Everyone who has ever managed at least one employee has had to conduct the awkward, sweaty-palm-inducing ritual known as the job appraisal or performance appraisal. The definition of a performance appraisal is as simple as an impartial rating of a person's job performance, but how it's done is important since job appraisals serve valid purposes both for the business and the employee.

Attempts to improve the process and its outcomes through the years have resulted in numerous different types of job appraisals to choose from and — depending on your goals and your management style — one or several may work for you.

Understanding Performance Appraisal Objectives

Performance appraisals are more than just annual rituals to get through and check off your to-do list. Job appraisals or reviews can help your business in several ways:

  • Give employees specific direction on areas for improvement.
  • Show appreciation for work done well by acknowledging successes.
  • Can improve efficiency and performance, resulting in increased profits.
  • Serve as a written record of assessment, useful for promotions or terminations.

Similarly, job appraisals can benefit employees too:

  • Acknowledge where they have excelled and what needs improvement.
  • Provide a road map by setting goals and defining steps to reach them.
  • Lets them know where they stand in their boss's view.
  • Can be motivational, especially when accompanied by a raise in pay.

Comparing Ranking Performance Appraisal Methods

Some of the most popular types of performance appraisal methods are those that rank or grade employees' work on some type of scale, usually a numerical one.

Graphics Rating Scale: A list of desirable traits for the job is preprinted, such as "detail-oriented" and "team player". The manager considers each trait and assigns a value for it, based on how much the employee displays and uses this trait. The scale is typically numerical, such as 1-5, based on 5 as excellent and 1 as poor.

Behaviorally Anchored Rating Scale (BARS): This is a preprinted list of behaviors or statements that could range from "Generally arrives to work on time" to "Is able to lead a team project without taking it over completely". Ideally, the managers using BARS feel strongly that the statements pertain closely to desired behaviors for the job and are specific enough that most managers would rate the employee the same way.

For example, it's easy to check what time the employee arrives at work each day and to observe how she leads a project by sitting in on meetings or checking on team members' contributions. Conversely, a statement like "Exhibits good work habits" isn't specific enough and could be interpreted differently by different people.

Employee Ranking: Managers consider the entire team, or all employees with the same job description or the same level, and rank them from highest to lowest or best to worst. Although this method may be valuable for the manager, especially in deciding the amount of salary increase to give each individual, it may not be the best appraisal method to share with employees. While some low-rated workers may be motivated to improve and surpass others, many will be hurt and may quit in anger. Even if that is your hope, you'll always have someone who is rated the lowest and those rated highest may demand higher raises or nicer offices.

Simplifying With Checklists

For simplicity alone, it's hard to beat checklists, so some managers like the checklist scale. It lists statements about general employee behavior — not specific to the employee being evaluated — with each statement accompanied by columns to check "Yes" or "No". However, when presented with a simple checklist in her performance appraisal meeting, an employee may feel that she has been given scant consideration and needs more explanation.

In addition to the specific checklist scale, nearly every type of evaluation can be turned into a checklist. These work best when there is space next to the columns to write comments. Usually, though, not enough space is given to really say much. Checklists could be better used for update evaluations throughout the year, a trend that many companies are using to replace or enhance the annual performance appraisal.

Using Behavior/Trait-Based Appraisals

When discussing types of performance appraisals, the human resources field often talks about trait-based and behavior-based appraisals. This is another way of classifying or describing evaluations and can encompass other methods.

Traits are part of a person's personality or skill set, like detail-oriented, organized or tenacious. For example, the graphics rating scale is trait-based, meaning it describes human traits that are valuable in a job. BARS, on the other hand, is behavior-based because its statements describe behaviors on the job. Behaviors are how the person acts, such as how an individual uses organizational abilities to keep his desk neat and information easy to locate, or how her tenacity helps her follow-through, even on the toughest assignments.

Evaluating Through Standards and Objectives

Instead of ranking behaviors, actions, incidents or traits, some managers prefer to evaluate how well employees are meeting the company's objectives or objectives set specifically for them.

Work Standards Approach: Realistic standards that employees are expected to meet are set for the company as a whole and for each job; then, managers compare how well the employee meets each standard. It's best when the standards are descriptive and detailed so the manager can accurately assess performance. Some standards might be company-wide, such as, "Is prepared for the day and ready to work at company starting time". Other standards would be job-specific; a standard for a customer service rep might be, "Listens closely to what the customer is saying and asks questions for clarification".

Management by Objective (MBO): Similar to evaluating against standards, MBO sets objectives for each employee in advance, then evaluates how well he has met his objectives. Usually, objectives are set by the employee and manager together. When they meet to go over progress — perhaps quarterly rather than annually — they set new objectives for the next period of time or update previous objectives based on progress.

Taking a 360 Approach

A more recent type of job appraisal method is called the 360 approach because it looks in all directions by asking people who work with the employee to also evaluate her from their viewpoint. After all, part of doing a job well is working well with coworkers, and peers sometimes see or hear more than managers who don't sit in close proximity to the employee. While it can be frightening to be evaluated by many people rather than just one, it's also helpful to know how you are perceived by others. In some companies, even managers are evaluated by their employees.

Writing in Her Own Words

Evaluators who prefer to describe employees' strengths and weaknesses in their own words, with some room to explain, may find either the essay or critical incidents methods more their style. The critical incident method also includes an option for the employee to describe the incidents.

Essay: Usually, managers are prompted by questions and given space to write their answers. So, instead of assigning a number to a statement, the manager might be asked, "What does the employee do well when talking with customers, and where is there room for improvement?" The evaluator can then give specific examples she has observed.

Critical Incidents: These statements describe actual incidents an employee has experienced on the job. Sometimes the employee writes the incidents himself in a log as they happen; other times a manager may log observations. At the performance appraisal, the log is used to discuss the incidents — both positive and negative — noting what went well and what could be improved next time. For the critical incident method to work, incidents must be logged regularly.

Whatever performance appraisal method you decide to use, be sure to look for positive traits, behaviors and incidents, too. It's natural for managers to see what needs correcting. But employees also learn by hearing what they do well, and such praise goes a long way towards motivation.