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What is a performance appraisal?

6 min read
A performance appraisal - sometimes known as an annual review or performance review - is an opportunity for a manager and direct report to review the latter’s performance against pre-agreed expectations, and identify where improvements can be made. Here’s a guide to performance appraisals and some examples of how they’re run.

What happens in a performance appraisal?

It’ll depend on the organisation and the employee, but companies typically use performance appraisals to give employees feedback on their work in a formal, standardised way. They may also combine the appraisal with a pay or promotion review, or even to explain termination decisions.

How can performance feedback be given?

A manager might give performance feedback on one of 3 areas:

  • Specific metrics – this is easier for roles where there are clear numeric targets. For example, a call centre agent might be expected to successfully answer 300 customer questions a week, each in under 2 minutes; if they’re behind that, it’s easy to see.
  • Longer-term objectives – for roles with fewer specific targets, or where it’s hard to set them at the outset of a project, managers may need to comment on ongoing progress. For example, a client account manager might have short-term targets like response times; but that’ll be combined with longer-term ones like repeat work and client satisfaction.
  • Behavioural or learning objectives – you may want someone to focus on ‘soft skills’, like how they interact with others or how they adhere to the company’s values.

Often, the level of complexity of the role dictates the feedback you can give. A varied role with a looser job description may be more suited to behavioural or learning objectives.

Who runs a performance appraisal?

It’s usually someone’s line manager, as they know most about the employee’s role and their current work.

Why do you need performance appraisals?

The first thing to say is that it shouldn’t be a box-ticking exercise. While maintaining records and logging appraisal feedback is often mandated by HR, managers and employees should gain a lot more from the process. Here are some of the benefits for managers:

  • Give fair and candid feedback to employees on their current performance
  • Identify strengths and weaknesses of individual employees and whole teams
  • See if you have any allocation issues, where the wrong people are assigned to certain jobs
  • Help team members to develop as employees and people
  • Tie it into promotion or pay reviews
  • Explain individual and organisational goals
  • Use it as a goal setting opportunity for the coming months or years

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What makes a good performance appraisal system?

It’s down to your wider company culture and the atmosphere in your team. If employees are happy and feel comfortable giving feedback, the appraisal system works much better. If employees feel anxious or unhappy, they’re less likely to be open to feedback and talking about improving performance.

One of the most important factors is the line manager. Are they trained to do appraisals and ask the right questions? If they’re not, then the process can be counter-productive.

In the appraisal itself, there’s a few things that mark out a good one:

  • Purpose and structure – from the outset, an employee should understand what why the appraisal is happening, what will be covered and what are the long-term objectives
  • Time for achievements – you should use the appraisal to recognise an employee’s good work; it shouldn’t be entirely focused on areas to improve
  • The right questions – they should be open-ended so employees feel free to share; they shouldn’t be leading and encourage certain answers
  • Active listening and self-reflection – a manager should be open to feedback on their own performance or the company’s direction
  • Constructive feedback – managers should demonstrate ways to improve, not just highlight areas of poor performance
  • Evidence-led, not opinion-led – a manager’s personal feelings about an employee shouldn’t cloud their judgement; when commenting on their performance, they need to point to actual events
  • Actions – both the manager and employee should know what’s expected of them after the appraisal ends

How often are performance appraisals conducted?

In the past, performance appraisals were annual events, closely tied to pay or promotion reviews. That model is increasingly being replaced by more regular reviews, held every 3 or 6 months. And the more formal review is partnered by ‘performance conversations’, more regular meetings between managers and employees.

What are the issues with performance appraisals?

Some of the main criticisms of performance appraisals are:

  • It’s conducted too infrequently and allows issues to fester in between reviews
  • It’s backward-looking and doesn’t help people perform better in the future
  • It doesn’t take into account feedback from peers or direct reports, just managers
  • There’s a lot of admin around running and recording appraisals

There’s also a number of ways that feedback can be skewed against or in favour of employees:

  • Employees who are well-liked by their manager are more likely to get good feedback
  • Different managers’ personalities make it hard to compare teams – you can’t compare feedback from one team with a very tough manager, with one that is led by a more generous reviewer
  • Employees that question their managers or challenge how things are done are more likely to get bad feedback

You can take steps to counter some of these biases by using AI technology, monitoring employee scores across teams to identify outliers, or training your raters to spot their own unconscious biases and how to ask the right questions.

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