Performance appraisal, or performance review, is a recurring process vital for both employees and organizations. Although familiar, few HR professionals and top executives really have a bird's eye view on the matter.
1. What is a performance appraisal?
Well, performance appraisal is an annual/semi-annual evaluation of an employee’s job performance and overall contribution to the company, measured by a predetermined set of goals and core competencies.
This process is a crucial part of performance management. For organizations, it helps identify improvement criteria for better productivity and work quality. Appropriate performance reviews also encourage employees to devote more by recognizing their contribution and expectations, therefore increasing their engagement and retainment as well.
For employees, the performance review is a chance to present their achievements for a bonus or promotion opportunity. Career conversations during the process help forge a stronger mutual understanding between the employee and the company, which leads to proper support for the employee’s personal and career development.
2. The process
The employee appraisal process is usually conducted by the HR Department, which helps managers and leaders in organizing individual performance reviews in their teams. A typical process should look like this:
- Establishing a company-wide and consistent assessment model.
- Employees conduct a self-assessment according to the established guidelines.
- Conduct one-on-one meetings between the manager and employee to discuss the review and set future goals.
- Sign off on the agreed performance review.
- HR Department processes the review results for reporting, promotions, bonuses, etc.
3. 3 common performance appraisal methods
A performance review has two main aspects. First, the criteria to evaluate employees. Second, the rating, or scale for each criterion (Ex: scale ratings, essay ratings, checklist ratings). Tied to the rating and criteria is the weighting each item will be given. To keep things concise, below are three common ways to address an employee’s performance:
Checklist Scale + Essay Rating
The popular method used by most companies is a combination of checklist scales and essay ratings. In a checklist scale, a set of questions are asked, and the responses are simply yes or no, or a checkmark in the criteria where the employee meets the goals. For essay ratings, the evaluation criteria are listed out where the reviewer writes open comments on each of them.
PROS: Quick and easy to develop.
CONS: highly subjective, no detailed analysis, writing ability of reviewer impacts validity.
BEST FOR: small companies or startups whose product/service range is small and internal operations are low in complexity.
Management by Objectives (MBO)
The Management by Objectives (MBO) method was first developed in 1954 and is still gaining popularity today. In this method, the employee and manager begin by working together to agree on a set of SMART goals (Specific, Measurable, Achievable, Realistic, Time-sensitive). Over the reviewing period, the manager and employee conduct catchup meetings to discuss the progress made and address potential issues. Finally, at the end of the reviewing period, they conduct a final review to evaluate the goals and set new ones for the next period.
PROS: S.M.A.R.T, open communication, employees feel involved, encourage personal development and contribution.
CONS: Hard to apply for positions that highly require intangible competencies like interpersonal skills, commitment, innovation, etc.
BEST FOR: Measuring the quantitative and qualitative output of management level.
This method includes not just feedback from the manager and employee, but also other sources. It has five integral components: self-appraisals, managerial reviews, peer reviews, subordinates appraising manager, customer/client reviews.
PROS: Provides a bigger picture of employee performance.
CONS: Risk of unconstructive feedback from outside sources due to cultural differences, competitiveness, ineffective planning, misguided feedback.
BEST FOR: Private sector organizations.
4. Performance appraisals examples
- “I see three out of four projects you have worked on last year met the expected deadline and were within budget. The other project is still awaiting approval. You succeeded in the objectives expected of a Project Manager here at ABC Company.”
- “Looking at the project reports here, I see that two of the three projects were kicked off late. Project ABC was 20% over the approved budget. Team members also reported that they lacked information and managerial support while doing their tasks. Do you have any suggestions on how to improve the punctuality and effectiveness of the projects?”
- “For the upcoming projects this year, I’d like you to draft a detailed project plan one month before project kick-off. We can go over it together and figure out where the gaps might be.”
- Use measurable outcomes instead of broad generalizations.
- Use a positive tone.
- Let the employee have chances to propose their solutions where possible.
- Give clear, constructive and neutral feedback.
- “Let’s talk about some of the problems.”
- “I have heard that your attitude has been less than positive during project meetings.”
- “You and I definitely think alike when it comes to project management.”
- “I don’t think we have too much to talk about as everything seems fine. Keep up the great work.”
- Use negative tones or give baseless comments.
- Make the discussion personal.
- Ignore rooms for improvements, nobody is perfect.
5. Choosing a suitable performance appraisal method
Choosing and implementing the right performance appraisal method is so essential to your business. It not only reflects how you perceive your employees’ contribution but also is an important part of organizational performance.
Do you need a helping hand?
Check out our Candidate Assessment Tools Service.
Or subscribe to our monthly FutuHRe Insights newsletter for latest updates, tips & tricks for the HR Industry.
University of Minnesota Libraries Publishing, Human Resource Management, 2011. https://open.lib.umn.edu/humanresourcemanagement/