A performance appraisal is a formal assessment usually carried out by a line manager on employees. It is a periodic and systematic meeting set up to assess the employee’s performance using specific pre-established criteria and determine their overall contribution to achieving organisational objectives.

Also referred to as a performance review or performance evaluation, a performance appraisal is traditionally done yearly. But a more frequent (weekly, monthly, or quarterly) evaluation, which is also more effective, is being adopted. During the appraisal, managers also consider other matters such as employee acculturation, accomplishments, the potential for future improvement, and strengths and weaknesses.

The main objective of a performance appraisal is to determine what is working and what is not to improve the organisation’s processes and, ultimately, its bottom line. Therefore managers must carry it out purposefully with adequate knowledge of the outcome of past appraisals.

 

Importance of performance appraisal

  1. It provides an opportunity for recognition of accomplishments.
  2. It can facilitate improved future performance.
  3. Performance appraisals establish a clear understanding of job duties, responsibilities, and priorities.
  4. It helps employees explore their strengths and weaknesses.
  5. Employees learn to become more proficient and productive.
  6. Managers and their direct reports can plan for the training and development needs of their departments.
  7. It is an opportunity to discuss the employee’s career aspirations.

 

Performance Appraisal Methods

Shorter-cycle Performance Review

Shorter-cycle performance appraisal has taken over the traditional annual reviews because it offers a better evaluation of employee performance. Appraisals are done weekly, biweekly, monthly or quarterly; this way, matters arising are quickly attended to as they occur, instead of waiting till the end of the year when issues would have lost their significance. Shorter-cycle appraisals keep employees on their toes.

Self-appraisal Method

With the self-appraisal method, employees highlight their achievements, note their weaknesses, and should be willing to discuss possible improvements. Consequently, this performance appraisal method will help alleviate employees’ general fear of appraisals because they evaluate their performance themselves. The ultimate goal of the self-appraisal method is to get the employee and manager on the same page about their performance.

360-degree Appraisals

The 360-degree review is a more objective performance appraisal method. The employee’s manager, peers, direct reports, and sometimes customers evaluate the employee, providing a broader view of their performance and conduct. 85% of Fortune 500 companies have adopted the 360-degree appraisal method as a better alternative to the traditional annual appraisal.

Management by Objectives

The management by objectives method actively engages the employee in the process of goal setting. Afterwards, the employee’s performance is evaluated against the set goals.

The manager and employee work together to set SMART objectives, which are:

  • Specific: The objective is clearly defined
  • Measurable: Progress towards the objective is quantifiable
  • Attractive: The employee feels that the objective is worth working toward
  • Realistic: It is feasible
  • Time–based: The objective has a deadline

There is no one universal appraisal method, and you can decide the best method that works for your organisation. Managers can co-implement two or more of the appraisal methods explored above for a thorough employee performance appraisal.

 

Conducting a performance appraisal meeting

Before the appraisal meeting:

  1. Review the employee’s performance to identify the met goals and challenges encountered.
  2. Evaluate their performance in terms of SWOT Analysis.
  3. Provide your employee with the agenda for the meeting.

During the appraisal meeting:

  1. Communicate clearly and positively with the employee. Be as precise as possible.
  2. Have practical ideas to help employees improve their performance.
  3. Encourage employees to express their opinions and suggestions on improving their productivity freely.
  4. Talk about career development.
  5. Discuss the job description if necessary.

After the appraisal meeting:

  1. Go over the identified issues and possible improvements with the employee to be sure your communication was effective.
  2. Praise the employee for their positive contribution to the company.
  3. Show support and offer any assistant you can give.
  4. Thank them for their time.

 

Tips on how to conduct an effective performance appraisal

  • Be prepared. Review company goals for the year and the results of the employee’s previous appraisal.
  • Establish performance standards.
  • Create a plan.
  • Communicate performance standards.
  • Discuss challenges and successes.
  • Measure performance against company goals.
  • Compare performance to established standards.
  • Compare current performance to previous performance.
  • Constructively discuss areas for development and action.
  • Agree on actions that need to be taken.
  • Summarise the meeting and express support
  • Be a good listener, let the employee communicate during the appraisal.
  • Provide feedback on positive and negative performance since the last review.
  • Ask for the employee’s views on problems, suggestions for changes, improvements.
  • Be prepared to discuss the employee’s concerns regarding salary increases, promotion opportunities, career development and office relationships.
  • Strive for constant two-way feedback. 
  • Maintain an impartial, neutral attitude. Remove every bias and allow an objective appraisal. Using performance management software can help guarantee objectivity.
  • Implement actions derived from the outcome of the appraisal. Above all, an appraisal is only judged as effective when the desired results are achieved.

 

Conclusion

Employee performance appraisal is about reviewing the past and present with a focus on the future. A poorly done performance appraisal can be counterproductive and demoralise employees. 

We have learned that an annual performance appraisal is insufficient. Still, the requirements of a more regular review can be daunting to the already busy manager. That’s why you need a performance management software that comes with OKR and Balanced Scorecard frameworks and lets you manage performance at the departmental and organisational levels.