Performance appraisal: Definition, Objectives, Process, Methods, Advantages & Disadvantages

Performance appraisal: Definition

Performance appraisal is defined as a process that systematically measures an employees personality and performance usually by managers or immediate supervisors against the predefined attributes like skillset, knowledge about the role, technical know-how, attitude, punctuality and so on.

Performance appraisal has many names across organizations, some call it performance evaluation, some prefer performance review, merit rating, annual reviews, etc.

This process is carried out to identify the inherent qualities of an employee and the abilities and level of competency of an employee for their future growth and development and that of the organization they are associated with. It aims at ascertaining the value of an employee and his/her offering to the organization. 

Performance appraisal helps managers and supervisors place the right employee to do the right job, depending on the skill set they possess. Without an ounce of doubt, every organization needs a robust performance appraisal system. 

There are various methods that are used by managers and supervisors to evaluate employees based on objective and subjective factors, however, it can get a bit tricky, but to effectively evaluate an employee both factors are essential. 

Objectives of performance appraisal

Following are the objectives to conduct performance appraisal year after year: 

  • This is an essential first step towards promoting an employee, based on the subjective and objective factors- performance and competency. 
  • To identify the training and development needs of an employee.
  • To provide confirmation to those employees who were recently hired and are on their probation period. 
  • To take a concrete decision what should be the percentage of hike in the salary of an employee based on the work done by them. 
  • To encourage a proper feedback system between the manager and employees. 
  • To help employees understand where they stand in the current year and what is the scope of improvement.

Performance appraisal process

Step 1: In most organizations, the performance appraisal process means evaluating an employee every 6 months or one year for the period an employee has continually worked with the organization. In modern times, the Human Resources department sends out an employee survey for them to fill out to collect data related to their engagement and satisfaction levels. 

Step 2: The employee’s immediate manager or supervisor will then evaluate the quality of the employee’s performance based on the work done in the previous year and then meet face-to-face to discuss the facts and figures. 

Step 3: The feedback received from the survey can be kept anonymous. This feedback can be analyzed real-time by using QuestionPro’s Workforce platform, that measures, analyzes and activates data to get actionable insights. 

For probationary employees, the probation period usually lasts between three to six months. Their evaluation is based on whether they have come at pace with the work and culture of the organization and if they are ready to take up more responsibilities. 

Performance appraisal methods

There are 5 performance appraisal methods. Using one of these methods for performance appraisal can help organizations gain partial information. However, combining one or more methods will lead to extracting better information and accurate data. It is one thing to collect data and another to do something actionable with it. 

  1. Self-evaluation: This is an important way to get insights from the employees, evaluate themselves. You need to first get information about how an employee evaluates himself/herself, after conducting this evaluation the management has an opportunity to fairly appraise an employee based on their thoughts. 
  2. 360-degree appraisal system: 360-degree feedback, an employee is evaluated by his/her supervisor/manager, peers, colleagues, subordinates and even management. Inputs from different sources are considered before talking to the employee face-to-face. In this process, each employee is rated according to the job done based on the job descriptions assigned to them. 
  3. Graphics rating scale: This is one of the most commonly used methods by managers and supervisors. Numeric or text values corresponding to values from excellent to poor can be used on this scale. Members of the same team who have similar job descriptions can be parallelly evaluated using this method. This scale should ideally be the same for each employee. 
  4. Checklists: The evaluator is given a checklist of several behaviors, traits, attributes or job description of the employee who needs to be evaluated. The checklist can contain sentences or simply attributes and the evaluator thus marks the employee based on what describes the job performance of the employee. If the evaluator believes that the employee has certain traits it is marked positive otherwise it is left blank. 
  5. Essay method: This is also known as “free form method”. As the name suggests, it is a descriptive method which elaborates performance criteria. A major drawback of this method is to keep biases away. 

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Advantages of performance appraisal

  1. A systematic performance appraisal method helps the managers/supervisors to correctly identify the performance of employees and also highlight the areas they need improvement in. 
  2. It helps the management place the right employee for the right kind of job. This is a win-win situation for both the employee and the organization. 
  3. Potential employees who have done some exceptional work are often offered a promotion on the basis of the result of performance evaluation. 
  4. This process is also effective in determining the effectiveness of the training programs conducted by the organization for the employees. It can show managers how much an employee has improved after the training. This will give actionable insights to the managers on how to improve the programs. 
  5. It creates a competitive environment amongst the employees in a good way. Employees try to improve their performance and get better scores than their colleagues. 
  6. Managers use this as a platform to get first-hand feedback from employees to talk about their grievances and how to handle them. 
  7. Keeping year on year record of appraisals gives managers a very good idea what is the pattern of the growth rate of employees and which ones have a declining rate and what actions need to be taken to improve it. 

Disadvantages of performance appraisal

  1. If the attributes being used in this method are not correctly defined the data collected won’t be useful. 
  2. Sometimes biases can be an issue in this system. 
  3. Some objective factors can be vague and difficult to pin down. There are no known scientific methods to measure that. 
  4. Managers sometimes are not qualified enough to assess the abilities of the employees, thus be detrimental to the growth of an employee.