Your employees eagerly wait the entire year for their performance appraisal. A raise or a promotion, they feel, is the reward for their dedication and hard work they have put into your organisation. So, you should be objective and tactful in assessing the performance appraisal of your employees. Performance appraisal is a part of the overall performance management process of the company.
Performance appraisal definition
Let us first understand what is performance appraisal. Performance appraisal is a process that periodically reviews the job performance of your employees and their overall contribution to your company. Performance appraisal is called by many names, such as performance evaluation, performance review, employee appraisal or annual review. It is a part of the performance management process that evaluates an employee’s skills, achievements and growth or lack thereof. Employers use performance appraisals to provide detailed feedback to their employees about their performance at work which justifies their increase in pay and bonuses or reaffirms their decision to demote or terminate. The performance review can be conducted annually or biannually. It solely depends on the discretion of the company.
Performance appraisal helps the employers to place the right employees for the right jobs depending on their skills and expertise. Employees are curious about their performance in the appraisal and often compare it with other colleagues to understand how they can improve their performance further. So, make sure that you institute a good performance management cycle.
Usually, an HR professional of your organisation will offer help with the assessment of the records on physical factors or physical objectives such as attendance, efficiency and amount of work. However, things become slightly complicated while evaluating the subjective factors such as behaviours, attitude and friendliness at work. It doesn’t matter which of the many performance evaluation methods you make use of, as long as you consider both objective and subjective factors during an employee’s appraisal.
Goals of a performance appraisal system
The goals of a typical performance evaluation method are as mentioned below:
- To promote your employees based on competence and performance
- To confirm employees on probation, once their term completes
- To determine the training and development needs of your employees
- To facilitate healthy communication between employees and their managers
- To make an informed decision about incentives and the raise in employee salary
- To help your employees understand their position amongst the team or in the company in regards to their performance
The discussions and outcomes of the performance appraisal can also be documented for different administrative purposes.
Types of performance appraisal
The performance evaluation method can be categorised into various types, which include:
- Traditional appraisal
In this appraisal process, the manager conducts a one-to-one session with the staff and discusses their previous year’s performance. Usually, only one year’s performance is discussed during the appraisal. The discussion highlights the manager’s observations and employee feedback, as well as the employee’s review on their performance.
This process is followed to encourage your employees to take accountability for their performance by analysing their achievements and failures themselves. This process also helps them understand, manage and evaluate their development goals in the company.
- Employee initiated performance review
In this process, an employer informs the employees that they could seek a review of their performance from their managers. This modern approach to the appraisal process is aimed at replacing the conventional and dull review process. It can boost self-management and create more cohesion between the manager and the employees.
- 360-degree feedback
The process of 360-degree feedback includes employee feedback on performance that is given by various external sources apart from managers. These external sources of evaluation include peer evaluations, external customer feedback and evaluation from different suppliers. This radical concept is being increasingly used by many companies to provide holistic performance-related feedback to their employees.
Importance of performance appraisal
- An annual performance appraisal report helps your managers effectively identify employee performance by segregating their core competencies and areas of improvement.
- The managers can use the data to provide constructive advice on the performance of the employee at work.
- A systematic process helps the desired employee get the right promotion and raise the salary of employees to the deserved levels.
- Plus, the appraisal process also helps you transfer or demote the less performing employees.
- The annual performance appraisal report helps to identify the right skills of the employees and accordingly, helps the employer to make more effective use of their abilities.
- It creates an environment of healthy competition among your employees.
- It helps you assess the effectiveness of various training programs introduced to improve the skills and employee performance.
- A systematic appraisal system will help you identify the shortcomings in the process and provide you with effective solutions to rectify them.
Performance appraisal methods
The various performance appraisal methods followed in different organisations include:
- Management by Objectives (MBO) – Management by Objectives in an appraisal method wherein managers and employees together identify, plan, organise and communicate their goals.
- 360-degree feedback – 360-degree feedback is the most widely used method for performance appraisal. In this method, the employee is not only assessed by their immediate manager, but also by their peers, suppliers and customers, along with a self-evaluation.
- Psychological appraisal – The psychological appraisal process is used to determine the hidden potential of an employee. This method analyses the future employee performance rather than their past performance.
- Assessment centre method – This method is used to assess employees by placing them in various social situations. The employee is asked to participate in social exercises, and their performance in these exercises is assessed.
The information above provides a sneak preview of all the essential elements of a performance appraisal. Do remember, it is a significant part of the employee performance management cycle. So put your extra effort in creating robust performance evaluation methods. If you would like to strengthen your understanding with a performance appraisal form sample or would like to view a performance appraisal example, then connect with our experts to know more.