How to Conduct a Performance Appraisal – A Guide for Employers

A performance appraisal is a periodic evaluation of an employee’s performance on the job. Many companies implement performance evaluation systems to provide their staff with feedback on their work and to justify HR decisions such as pay rises, bonus payments or even terminations. Read on for a closer look at performance review systems in corporate environments.

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What is performance in a professional context?

Although a performance appraisal can be conducted at any point in time, many organisations schedule performance reviews on a regular basis, typically each quarter or once a year. In a nutshell, the term performance refers to how a member of staff fulfils their duties, carries out the required tasks and conducts themself in the workplace. Aspects of employee performance that are typically measured include the efficiency, quality and quantity of their work. When an employee’s performance is poor, this may lead to dissatisfied customers and ultimately a negative impact on your business. Conversely, acknowledging your employees’ strengths will motivate them and boost employee engagement. Regularly reviewing employee performance is, therefore, a must for any employer.

Why is a performance appraisal needed?

Performance review systems primarily serve to provide feedback to each employee on their performance, to serve as a basis for changing behaviour and make an employee more effective, and to provide managers with data that enables them to make decisions on future responsibilities and remuneration. A streamlined performance evaluation system is a key component of effective management. Usually, a performance appraisal is more concerned with the outcome of employee behaviour rather than the behaviour itself. Ultimately, regular performance reviews are sure to increase employee productivity and grow your business.

The main benefits of performance appraisals are:

  • measuring employee performance
  • advising employees on how they are doing
  • improving employee performance
  • listening to employee concerns
  • managing changing roles and duties
  • identifying employee potential
  • rewarding good employee performance

Related: Tips for Business Communication During the COVID-19 Crisis

What types of performance review system are there?

Different companies or even different departments within the same organisation may each have a different performance appraisal system in place. Let’s take a closer look at the most common ones:

Employee self-evaluation

An employee self-evaluation requires the individual to reflect on their contribution to the company before the appraisal meeting. The results of this self-evaluation are used as the foundation for the discussion and help both parties prepare.

360-degree feedback

A 360-degree performance appraisal involves detailed feedback from colleagues, managers and in some cases even customers to get an idea of the bigger picture with respect to the employee being reviewed. This appraisal technique avoids a biased review on the part of a single manager as it takes into account a variety of perspectives.

Traditional performance review

Traditionally, managers and employees meet at scheduled intervals to assess whether established objectives were met. Both manager and employee review the employee’s strengths and weaknesses, ideally discussing examples of both. Finally, new goals are set and used as a benchmark for success for future performance appraisals.

Checklist scale review

This type of performance evaluation system uses a questionnaire with a checklist scale to evaluate the employee’s behaviour, results and aspects such as teamwork or communication skills. Using a checklist makes the evaluation more objective, although some degree of subjectivity will naturally still be present. The manager is only required to tick ‘yes’ or ‘no’ in response to a range of questions about the employee on a checklist. This type of appraisal is quicker than other methods but less detailed.

Performance appraisal tools

It’s a good idea to write down some best practices for your in-house performance appraisal system. You can refer to them yourself or pass them on to other managerial staff to ensure a consistent process across the board. The following five steps are essential in any performance appraisal tool kit:

1) Set an agenda

Let the employee know in advance what you have planned and which points you’re planning to discuss. This also gives them the opportunity to prepare beforehand.

2) Prepare

Being prepared is essential for a successful performance appraisal. Of course, everyone is busy, but a performance review can only be successful if you know which points you want to raise and have done your research on the employee’s performance.

3) Provide support materials

Some businesses may choose to provide written guidelines outlining what exactly should be discussed in a performance appraisal meeting. This may be helpful to give the conversation structure and ensure a uniform standard across departments. If you work in HR, you may want to compile and distribute such guidelines and supporting material to your managerial staff.

4) Give balanced feedback

If your employee has done something wrong or is not behaving in the way you’d like them to, don’t ambush them with criticism. Use the sandwich method and start by praising them for something they’ve done well before outlining what you think needs improving. Finally, end on a positive note so they leave feeling encouraged.

5) Be ready to actively listen

You’ll be keen to communicate the items you’ve prepared, but also take time to listen to your staff member. Make an effort to really take in their concerns and feedback. They will feel respected and appreciate it. And you may discover new information that you weren’t aware of. At the end of the day, an appraisal meeting needs to be a two-way street to be effective.

Formal or casual?

It’s entirely up to you whether you want to set up a formal or casual performance evaluation system. Both have their advantages and drawbacks, but either way, it’s a good idea to conduct the meeting in a quiet, disruption-free environment like a private meeting room if you’re opting for a formal appraisal, or a quiet local café if you prefer a more casual setting.

Formal performance evaluation system:

  • Older generations may tend to prefer a more formal structure
  • Formal documentation makes it possible to track what was discussed
  • More focused on long-term goals
  • Typically scheduled at regular intervals

Casual performance appraisal:

  • Younger generations may prefer informal appraisals
  • Casual settings can make it easier to communicate openly
  • Can be used to discuss short-term projects or tasks
  • Can be more ad hoc as needed

Related: How to Build an Effective Employee Resource Group (ERG) Program

A performance evaluation system can have a significant impact on your company’s culture, employee engagement and team performance. These aspects all enhance your employer brand and help you retain key talent in your organisation. An effective performance appraisal system provides valuable insights to both managers and employees – not only does it provide a solid decision-making basis for managers when it comes to pay rises, bonus payments or promotions, but it also gives employees guidance so they can grow professionally.

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