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Performance appraisal: definition, methods, and examples

How does your business assess employee performance? Checking in regularly with employees gives you a chance to highlight what’s working well and discuss options for boosting performance. In this guide to the performance appraisal process, we’ll look at how appraisals work and what you need to include in annual reviews.

What is a performance appraisal?

A performance appraisal gives businesses a way to check in regularly with each employee. Also called a performance review or annual review, appraisals assess an employee’s contributions. This includes skills, achievements, and areas for growth. It looks at how well the employee is demonstrating core competencies, both at a company-wide and role-specific level.

Companies might use performance appraisals to justify a promotion or raise. They can also be used simply to give feedback. While it’s most common to conduct an annual review, some companies might perform appraisals more regularly. 

The purpose of a performance appraisal

Purpose is baked into the performance appraisal definition; it gives employers the opportunity to weigh employee contributions. But it’s also important to understand that a performance appraisal is a two-way street, with benefits both for the organisation and individual employee.

From the company’s perspective, a performance appraisal:

  • Highlight processes that are working well

  • Address behavioural issues that could impact productivity

  • Support employees with professional development

  • Give praise for achievements, encouraging further contribution

  • Justify hiring and firing decisions

For employees, there are also benefits to a performance appraisal:

  • Receive valuable feedback to improve performance

  • Receive justification for a promotion or raise

  • Identify areas for improvement

  • Highlight new opportunities for career development

  • Provide ongoing motivation to achieve goals

Performance appraisal methods and examples

When the performance appraisal process works well, it offers numerous benefits including those mentioned above. While there’s no one-size-fits-all way to approach this process, here are a few of the main performance appraisal methods.

  1. Top-down: This is the process described above, with management individually assessing each employee.

  2. Self-assessment: Some companies prefer to have employees rate their own job performance before engaging in a productive discussion.

  3. Peer review: When working in teams, you could have the individual’s colleagues rate their performance.

  4. 360-degree review: This method tries to involve all parties equally, with input from the individual, the supervisor, and the peer group.

There are standard processes involved with all of these methods. One example of a performance appraisal could involve a simple Yes or No checklist, including a series of behaviours or traits. The supervisor ticks off a Yes or No against each trait, using this as a jumping-off point for evaluation.

Another example of a performance appraisal would be a rating scale. This common method features a weighted set of criteria that the manager uses for evaluating performance. While a Yes and No checklist weights all tasks equally, a rating scale puts stronger emphasis on areas that are most important to the company.

What goes on a performance appraisal form?

Whether you use a checklist, rating scale, or list of objectives, there is some basic information that should be included on any performance appraisal form.

  • Employee name

  • Dates of employee evaluation

  • Date the form was completed

  • Explanation of rating system

  • Performance indicators (goals, objectives, responsibilities)

  • Space for commentary

  • Spaces for signatures

Both the employee and supervisor should sign the performance appraisal form to show that it’s been discussed during evaluation.

How to conduct a performance appraisal

While ticking off a few boxes might seem simple in theory, in practice employee management can be tricky. The appraiser needs to review performance with an eagle eye for detail along with sensitivity to the employee.

  1. Establish the method of assessment and enlist help from your human resources department if needed.

  2. Write up a clear list of expectations and competencies for each employee. 

  3. Conduct the performance appraisal using the method chosen.

  4. Conduct a one-on-one debrief session between the manager and employee to discuss results.

  5. Discuss future goals and company-wide objectives, highlighting areas for potential growth and development.

Finally, have both parties sign off on the performance review and archive the paperwork. The performance appraisal form can then be referred to in the future for promotions or planning purposes.

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