Performance Appraisal

What is performance appraisal in HR?

Performance appraisal refers to the process of evaluating an employee's job performance and overall contribution to the firm on a regular basis. A performance appraisal, also known as an annual review, employee assessment evaluation, or employee appraisal, assesses an employee's abilities, accomplishments, and growth, or lack thereof.

How do performance appraisals work?

Step 1: Establishing performance standards is the first step.  


Performance standards are established to guarantee that departmental goals and objectives are met, as well as the organization's overarching strategy and goals. Individuals are not held to the same standards as positions. Standards should follow the same rules that apply to goal-setting in order to be readily understood and viewed as objective.

Step 2: Disseminate performance expectations  


Performance standards must be properly communicated and acknowledged to be expectations in order to be effective. Initial and corrective training should be integrated into the performance management process since performance criteria presuppose that an employee is competent. It should also be disclosed whether there is a defined training period after which an employee is regarded to be competent and performing to standards.

Step 3: Measure the performance via performance metrics


Cost, quantity, quality, and timeliness are examples of quantitative performance that is relatively easy to quantify. Soft skills performance, including as communication, customer service, and leadership, is more difficult to assess. Personal observation, oral reporting, and written reports are among the sources of knowledge recommended by DeCenzo, Robbins, and Verhulst. They do point out, however, that what is measured is likely more important than how it is measured. Instead of measuring what's easy to assess, the focus should be on measuring what matters.

Step 4: Evaluate real performance against performance benchmarks.  


Actual performance is compared against performance standards in this step of the appraisal process. Actions and outcomes should be highlighted in documentation.

The Human Resource department at Indiana University defines the following qualities of good documentation:

  • Must be accurate and specific
  • Must be continual (covering the entire review period)
  • Must contain actual information (not based on conjecture)
  • Must be balanced, with examples of both successful and disappointing performance
  • Must be in a written form

Also read: 9 step checklist for choosing a performance management system

Step 5: Talk to the employee about the evaluation.  


This is usually the most difficult step in the process for both managers and employees. Even when performance is excellent, there may be disagreements about the next course of action. A related point: If an employee's performance is continuously bad, the problem should be addressed immediately, with corrective action implemented, rather than being deferred to an annual review.

Management can ask employees to complete and submit a self-evaluation prior to the appraisal meeting to identify and prepare for differences of opinion. The manager's ability to remain cool and respectful will have a tremendous impact on the employee's motivation, confidence and future performance.

Step 6: Put the plan into action with your team.  


The discussion and/or implementation of any next steps: a reward of some sort—a raise, promotion, or sought growth opportunity—or corrective action—a performance plan or termination—is the final phase in the assessment process. Corrective action that might assist an employee meet expectations, on the other hand, should not be deferred until the next formal appraisal. When performance gaps are detected, supervisors and managers should take the time to figure out why the employee's performance isn't meeting expectations and whether extra training and/or coaching can help the person reach those standards. As previously stated, if performance is such that termination is necessary, that action should be conducted as soon as possible.

What are the 5 types of performance appraisal methods?

The majority of performance evaluations are top-down, which means that managers evaluate their employees without any input from the subject. However, there are others:  

1) 360-degree feedback

360-degree feedback is a multidimensional performance appraisal system that evaluates an employee based on feedback from their circle of influence, which includes supervisors, colleagues, customers, and direct reports.  

Also read: 20 Questions You Should be Asking in 360-Degree Performance Reviews

2) Peer assessment  

Peer appraisal is a type of performance appraisal where an employee is evaluated as part of the assessment process based on feedback from co-workers or persons in his or her immediate working environment. Unlike 360-degree performance appraisals, supervisors and managers are not included in this type of appraisal method. This is may or may not be an anonymous survey.

3) Self-assessment

Individuals rate their job performance and behaviour in a self-assessment. Employees can use self-appraisals to reflect on their performance and identify their strengths and limitations. Self-appraisals without defined forms or formal procedures, on the other hand, might become lenient, fickle, and biased.

4) Management by objectives (MBO)

Management by objectives (MBO) is an appraisal process in which managers and employees collaborate to create, plan, organise, and communicate goals for a certain appraisal period.  This performance appraisal approach is intended to effectively connect broad company goals with personnel objectives while validating objectives using the SMART method to determine whether the established goal is specific, measurable, attainable, realistic, and time-sensitive.

5) Negotiated appraisal

This is a newer practise that uses a mediator to try to minimise the adversarial nature of performance appraisals by enabling the subject to speak first. Prior to any criticism, it also focuses on what the individual is doing well. During confrontations between subordinates and bosses, this arrangement is often helpful.

What is the importance of performance appraisal?

1) Facilitation of communication

In enterprises, communication is seen as a critical component of employee motivation. It has been suggested that input from PAs can help to reduce employees' feelings of insecurity. Fundamentally, job performance can be guided via feedback and management-employee communication.  

2) Employee concentration can be improved by encouraging trust

A variety of behaviours, thoughts, and/or issues can divert employees' attention away from their task, and trust concerns can be one of them. PAs that are well-designed and used have the capacity to reduce distracting variables while also encouraging trust within the firm.

3) Setting goals and reinforcing desired performance

Organizations find it effective to align individual worker goals and performance with organisational objectives. PAs provide for debate in the collaboration of these individual and organisational objectives. Employee acceptance and contentment with appraisal findings can also be a benefit of collaboration.

4) Performance improvement

Well-designed Performance Appraisals can be useful instruments for communicating with employees about how their job performance compares to company goals.  

5) Identification of training needs

It has been claimed that in order for Performance Appraisals to be genuinely effective, they must be provided with post-evaluation opportunities for training and development in issue areas identified by the appraisal. PAs can be very useful in identifying new employee training needs. They can assist in the development and monitoring of an employee's career goals.  

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