The performance appraisal may not be the highlight of many people’s calendars, but it’s a valuable opportunity to pause and reflect. Done properly, a performance appraisal is an opportunity to celebrate wins, highlight areas for growth, and get everyone on the same page about what’s next. These days, it’s less of a formal, box-ticking exercise and more about creating an ongoing, meaningful conversation that benefits both employee and organization.
What is a performance appraisal?
A performance appraisal is the opportunity for an employee to sit down with their line manager to review their performance, and set future direction and goals.
Performance appraisals are part of organizational performance management, which includes regular reviews, one-on-ones and continuous feedback. They’re an essential part of employee experience, helping to keep the workforce engaged.
Performance appraisals can be used for lots of different purposes:
- Recognising and rewarding employees who have done well, or ‘gone the extra mile’
- Motivating people to carry on doing great work
- Pinpointing employees’ weaker areas that would benefit from extra skills training and development
- Identifying employees who are underperforming or struggling with their work
- Enabling early intervention in performance issues so employees can be supported and resourced before they really get out of their depth
- Creating a culture of feedback, continuous growth and improvement that delivers high performance and engages employees
Performance appraisals vs. performance reviews
The terms ‘performance review’ and ‘performance appraisal’ are often used interchangeably – and often wrongly.
Let’s get the two terms straight:
- A performance review is a formal evaluation of an employee’s job performance, covering what has happened in the past – usually since the last review
- A performance appraisal looks at the employee’s current situation and offers guidance for future growth and development
Here are some more differences between them:
Performance review |
Performance appraisal |
|
Purpose |
A formal assessment that evaluates an employee’s overall performance over a set period | Continuous feedback and discussion that focuses on specific tasks, goals and improvements |
Cadence |
Traditionally once a year (the dreaded ‘annual survey’) or perhaps twice a year | Quarterly, monthly, weekly, or continuously |
Focus |
Past employee performance and achievements | Future goals, opportunities for growth and development; ongoing challenges |
Approach |
Formal, ‘box-ticking’, and structured, based on judgment and evaluation | Collaborative, data-driven, empathetic, based on coaching |
Results |
Performance ratings or scores, often tied to promotions and pay raises | Insights that are actionable, plans for improvement and future success |
Stakeholders |
Human resources professionals, managers | Collaborative: managers and employees, and may include peer assessment |
Reporting |
Formal reports and records | May be formal or informal, but the focus is always on action for improvement |
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The role of performance appraisal in employee development
If you want your employees to develop (and of course you do), choose performance appraisals over performance reviews. Employee development and performance appraisal are intertwined.
Performance appraisal supports employee development by:
Setting goals
Goals are future-focused, as is development. A performance appraisal is the ideal time to set goals for your employee’s growth, in line with your organization’s objectives. Make sure the goals are SMART (Specific, Measurable, Achievable, Relevant, and Time-bound).
Exchanging feedback
These days, feedback works both ways, and in many cases, team members get a say in how often they want formal feedback. Managers help employees understand their strengths and experience gaps, and employees are free to speak about the strengths and experience gaps of their manager. Both develop from this two-way feedback.
Giving recognition and reward
Research shows that employee recognition, feedback and reward are the most effective factors that motivate people to do their best work, with 37% saying “Recognize me” as the top driver. Performance appraisals are the ideal time to celebrate and reward your employees for their hard work and achievements.
Identifying training needs
By comparing an employee’s performance with set standards and organizational expectations, a performance appraisal quickly flags up gaps in skills, knowledge and ability. You can then put the appropriate training in place to close those gaps and develop that employee.
Resolving problems
Not every performance appraisal will be issue-free. Issues, of performance or otherwise, may arise, and this is where the real benefit of forward-looking performance appraisals comes in. Managers can have open and honest conversations with their team members, identify the gaps in their experience, and together, and come up with an improvement plan that includes coaching and feedback.
Drawing up development plans
A performance appraisal is an ideal springboard for employees to create individual development plans that take them step by step through performance improvement and achievement of their career goals.
Advancing careers
Because of the forward-focusing nature of employee appraisals, it’s not out of turn for employees to discuss their ambitions for their future career trajectory. In fact, these ambitions can be included in personal development plans to be resourced and supported as the employee’s career advances.
Performance appraisals are, therefore, great roadmaps for employee development. By setting goals, identifying needs and experience gaps and overcoming obstacles, your employees can create personalised pathways to grow professionally.
The only caveat is to balance what employees want in terms of feedback and appraisal, and what your organization is able to usefully deliver.
When is it best to run performance appraisals?
The annual performance review is dead. Long live the performance appraisal.
Because it’s so flexible, you can choose the cadence of your performance appraisals to fit the style and resources of your organization.
In fact, most forward-thinking businesses, with distributed teams and digital communication, are now moving to a continuous evaluation process that’s tech led.
But if you do want to be more structured, and chime across the whole organization, you can set an appraisal framework to suit your working style.
Intervals can include:
- Predictable intervals such as quarterly, monthly or weekly to keep everyone on task, on budget, resourced, and goal-focused
- Major organizational milestones (e.g. the end of the fiscal year or completion of a big project) to take a snapshot of the achievements and challenges these produced
- Frequent appraisals to keep pace with agile or dynamic workflows, or rapid change; appraisals need to keep up to remain meaningful. Continuous appraisal really comes into its own in fast-moving industries
Types of performance appraisals
360-degree feedback
360-degree feedback (also known as a 360, a multi-source or multi rater feedback assessment) is a data-driven way for people to understand their personal strengths and weaknesses, using the constructive, anonymous feedback of others who work with them the most.
A 360 is primarily a development tool for individual leaders and employees, and therefore ideal for performance appraisals. It is not a performance management tool, nor has it any element of competition – otherwise it may prevent raters from giving supportive feedback in their peer assessment. It’s solely about development.
The combined insights from a 360’s collective feedback process are then used to augment an individual’s development plan.
Behaviorally Anchored Rating Scales (BARS)
These are a way to measure how well employees are doing their jobs by focusing on specific examples of behavior, such as actively listening to other team members, or contributing ideas during meetings.
BARS attaches specific actions to a rating scale, so “consistently supports team goals” may score a 5, while “rarely contributes to team discussions” may score a 2. Thus, BARS keeps feedback fair and consistent, and easier to evaluate.
Management by Objectives (MBO)
This is an outcome-oriented style of management and appraisal where everyone works towards pre-agreed, crystal-clear goals. Everyone is ‘on the same page’, knows what success looks like and has a plan to achieve it.
Frequent appraisals are a fundamental part of MBO, as continuous checking in on progress and tweaking projects is part of the evaluation process.
MBO’s focus on outcomes is particularly useful for distributed and hybrid teams, as it provides clear, shared goals that keep everyone aligned, regardless of where they work, and regular check-ins to encourage open communication and collaboration.
Traditional appraisals
Some organizations still rely on the annual survey, and it does gather a lot of comprehensive feedback. However, due to its infrequency, this traditional appraisal does not capture real time performance, and is far from a continuous conversation – a necessity in today’s business environment.
Best practices for conducting performance appraisals
Because performance appraisals deliver so much benefit to your organization, you’ll want yours to be successful. Follow our best practice guidance to get the very best out of them:
1. Align your performance appraisals with your strategic objectives
Your organization will have a specific mission, vision and priorities. Make sure you set goals and employee’s performance criteria within your appraisals that reflect what you are about.
2. Support your managers
After all, these are the people who will be running the appraisal process. They’ll need specific training to give them the skills to assess employee strengths and weaknesses, deliver (and receive) constructive feedback, and the tools and resources to do them efficiently.
3. Create a culture of feedback
Encourage a psychologically safe workplace where people feel they can communicate openly and give feedback continuously, even to the extent that they feel comfortable talking about future career aspirations. Provide employees with online tools that make giving feedback effortless.
4. Embrace technology
Once you bring technology into your performance management processes, you open a world of rich data that’s also scalable. You can use quantitative and qualitative performance metrics, self-assessments, peer reviews, 360s, BARS and MBOs to assess employees’ job performance.
5. Recognise top performing employees
Don’t hold back on recognising and rewarding employees who go above and beyond their performance expectations. These are your role models who demonstrate the behaviours that get rewarded, and can motivate your teams.
6. Keep scrutinizing your performance appraisal processes
The world of business changes fast, the needs of an organisation evolve, and your appraisal process must keep up. Make regular performance evaluations of your appraisal process and its systems. Is it still delivering what you need? This way, it will always be relevant, and continue driving your organization’s success.
How Qualtrics can help with performance appraisals
Qualtrics EmployeeXM 360 can enhance your performance appraisals by making them more structured, data-driven, and actionable. It’s customisable, with all the basic functions you need, and options to add on ones that are specific to your organization.
Managers, leaders, peers, and direct reports can easily and quickly fill in multi-rater assessments to generate a seamless, real-time flow of qualitative development feedback. From this information, your employees will know exactly where to focus to develop their own careers, and leaders can use these qualitative reports to make talent management decisions such as career and succession planning, promotions, and transfers.
You’ll be able to:
- Find out which of your leadership, management and role behaviors and objectives are being fulfilled
- Identify development opportunities for individual employees and leaders
- Highlight areas where you can drive career growth and improve business outcomes and impact
You’ll seamlessly create a culture of engagement, and ongoing development.
Free eBook: Your guide to talent development using 360 Feedback
References:
Bersin Josh. (2018). We wasted ten years talking about performance ratings. The seven things we’ve learned. Josh Bersin Institute: Retrieved March 18th from https://joshbersin.com/2018/11/we-wasted-ten-years-talking-about-performance-ratings-the-seven-things-weve-learned/#_ftn1
Capelli, P & Tavis, Anna (2016) Assessing Performance: The Performance Management Revolution. Harvard Business Review. Retrieved March 18th from https://hbr.org/2016/10/the-performance-management-revolution
Enderes, K., & Derunts, M. (2018). Seven Top Findings for Enabling Performance in the Flow of Work, Bersin, Deloitte Consulting LLP.
Kathi Enders (2018) Performance Management, Disrupted: Enabling Performance in the Flow of Work. Bersin, Deloitte Consulting LLP.
Pulakos, E. D., Hansen, M. R., Cargill, A. S., Moye, N. (2015). Performance Management can be fixed: An on the job experiential learning approach for complex behavior change. Industrial and Organizational Psychology, Vol 8(1), 51–76.
Rodgers, R., & Hunter, J. E. (1991). Impact of management by objectives on organizational productivity. Journal of Applied Psychology, Vol 76(2), 322–336.
Smith, M. and Bititci, U. (2017), “Interplay between performance measurement and management, employee engagement and performance”, International Journal of Operations & Production Management, Vol 37(9), 1207-1228.