Employee Performance Appraisal – Importance and Guidelines

They say, Success comes from Failure, but what if you don’t know why someone has failed? Or what if you’re not even sure when you’ve succeeded?

Employee performance reviews help managers understand a person and correlate to their performance. That’s why employee appraisals are so crucial. Not only are they a fantastic opportunity to motivate employees by recognising their progress, but it’s also a chance to highlight any areas of improvement and outline an action plan to achieve future goals.

Learning and improving is the only way to get ahead.  This is possible if we understand the reasons why someone performs the way they do and challenge them in a productive way. The goal of HR should be to invest in their employee’s professional growth and development that paves the way for better company performance.

What is an Employee Appraisal?

An Employee Appraisal can also be called an annual review, performance review, performance evaluation or personal development plan. They all serve the same purpose. An appraisal or review is a process that involves a manager or a consultant observing and evaluating employee work behaviour and achievements.

These are usually benchmarked against a set of predetermined standards and KPI’s for the company, but should also be measured against the employee’s individual goals determined in previous appraisals.

Once the manager assesses the achievements of the employee as well as other areas where goals or standards were missed, both the manager and employee can examine the reasons for these. They can then come up with a specific accountable plan to improve performance and meet current or new goals.

Why is an Employee Appraisal so Important?

Performance appraisals are important for businesses, managers, and employees. First and foremost, they help all three stay on the same page and ensure basic standards are being met. Appraisals also facilitate significant improvements in productivity. Here’s why you should consider employee appraisals more seriously if you’re not already:

• Creates a healthy manager-employee dialogue that ensures honest discussion so problems can be identified and resolved quickly.
• Helps to ensure goals and productivity are being met so that the most basic demands of the business can be achieved.
• Aligns employee interests and performance with business goals so that everyone works together and business targets can be met.
• Provides development and career progression opportunities that help keep employees happy and improves retention.  This enables business goals to be met more affordably by fostering the necessary talent from within.
• Organises moving parts by tying business goals with learning, training, career progression, succession and so on.
• Ultimately improves business performance.

What is an Ideal Performance Appraisal Structure?

When it comes to appraisal time, there is a rough guideline you should follow to make sure you don’t miss anything and the review goes smoothly. Take a look at this quick step-by-step guide to help you, but remember that you may need to adapt your performance appraisal process to suit your own business needs.

1: General Discussion

Managers should start with a general discussion to help ease any tension and start with an open and honest dialogue. While it’s important that the appraisal is detailed and thorough, it’s also important to build a rapport with the employees so that feedback can be accepted and properly understood on both sides.

2: Review Performance at Regular Intervals

How often you have appraisals is down to your business, but be aware that the standard yearly review is no longer seen as the most effective process. Instead, look at giving more regular feedback appraisals throughout the course of the year.

More regular reviews can make the meetings themselves shorter while being able to identify problems quickly and make the necessary adjustments to ensure employees are staying on target. It also works both ways, giving employees more opportunities to speak directly with their manager and air any concerns that they may have. This is vital for a strong manager-employee dynamic and can significantly improve well-being at work for better retention.

Whatever the period you choose, take a look at the employee’s behaviour and work over that period to identify any achievements as well as any areas where they may have missed goals or did something of concern. A good performance management software can be invaluable at this stage as it can immediately highlight an employees progress in line with the metrics and goals that matter to your business.

3: Discuss Positives First, Then Concerns or Issues

Avoid the traditional ‘sandwich’ method of trying to buffer the impact of bad news by starting and finishing with positives. Research has shown that employees see right through this trick and will still leave focusing on the negatives anyway. Instead, be frank and open about the negatives. A good appraisal process should foster a positive manager-employee relationship and detail thoroughly all the actions to be taken to meet goals in the future. Negative feedback should just be seen as an opportunity to improve.

4: Consider Areas of Development and Improvement

As soon as any concerns or issues have been mentioned, follow immediately by discussing how these could be improved or rectified in the future. By understanding why mistakes were made or targets missed, you may find some immediate solutions.

For example, employees may be overworked or have misunderstood their goals. Alternatively, it may be that there needs to be some significant changes made for problems to be resolved. Or you may realise that an employee doesn’t have the necessary skills or knowledge to complete targets and will need to take additional training and courses.

If you find that there aren’t many areas of concern then this is also a fantastic time to review what the employee is doing really well and whether this can also be somehow built upon. Is there an opportunity for career progression or Are there any training or courses the employee has identified that they would like to take on?

You may find that they want to branch out into a different expertise altogether. If you can create an open conversation about this and commit to helping employees explore new areas, you could prevent them from leaving for a different job with another company.

5: Agree On Measurable Objectives

Based on your findings, set some short term objectives for the next appraisal period and make sure they’re in line with the employees long term targets as well as overall business goals. This is the time to identify and plan out the small actions that need to be taken to achieve bigger goals and break down everything into achievable steps. Having measurable steps like this also helps managers keep track of ongoing performance so that they can identify problems more quickly and step in to help if necessary.

6: Allocate Resources

Don’t forget to follow through on any of your own responsibilities  to help the employee meet their goals. This could be ensuring that they have access to training, courses and other learning activities. Some objectives may also be better met with the help of a mentor.  

Performance Appraisal Guidelines

Here are some performance appraisal best practices. You may want to adapt them to suit your own business but they are by no means a complete list. These guidelines may help you identify what other areas you want to address as well to make review processes as detailed and accurate as possible.

• Define employees current responsibilities
• Look at the employee’s current performance and ability to accomplish their responsibilities
• Look at how they have developed since the last meeting
• Examine and ask if they have achieved their goals
• Discuss any examples where they have performed exceptionally
• Ask if the employee understands how they fit into your organisation
• Discuss any improvements that both manager and employee can identify
• Ask the employee what areas they are most keen to develop in

Ready to start giving better employee feedback and set the ball rolling with an Employee Performance Appraisal Structure and Plan? Do it with the help of superior performance tracking and intuitive feedback forms that give managers handy prompts, keeps feedback compliant, enables you to complete appraisals from any location at any time and much more. Book your demo of SuccessFactors today.