Performance appraisals are systematic ways of measuring, reviewing and analyzing employee performance over a given period of time, and using the information gathered to plan for the employee’s future with the organization. This periodical, impartial feedback is used to judge employee effectiveness as well as provide necessary development and training to improve the employee’s contributions to the organization’s goals.

You must understand the process of performance management and its importance to gain the most benefits for your organization.

Importance of Performance Management

Employees are the most significant resource of any business, and performance appraisals reflect the organization’s commitment to developing this important resource of human capital. Performance appraisals grant upper management an opportunity to reward excellent performance or reprimand unsatisfactory performance.

This powerful managerial tool should directly reflect the overall organization’s goals and objectives. The employee assessment should provide useful feedback about the employee’s contributions or lack of contributions toward these goals.

Process of Assessing Performance

The process of performance management has three stages: planning, managing and appraising. The planning stage requires communication between the employee and supervisor about the employee’s work plan, development plans and job expectations. The managing stage includes monitoring performance and providing feedback throughout the process. The appraising stage involves making decisions regarding rewards, punishments and possible training or development needed.

Methods of Appraisal

The most common methods of performance appraisals include straight ranking, paired comparison, scale rating and free response.

  • Straight ranking method: Managers rank employees from best to worst starting with the best employee and worst employee, and working their way toward the mediocre employees, one ranking at a time.
  • Paired comparison method: This is a systematic method of ranking employees only after comparing each employee to every other employee.
  • Scale rating method: This method has specific categories relating to performance with employees receiving either a number score, usually between 1 and 5, or a letter grade, such as A, B, C, D or F, for each category.
  • Free response method: This is basically a performance appraisal essay written by the supervisor with no requirements or limitations. 

Scope of Performance Appraisal

The scope of performance management and appraisal should include the following:

  • Provide employees with a better understanding of their role and responsibilities.
  • Increase confidence through recognizing strengths while identifying training needs to improve weaknesses.
  • Improve working relationships and communication between supervisors and subordinates.
  • Increase commitment to organizational goals; develop employees into future supervisors.
  • Assist in personnel decisions such as promotions or allocating rewards.
  • Allow time for self-reflection, self-appraisal and personal goal setting.

Using Appraisal Effectively

Although performance appraisals have many intended benefits for both the organization and employee, if the process is not carefully implemented and managed, it can result in employee backlash. Constructive criticism can help improve performance, but there is a fine line between providing helpful feedback and upsetting an employee.

Management should always make sure to recognize and reward excellent performance to avoid coming off as too negative. Employees who work hard and take pride in their work will have a hard time correctly utilizing the feedback if none of their accomplishments or positive contributions are noticed and appreciated.