.

Performance appraisals serve many purposes in a company. They offer employees comprehensive feedback on their work. They also play a role in determining pay raises, bonuses, or even termination decisions. These evaluations can be conducted at different intervals, with annual, semiannual, or quarterly reviews being common. They are also useful in deciding how to fill new positions within the company using existing employees’ skills and potential.

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Types of Performance Appraisals

Different types of performance appraisals are used in organizations to check an employee’s performance. These methods help assess how well employees are performing their jobs and provide feedback for improvement. Here are some common types:

  • Rating Scales: This method involves the use of predefined scales or criteria to rate employee performance. There are various factors to judge, like job knowledge, quality of work, communication skills, and teamwork.
  • Narrative Evaluations: Managers use this strategy to provide written reports of an employee’s performance. It highlights strengths, areas for improvement, and specific examples of their work.
  • 360 degree performance appraisal: In this method, feedback is collected from multiple sources, such as managers, colleagues, subordinates, and even customers. This is typically done by conducting questionnaires or surveys. It provides a comprehensive view of an employee’s performance from different perspectives. 
  • Critical Incidents: This method focuses on specific incidents or events where an employee showed exceptional performance or handled challenges. Managers document these incidents and provide feedback based on them.
  • Behaviorally Anchored Rating Scales (BARS): BARS involves using predetermined behavioral standards. Managers assess employee performance by matching their behaviors to these predefined parameters.
  • Management by Objectives (MBO): In this method, the manager and employee together decide goals for the employee. In the review period, both the manager and employee keep track of the employee’s progress toward the goals. Performance is then evaluated based on the extent to which these objectives are met.
  • Self-Assessment: This method allows employees to evaluate their own performance. This provides insights into their strengths and weaknesses and also highlights their achievements. The self-assessment is then discussed with the manager for a more detailed evaluation.
  • Negotiated Appraisals: This type of appraisal involves a mediator during employee evaluation. The mediator highlights the achievements and areas where the employee is performing well before any further discussion. This process helps foster open communication and agreement between both parties, especially where there is a tense situation between manager and employee.
  • Peer Appraisals: Peer appraisals involve feedback and evaluation provided by colleagues or coworkers who work with the employee. Peers assess the individual’s performance based on whether a person works well in a team and is contributing to their fair share of the workload. This type of appraisal can provide valuable insights from different perspectives within the workplace.

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How Do Performance Appraisals Work?

How Do Performance Appraisals Work?

Human resources departments usually design performance appraisal mechanisms to help employees advance in their careers. Here’s how they generally work:

  • Setting Goals: Employees and managers set specific goals and objectives that the employee should achieve within a given period.
  • Performance Management: Managers are responsible for the performance management of the employee. They observe and track employee performance, looking at factors like quality of work, productivity, communication, and obedience to company policies.
  • Feedback and Evaluation: Managers provide feedback to employees and discuss their strengths, areas for improvement, and any issues that need attention. This feedback is based on observed performance and includes examples and specific instances.
  • Documentation: Performance appraisals often involve written documentation. Managers record the feedback and evaluation to maintain a record of employee performance.
  • Performance Ratings: In some cases, performance appraisals use rating scales or other prefixed methods to assign a score or rating to an employee’s performance. This helps in comparing the performance of different employees or departments.
  • Development Planning: Based on the evaluation and feedback, managers work with employees to create a development plan. This plan identifies areas for improvement, sets goals for growth, and outlines steps to enhance performance.
  • Performance Review Discussions: Managers and employees hold discussions to review the appraisal results, address any concerns, and identify strategies for improvement. These discussions may also include setting new goals or adjusting existing ones.

What are Performance Appraisals Used For?

Performance appraisals are used for many purposes within organizations. Here are some of the common uses:

  • Feedback and Improvement: Performance reviews offer employees insights into their strengths and areas needing development, aiding them in refining their skills and boosting performance.
  • Goal Setting: Appraisals help set clear goals and objectives for employees. Henceforth, this aligns their efforts with organizational objectives and provides a roadmap for success.
  • Performance Measurement: Appraisals check employee performance. This allows organizations to measure and compare performance between individuals, teams, or departments.
  • Promotion and Rewards: Performance appraisals often influence promotion decisions and the allocation of rewards. Based on employee performance, there can be salary increases, bonuses, or recognition.
  • Identifying Training and Development Needs: Appraisals help identify areas where employees may need extra training or development opportunities to enhance their skills and knowledge.
  • Succession Planning: Performance appraisals play a key role in identifying high-potential employees for future leadership and succession planning within the organization.
  • Performance Documentation: Appraisals provide a formal record of employee performance, which can be used for reference during decision-making processes, such as disciplinary actions or performance-related discussions.
  • Communication and Dialogue: Performance appraisals facilitate open communication between employees and managers, providing a platform for discussing expectations, concerns, and career aspirations.

Top Tips and Techniques for Performance Appraisals

By implementing the below tips and techniques, you can conduct effective performance appraisals that promote employee growth, engagement, and organizational success.

  • Document Your Appraisal Sessions: Keep written records of appraisal discussions, including key points, feedback, and agreed-upon action plans. This helps maintain consistency and provides a reference for future evaluations.
  • Use Outlines: Prepare a structured outline or form to guide your appraisal sessions. This ensures you cover all important areas. This helps you gather specific information about the employee’s performance.
  • Check-In with Your Employees More Frequently: Instead of relying on annual or biannual appraisals, have regular check-ins throughout the year. These frequent conversations allow for ongoing feedback, goal tracking, and addressing any emerging issues promptly.
  • Focus on Behavior and Results: Evaluate performance based on observable behaviors and measurable outcomes. This objective approach helps employees understand how their actions contribute to overall performance.
  • Provide Constructive Feedback: Provide specific, actionable feedback that highlights areas for improvement while guiding and supporting employees in enhancing their performance.
  • Set SMART Goals: Collaboratively define goals that are Specific, Measurable, Achievable, Relevant, and Time-bound. Clear goals provide a roadmap for employees and align their efforts with organizational objectives.
  • Follow-Up and Follow-Through: After the appraisal, ensure you follow up on action plans and provide ongoing support. Review progress, offer guidance, and make adjustments as needed.

Conclusion

Performance appraisals serve as an important tool for organizations to assess and improve employee performance. They offer numerous benefits, including recognizing strengths, promoting effective communication, and setting clear goals. These appraisals also help in identifying areas for development, boosting morale, and rewarding top performers. However, they come with drawbacks like goal pressure, potential bias, and issues related to trust. Performance appraisals might not be a one-size-fits-all solution, as their effectiveness can vary across different job roles and workplace cultures.

To make performance appraisals work well, it’s important to focus on constructive feedback, SMART goal setting, and maintaining regular communication with employees. While they have their challenges, when conducted effectively, performance appraisals can contribute to the growth and success of both employees and the organization.

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