Performance Appraisal - Meaning, Definition & Process

Performance Appraisal Guide

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What is Performance Appraisal?

WIKI says-

Performance appraisal is a way to document + evaluate the performance of an employee. Other words for performance appraisal are performance review, development discussion, employee appraisal or performance evaluation.

Define goals
Measure /
Monitor
Components
Of Performance
Appraisal
Feedback
Evaluate
and record
performance

In other words

A performance appraisal is a job performance review or the contribution of an individual towards company goals. It is mostly done on an annual basis after taking into consideration skills growth, initiatives, achievements against goals set. This practice is done primarily to decide the percent at which the employee should be appraised.

Why is Performance Appraisal Important?

Performance appraisals are important due to a gamut of reasons. Depending on how the employees performed, it impacts each one of them differently yet positively.

They help the team lead in understanding the training needs after seeing the skill gap. The feedback given at the performance appraisal time can help the employees opt for the right educational programmes and trainings to improve their performance and be more productive.The right performance management software can truly help you appraise your employees as they deserve.

When done effectively performance appraisals can develop employees, better performance and boost productivity. There are many comprehensive HR software solutions for CXO and HR that can help them keep a track of all these and take the right actions in time. When the good performers are rewarded, promoted; this also helps in retaining the top talent and keeping them and other motivated to keep pushing their boundaries, outperform each others and oneselves performance.

Difference Between Performance Management And Performance Appraisal

It is easy to get confused between performance appraisal and performance management as they are closely related to each other. Contrary to the popular belief, they are different!

“Performance appraisal is a part of performance management and not its equivalent.”

The major difference between performance management and performance appraisal lies in the way they are executed. Performance appraisals are your reaction to how individuals performed, on the other hand, performance management is a process that runs actively round the year to help employees in learning the new and rectifying their mistakes.

Performance appraisal is done in a set time wherein the past actions of the employees are analysed and rated. Performance management looks at the present and future and strives to improve the same.

Performance appraisal is more formal, quantitative and operational in nature and while performance management is more informal, strategic and flexible in nature. Earlier HR software was considered as a software providing solutions for HR only, but now it is used actively to provide solutions for managers and employees as well.

To help you understand the difference to the T, here is a table for you to know the difference between performance management and performance appraisal in a glance-

Performance Management	Performance Appraisal
Proactive	Reactive
Forward Looking	Backward Looking
Flexible	Rigid
Strategic	Operational
Doesn’t use ranking and rating	Uses ranking and rating
Continuous	Once a year
Led by manager	Led by HR with software for HR manager’s support

Objective Of Performance Appraisal

The primary objective is to evaluate the performance, efforts and then reward the employee accordingly so that employees continue to perform well and contribute to the success and goal achievement of the organisation. An adaptable and comprehensive HR and payroll software can help you set the performance cycle and monitor progress in real-time!

There are 3 main elements that this evaluation requires. You must sit with the team members individually when setting the objectives. It is a prerequisite for both, the manager, and the team member to mutually agree on them. It’s the first step to ensure the successful accomplishment of the set objectives.

The quantity and quality of the work done

Ask the employees the amount of work they can take up and ensure to maintain the quality expected and then decide the number. You don’t want to overburden them and lose the work quality.

The time taken to perform the tasks

Validate the quantity they commit to deliver by discussing the time they would need for each task. Decide the time and mention them in the objectives simultaneously.

The actual value that work adds to the company

Avoid deciding the tasks without understanding the company goals properly. The objectives you set must be in sync with the company objectives. Come up with the tasks for the team, basis that. Also, make the team understand how their work would impact the bigger goals. This adds more meaning and motivation.

Types Of Performance Appraisal/ Performance Appraisal Methods

There are multiple methods to do performance appraisals. However, not all of them work well in every work culture and company. In this section, we explore the performance appraisal process types while mentioning the pro, the cons and what are they ideal for. For your convenience and clear distinction,

we have divided performance appraisal methods into two types-

Traditional methods of performance appraisal
Modern methods of performance appraisal

Let’s dive right in!

Traditional Methods
Modern Methods

Traditional Methods of Performance Appraisal

In total, there are 8 traditional methods of performance appraisal. Since, they don’t hold much relevance in today’s time, we discuss them briefly below.

Essay Method

This is said to be one of the first ways to evaluate the performance of an employee. In this appraisal method, the rater (typically the manager) writes/ documents the behavior, performance of the employee including his job knowledge, skills, attitude, growth, potential and improvement made by far.

Rating Scales Method

This stands to be a popular method, still used as a sub part of the modern methods of doing appraisal. Rating scales method uses a scale to evaluate performance on different parameters. The parameters can be anything, from attendance, skills, timeliness and results. The rating for each one of them is given from 1 to 10. The higher the score for the parameter, the better!

Criteria	Yes	No
Is the employee competent enough?
Is the employee completing the tasks given to him on time?
Is the work showing efforts being put?
Is the employee taking initiatives?
Does the employee shows resentment when he is given new opportunities at work?

Checklist Method

As the name suggests, in this appraisal method a checklist is created by the employer consisting of brief statements. Then there are two options – yes or no that need to be ticked off. The long series of questions based on different criteria then helps in evaluating the performance.

Bell Curve Appraisal Method

Also known as forced distribution method, in this, the manager on his own or by asking the team to categorise each other, divides employees in his team into low- average- high performers. it is assumed that only 10-20% would be high performers and 70-80 average while 10% would be low. The curve decides how the employees would be treated-given training, terminated, promoted or required to be more productive.

Josh Bersin, in an article in Forbes, mentioned how Bell Curve is a myth. He says that it fails to reflect how the people actually performed. It just puts employees in a box on the basis of their past performance and the decisions are taken not on how the employee is performing currently but just the past because of the tag they got. This goes on to disrupt happiness and performance of employees.

Ex. Implement product in tight deadline.
Workers	Reaction	Scale
A	Worked overtime	4
B	Been the most responsive	3
C	Client appreciated the most	2
D	Was not as involved	1

Critical Incident Method

This appraisal method puts emphasis on one critical incident that required quick, strong, immediate action/response/support from the employee. Instead of taking the overall performance of the employee and the quality he delivered in other tasks assigned to him, he is solely judged on the basis of such incidents. For instance, On xyz date implementation team was asked to get the product implemented in a maximum of 3 days.

How did A, B, C, D, E react Who worked the most? Who was resisting? Or not as dedicated?

Paired Comparison Method

In this method, for every trait the manager wants to evaluate, employees are compared in pairs, the better person in each pair is chosen till the time one comes out as the best. A special formula is used to find how many pairs should be made-

N(N-1)/2 wherein ‘N’ is the number of employees you want to evaluate for the trait.

Field Review Method

This method is one of the oldest, in this, the HR asks the manager about their opinion of the people in their team. A certain set of questions is prepared to conduct field review and the answers of managers for each individual are recorded and later used for appraisal of each employee.

Confidential Appraisal Method

Widely used in Government organisations even now, in this, the promotion or transfer of the employee is done on the basis of a report prepared by the senior. To keep everything confidential, the report is sent in a sealed cover or in the mail directly to the authority who takes the final decisions.

Modern Methods of Performance Appraisal

There are majorly 6 types of performance appraisal in modern methods of appraisal. Take a look.

Management by Objective

In this appraisal system, with the involvement of employee, certain SMART goals are set for every appraisal period. Meetings are held frequently to look at the advancements and share feedback. At the end of appraisal period, employees are reviewed against the individual goals set, what has been achieved by far and what was expected.

EMPLOYEE
MANAGER

PLAN
CHECKIN
REVIEW
FEEDBACK

Encourages discussion on improvement areas and creates a feedback loop thereby helping employees in career development
Intangible aspects like interpersonal skills are completely ignored

Ideal For?

Measuring quantitative output of senior management i.e. directors, managers for any business size

When setting goals, you must ask yourself these three questions-

Have you defined the organisational goal and then translated it into individual goal?
Is the goal SMART-specific, measurable, achievable, relevant, time bound?
Was employee the part of goal setting?

For example when you follow MBO, objective for a content writer can look like-

Company goal : Increase revenue by 3x

Name : A

Budget : Rs. xxxxxx

Bounce rate : 50%

Goal : Publish 30 seo oriented high search blogs

Research and craft at least 50 blog titles and summary by 27/12/2020 -10%
Present, discuss and select 30 blogs by 29/12/2020-10%
Write 15 blogs of upto 800 words each by 16/1/2021-40%
Write other 15 upto 800 words each by 27/1.2021-30%
Proofread, and schedule them by 30/1.2021- 10%

Human Resource Accounting Method

In this the economic value/ contribution of the employee is estimated and used to decide if the person should be appraised or not. In other words, the monetary benefits or difference that the person makes to the organisation to give appraisal and not the productivity, efforts or anything else.

It helps in planning and ensuring efficient utilisation of human resources and also identify how an employee’s performance affects the company’s bottomline
No specific guideline that is accepted widely to value humans and their worth

Ideal For?

360 Degree Feedback is an ideal for Startups and SMEs because there every employee’s performance is crucial, it can legit slow or speed up the success and growth.

The contribution of employee – cost of employee = Performance

The more the contribution, the more positive is the appraisal.

Note: While you follow this method, it is important to know the difference between employee’s current salary and the one he/she should be paid as per industry standards

#Performance Appraisal Example

When an employee delivers excellent performance.

You say something like this: “Everything seems great, You have delivered the tasks in time, the quality of work is good, your work has helped us achieve the desired results. Keep it up! I guess we are on the same page, I am happy with your work.”

But, here’s what’s not alright:

The feedback is brief and vague and doesn’t really talk about the actual work (should have rather mentioned specific events to appreciate)
Even if you are happy with everything, the employee might not be. So, always share and ask what has scope for improvement. (Troubles with peers, or company should be asked specifically)
None of us is perfect, every appraisal should offer some feedback to improve and hone skills even more, or learn a new one
This also seems like one trait or quality has clouded the mind of the appraiser and his ability to judge. Moreover, this kind of feedback can also make the employee overconfident
When you say everything is perfect and then not give the perfect appraisal, it can leave the employee highly demotivated and not only can her/his performance drop, she/he can also start looking for job opportunities.

To keep the employees loyal and invested the performance appraisal must offer learning, growth, or both, otherwise what’s the reason for them to stay?

360 Degree Performance Appraisal

This is the most recommended appraisal method and also the one that HROne HR software and performance management system runs on. In this appraisal method, everyone including the manager, peers, employees and seniors from other departments, clients, and the employee herself/himself (self appraisal) share their feedback on how well the employee performed task(s).

This system of giving and receiving feedback-

Keeps employees motivated
Helps them improve themselves
Treats everyone as equal
Makes recognition a habit, it remains continuous

Top
Management
Customers
Self
Subordinates

360
Degree
Appraisal

Immediate
Superior
Peers

Increase the awareness of their strengths and weaknesses, and how it impacts the company and other departments.
Due to competitiveness, employees may not give peer to peer feedback honestly. Moreover, they can also follow a rule of tit for tat or appreciate just their friends even if someone else is more deserving

Ideal For?

Startups and SMEs because there every employee’s performance is crucial, it can legit slow or speed up the success and growth.

Assessment Centre Appraisal Method

Introduced back in 1930 by German Army, this method is used now to test employees leadership skills, intelligence, interpersonal, planning and organising skills.

Assessment centre is actually a place where all the activities like social events, roleplay, assignments and business games are organised. The performance and behavior in the activities is noted and used to provide required training, and roles and responsibilities.

Pre
Assessment

set review objectives,
find reviewers and the competencies. Work on simulation exercises and select a rating method

During
Assessment

Explain the policies and objective, leverage competency exercise matrix, begin the discussions and exercises and jot down the behavior(weakness and strengths)

Post
Assessment

Take the feedback from all the reviewers and then evaluate the results, share the feedback and results, and give training to the employees if some more grooming is required before promotion

Gives you a clear picture of your employees’ personalities. There is no scope for manipulation here as you are not asking them questions you are making them walk the talk
If the assessors are untrained, the results are questionable, this involves high costs and the introverts tend to lose more

Ideal For?

Large enterprises, MNCs, manufacturing, consulting, educational and service based companies to identify future leaders.

Alternatively, you can use 9 box matrix and save time and cost. KNOW MORE

Note : Don’t choose immediate manager as the supervisor or assessor and train the ones you choose perfectly so that the evaluation is apt.

#Performance Appraisal Examples

When you have mixedmixed feedback for an employee’s performance.

You should say something like this: “I am happy with your performance overall. I would like you to evaluate my performance as well once I share my feedback with you. In the past four months, you’ve met our expectations, completed the 3 projects within timelines and the set budget. However, since this was your first appraisal as a manager, I would like to also reflect upon few of the qualities that you exhibited and see the improvement areas. In X project Y had expressed his ideas weren’t heard and he felt undervalued. They expressed the same in later meetings but didn’t find any solution to it. Some weren’t delegated the tasks in time and hence they had to complete it in a tight deadline. Why did this happen? What do you think can be done to keep him and other employees engaged?”

Here’s why this approach works:

This begins on the positive and humble tone and puts the employee in a positive and constructive light
There are no generalisations. This talks about the actual work on individual project and is not vague
Perfect example of how to neutralise the feedback and share feedback on the day to day continuous observations
Suggest a path for improvement while also asking the employee to add to it
The feedback is actionable and doesn’t leave the employee thinking as if it was unfair or biased
The employee is also given the opportunity to share their feedback for the organisation and the reviewer

Psychological Appraisals

Comparatively slow and complex in nature, this performance appraisal looks at and reviews future performance and not the past track record.

This modern method of appraisal is conducted by a psychologist with the help of in-depth interviews, discussions and psychological tests. The aim is to ascertain the cognitive abilities, intellect, emotional quotient, productivity, interpersonal skills and like.

Psychological appraisal is done by asking questions on specific situations.

One great way it helps in is helping the employee perform better in ituation that are critical to their job role. For instance- By understanding how the employee deals with a disgruntled customer, she/he can be helped in correcting their behavioral and emotional response while improving their persuasion skills.

Doesn’t just evaluate performance but also evaluates the potential and works for introverts equally well
Lack or absence of trained professionals/nervousness of the employee or the combination of two can give inaccurate results

Ideal For?

Large enterprises can consider using this appraisal method due to a myriad of reasons like team building, develop leadership pipeline and resolve conflicts.

Behaviorally Anchored Rating Scale (BARS)

In this method, the behavior of employee that impacts their job is rated. To conduct this appraisal method, you must break the job into various behaviors on the BARS. Each employee Is given rating against the mentioned appropriate behavior on the scale.

For instance, in a product based company, the appropriate behavior for the people in support team must provide the resolution in 24 hours to the customer(or whatever time you have set in your company). In this Method, the above mentioned appropriate behavior would be if the employee being evaluated is showing this behavior, he would be anchored to excellent or the high number on the rating scale and

Provides clear feedback, consistent evaluation and inspires positive and proactive results
This is highly time demanding from managers and still taking promotion or compensation by solely looking at this might get tough

Ideal For?

This appraisal method can work fine for all industries and company sizes to assess the performance of everyone from entry level people to c-suite ones!

9 box matrix- An effective future leader identification tool

9 Box Matrix is a tool that accesses the current and predicts the potential contribution level of every employee in an organisation. The vertical section in the grid shows growth potential and the horizontal side shows how well the employee is performing currently- poor, average, excellent! The point where both these intersect tells the current scenario and the areas where development is needed.

In short, 9 box grid matrix can evaluate the talent pool of your company on the basis of two factors-performance and potential.

Here’s

why HROne is your best bet

#Performance Appraisal Example

When an employee delivers unsatisfactory performance.

You might say: “You have performed poorly in this appraisal cycle. Always procrastinating, giving excuses. You have also not taken any initiatives. Your attitude has also not been found appropriate during meetings and collaboration. No matter what is going on in your personal life, remember to not bring them to work!”

See what’s grossly wrong about it:

Starts with a negative, instead it should begin with positives so that the employee gets more receptive to the negative feedback
The tone is accusatory and the feedback shared is not supported with facts or incidences
Avoid getting personal in the appraisal like in this one, when you ask about the reason for unsatisfactory erformance, as a human centric leader you might as well want to act empathetic and show them support
This feedback is very unspecific and derogatory because of the words like ‘You, your attitude’, “poorly”. Appraisals must talk about contributions and job tasks

Traditional Methods of Performance Appraisal

In total, there are 8 traditional methods of performance appraisal. Since, they don’t hold much relevance in today’s time, we discuss them briefly below.