Performance appraisals refer to the continuous review of an employee’s effectiveness on the job relative to the job description. During appraisals, assessments are administered to evaluate the employee’s tact and skills in performing assigned duties. 

This post will take an in-depth look at employee appraisals, their various types, objectives, benefits, and how they can be adopted effectively.

What is an Employee Performance Appraisal

An employee performance appraisal is the careful evaluation of an employee’s input or contribution to the goals and objectives of an organization along the parameters provided in the job description. Organizations use periodic appraisals of an employee’s performance to provide feedback on their perception of employees’ overall contribution.

Use for Free: Staff Appraisal Form Template

Performance appraisals usually justify reward incentives, such as pay raises, promotions, job confirmations, or otherwise, making a case for appointment termination.

Types of Employee Performance Appraisals

Employee appraisals are meant to measure employee performance. Understanding where employees thrive and areas where they fail is imperative to organization growth and employee satisfaction.

As a result, various methods of employee appraisals exist to pinpoint different aspects of employee success.

The most suitable method for each organization will vary based on the diverse roles, industries, and time available for each review. 

Whatever the case may be, it is essential to conduct the appraisals by adopting a uniform approach to promote a fair process and avoid discrimination.

Use for Free: Employee Evaluation Form Template

Here are 9 types of employee appraisals

1. Straight Ranking Appraisal: This method adopts comparison as an evaluation tool. It compares employees to each other through a ranking system of good, better best. The same standards are used to grade all employees. 

2. Checklist Appraisal: The appraisal requires superiors to assess employee performance, with a yes on no response to a series of questions and statements about an employee.

3. 360 Feedback Appraisal: As the title implies, 360 feedback seeks to get a holistic view of employees by engaging with co-workers to get feedback on employee behavior. It is feedback from several people who relate with each employee. 

The idea is to get a balanced report from everyone, like colleagues, customers, and employees, to arrive at an accurate understanding of an employee’s attitude and behavior. It involves peer reviews, self-appraisals, manager reviews, and likes.

Use for Free: Probation Evaluation Form Template

4. Management Objective Appraisal: This method involves a collaborative approach between employee and manager to agree on goals achievable within a mutually agreed time frame. 

A substantial amount of feedback and input is required from both employer and employee in this process.

This appraisal method believes that involving an employee in the goal-setting process would result in employee success.

5. Competency Assessments: Competency assessment appraisals measure employees’ abilities against their core job skills. It amplifies the gap between employees’ input and the desired outcome. Competency assessments lead to learning plans to help address identified gaps. This appraisal is conducted via interviews, observations, and questionnaire forms.

Competency assessments are suitable for roles where a thorough understanding of skillsets is needed to achieve job success.

6. Critical Incident Appraisal: This form of appraisal has managers compile data on employees’ negative and positive behavior. After some time, both parties meet to review and evaluate performance.

Read: 15 Free Performance Appraisal Template + Question Examples

7. Grading /Rating Appraisals: In this type of appraisals, managers grade employees using a number scale system, usually from  (1-to 5), with 1 being the lowest and 5 being the highest. Rating appraisals describe an employee’s input in different job areas quantitatively.

8. Psychological Appraisals: This type of appraisal analyzes employees’ future performance to help discover employees’ hidden potential. Past work is not considered in psychological appraisals.7 significant attributes of an employee’s performance are measured, such as cognitive abilities, emotional intelligence, leadership and personality traits, and other relevant skills.

Specific occurrences are used to predict future behaviors. For example, how an employee manages an angry customer can be used to grade their ability to show empathy, deal with pressure and solve problems.

Read: Bad vs Good Survey Questions + [11 Examples]

9. Human Resource Cost Accounting Review: This method reviews an employee’s output through the financial value they bring to an organization. It is derived by comparing the cost of employee retention against the employee’s contributions in terms of monetary value.

Objectives of a Performance Appraisal

Providing feedback on employee performance is one of the aims of performance appraisals; some other objectives of appraisals include the following.

• To help Identify training gaps. Periodic appraisals highlight areas where employees fall short, which depicts the need for training.
• To motivate top performers – appraisals help identify their input and reward them.
• To ensure that employees are assigned roles where they will fit in seamlessly based on their strengths.
• To provide records that determine and justify reward and compensation systems.
• Aid employees in setting specific, measurable, achievable, relevant, and time-bound goals.

Use For Free: Sales Performance Appraisal Form Template

Advantages of Performance Appraisal

Effective Communication: Appraisals open the doors to 2-way communication between employers and employees. A cordial relationship flourishes and trust is established. Both parties can express expectations, disappointments, and reasons for failure or success and provide overall clarity.

Fosters Employee Engagement: Involving employees in the appraisal process ignites a desire to stay, appraisals breeds due to the engagement frequency. When employees see how their inputs impact their organizations and how much managers are willing to give to their success, it reduces attrition and encourages brand loyalty.

Eliminates Ambiguity: Appraisals provide clarity to employees. During appraisals, managers clearly define specific goals that employees are meant to achieve and help employees identify clear pathways to success in these roles.

Employee Development: It promotes personal development opportunities for employees by helping them identify their weak areas and proffer personalized learning plans to improve employees’ personal effectiveness.

Use This: Free Employee Peer Review Form Template

Promotes Merit Compensation System: Bias is discouraged through appraisals, and only employees deserving of certain rewards get it, and employees who fail at their tasks are also penalized. This promotes a culture of merit-based compensation, and employees clearly understand who gets what and why.

Targeted Recruitments: Since these periodic assessments pinpoint areas of strength and weaknesses etc. Organizations can now hire outrightly in areas where they require skilled people. The job descriptions are now streamlined to speak to the needs organizations are looking to meet.

Uses of Employee Performance Appraisals

1. Measure and Reward Employee Performance: The tracking and evaluation of job performance by appraisals provide an avenue to measure employee contributions effectively with the aim of rewarding well-deserving staff members. Appraisals offer multiple ways of assessing performance.

2. Identify Employee Potentials: Performance appraisals bring employees’ unique potentials to the fore. As the opportunity to relate with employees one on one is created. With this insight, managers can aid employees in mapping out a successful career plan in areas of their greatest strength.

This makes it an effective tool for talent retention.

3. Communication: Performance appraisal is one of the ways employees can provide feedback to their organization. Sometimes employees feel unheard. Appraisal periods offer an opportunity to communicate with management. As appraisals are conducted one-on-one, employees can speak freely without being intimidated.

4. Improve Employee Performance: Since appraisals utilize the carrot and stick approach, good behavior is rewarded, and negative inputs are penalized. It can serve as an incentive to boost employee performance.

This can be achieved through SMART goal setting, where measurable goals are set and realistic time frames are put in place to help them achieve these goals. As employees’ awareness of how they perform increases, appraisals can serve as a tool to outline career development and help nudge employees in the right direction.

5. Change Management: Appraisals can proffer the opportunity to share new developments with employees, regarding their workplace and job roles. The change could be new technology, new products, new service, etc.

It is essential to notify employees of these changes, and employees can get clarity on how these changes would impact their roles. Goals are now established based on new responsibilities and scheduled training to bring employees up to speed.

Limitations of Employee Performance Appraisal

1. Appraiser Bias: It is very easy for personal bias to affect appraisal results. Sometimes employees who are unable to suck up to management are appraised poorly. Sometimes individual perceptions of managers may not reflect the actual state of an employee’s performance.

2. Average Rating Problems: Most times, managers are meant to justify reasons for the high rating of employees. This sometimes influences the average rating standard by most managers in organizations.

3. Halo Effect: Refers to the tendency of an employee’s good impression or behavior to influence the perception of other aspects of his work. Based on this, the manager rates other inputs of this employee higher than they should be. Judgment is beclouded when the halo effect comes to play.

4. Performance Driven, Without regard for human values: One of the inherent limitations of performance appraisals is its core focus on performance. Appraisals measure performance, and its main focus is results. 

During reviews, human values of empathy, respect for others, kindness, etc., are not considered. This implies that even the most insensitive employee can still enjoy a high rating, reward, and compensation as long they are meeting set goals.

How to Conduct an Employee Performance Appraisal

Let’s look at the 7 steps to effective employee performance appraisal.

1. Design the performance review process: The first step is a legally valid performance review process.As the law states that appraisals should be job-focused and administered by people who have the relevant job knowledge.

Most Importantly, the appraisal process should be applied to all employees and should not be based on race, color, sex, religion, and nationality.

2. Design a standard form for performance appraisals: Appraisal forms should  include the following;

• Employees details 
• Date of completion
• Dates highlighting the period over which the employee is being assessed
• Goals, job description, and specific responsibilities
• Ratings and feedback
• Action plans to address outcomes and conclusion
• Spot for signatures

3. Schedule Appraisals: An ideal time for this is 6 months after the employee has commenced work in your organization. 

4. Initiate the performance appraisal process: Notify your employees of the upcoming appraisal process and share what it involves and what would be expected from them. Schedule a pre-meeting at least 2 weeks before the d day.

5. Have Employees Provide Suggestions and Updates: The appraisal forms should document employee suggestions and updates on job descriptions. They should be made to understand what the process involves.

6. Document Manager’s Contribution and Refer to Job Description/Performance Goals: This would objectively help you conduct the appraisal and guide what should be discussed during the appraisal meeting.

7. No Surprises Should Arise During Appraisals: Issues addressed during this process should have been discussed with employees beforehand to ensure fairness in the process.

8. Have The Appraisal: During the review meeting, it is vital to receive the employee’s feedback first and then respond. Discuss areas of disagreement amicably, discuss performance goals and always end the session in a friendly manner.

In the end, both of you should append your signatures signifying the end of the review process. Document your outcomes and file as this would be a physical point of reference for actions carried out based on this report.

What to Cover in Employee Appraisals

• Employee Appraisals should cover the following aspects.
• Teamwork and collaboration
• Problem-solving and conflict resolution
• Accuracy and quality of work
• Punctuality, attendance, and dependability
• Meeting goals and deadlines 

Sample Employee Appraisal

Managers and HR leaders can adopt this staff appraisal form. It is a template from Formplus.com that can be modified to include other parameters HR might want to measure.

You can get started with this free template today here.

Conclusion

Performance appraisals are a continuous assessment process that presents a broad view of an individual’s performance, with compensation for compliance personnel and penalties for deviants. Selecting the ideal performance appraisal method is crucial to the success of any appraisal process. While this is dependent on the niche of every organization, the purpose should be the same.

The focus of an effective employee performance appraisal is to nudge, support and align employees’ performance, skills and behaviors to achieve organizational goals. Continuous learning and improvement based on appraisal results encourage employee productivity and boost employee loyalty to an organization.