What is Performance Appraisal?
Appraisal is required in the growth of every sphere, hence also an employee need an appraisal system to keep a check on their work. This is a regular review system of an employee's job performance and their overall contribution to a company.
Performance appraisal also known as the annual review performance or evaluation of the employee, this evaluates an employee's skills, achievements, and growth - or lack in growth thereof.In this article, we will discuss performance appraisal in detail.
Performance Appraisal Overview
A performance appraisal is a review of an employee's job performance and his overall serving in a company. This appraisal is done annually or at different intervals. Organizations use performance appraisals, giving the employees a showcase of their work in a big-picture in the form of feedback, this justifies the increment in their pay scale and bonuses as well.
The appraisal report can be conducted at any given time but generally this tends to be annual, semi-annual, or even quarterly. Companies have a limited budget from which they award their increments and bonuses. Performance appraisals further help to determine how to allocate the funds. This appraisal system provides a way for the companies to determine which employees have contributed the maximum to the company’s growth.
Types of Performance Appraisal
Appropriate Appraisal methods for an organisation will largely depend on the variety of roles that is performed within the organisation, the time available to invest in the review process, and objectives for carrying out the reviews also matters for different organizations.
We also need to incorporate elements of methodology within the review system. Popular types of appraisal system are as follows:
Straight Ranking Appraisals
Grading
Management by Objective
Trait and Behavior Based Appraisals
Behaviorally Anchored Rating Scale
360 Degree Appraisals
360 Degree Appraisal
Organisations who focus on employee development use this 360-degree tool to analyse the performance and potentiality of the staff and this enables the employees to path their career based on the feedback received. Organisations usually perform this 360-degree feedback on an employee before a major decision about the professional's career.
The results from the 360-degree feedback are usually used by the person receiving the feedback to plan for the training and development. Results are also used by some organizations while making administrative decisions, such as pay hike or promotion strategies.
Employee Appraisal
An employee performance appraisal is a process that combines both the written and oral element. Here management evaluates and provides feedback on employee’s job performance.
These include steps to improve or redirect the activities as per needed. Documenting performance provides a basis to increase their pay and promotions. Appraisals are important to the staff members to improve their performance and provide an avenue by which they can be rewarded or recognized for a job well done.
The goals can be now easily realized if employee performance appraisal is processed. It fetches as the ultimate purpose for the betterment of all the parties. To create and also to maintain the framework, employers need to inform the workers about their value, appreciate them for their best works, also establish a track record for fair and honest feedback, that is to be consistent in their treatment of all the employees, and workers for their own check about their participation into the company's processes and operations.
Annual Performance Review
Successful annual performance appraisals have a thing in common that they are carefully planned and prepared for the employees as well as for the organization. Managers need to take time to carefully prepare the process of performance appraisal by gathering the information they need to effectively rate their employees' according to their performance. They can checklist the following for the preparation of appraisal report:
Conduct the performance appraisal meeting.
Set a comfortable environment for the meeting.
Review and discuss the performance ratings.
Discuss the performance on goals.
Review and discuss all over parameters.
Set goals for the coming year.
Set development plans with the employees.
Engage the employees in the discussion on their career aspirations.
Finally complete the administrative paperwork.
Hence, we see how important the appraisal system is for an organization. This helps in the overall conduct of an employees’ performance in an organisation.
FAQs on Performance Appraisal Strategies
1. What is meant by performance appraisal in a business context?
Performance appraisal is a systematic process where an employee's job performance and productivity are evaluated against a set of pre-defined standards. Its main goal is to identify an employee's strengths and weaknesses to help them improve and grow in their role. This is a key function of Human Resource Management (HRM).
2. What is the importance of having performance appraisal strategies in a company?
Performance appraisal is crucial for several reasons:
- Feedback and Development: It provides employees with constructive feedback to identify areas for improvement and plan for future training.
- Motivation: A fair appraisal system can motivate employees by recognizing and rewarding good performance.
- Informed Decisions: It helps management make objective decisions about promotions, salary hikes, and transfers.
- Validating Selection: It helps to verify if the right people were hired for the job by comparing their performance to expectations.
3. What are the main types or methods of performance appraisal?
Performance appraisal methods are broadly divided into two main categories:
- Traditional Methods: These include simpler techniques like Rating Scales (where employees are rated on various traits), Checklists, and Essay Appraisals (a written description of performance).
- Modern Methods: These are more comprehensive and future-focused. Examples include Management by Objectives (MBO) and 360-Degree Feedback, which involves collecting feedback from multiple sources.
4. How does the Management by Objectives (MBO) strategy actually work?
Management by Objectives (MBO) is a collaborative approach. Instead of a manager simply assigning tasks, the manager and employee work together to set clear, measurable goals for a specific period. The employee's performance is then evaluated based on how successfully they achieved these mutually agreed-upon objectives. This approach increases employee involvement and makes the appraisal process feel more transparent and fair.
5. What is the key difference between a traditional appraisal and a 360-degree feedback system?
The key difference is the source of the feedback. In a traditional appraisal, feedback usually comes from only one source: the employee's direct manager (a top-down approach). In contrast, a 360-degree feedback system collects feedback from multiple sources, including the manager, peers, subordinates, and sometimes even customers. This provides a more holistic and well-rounded view of an employee's overall performance and behaviour.
6. What are some common problems or biases that can make a performance appraisal ineffective?
Even the best strategies can fail if not implemented correctly. Common problems include:
- The Halo Effect: This occurs when a manager lets one positive trait of an employee overshadow all other aspects of their performance.
- Personal Bias: When the appraiser's personal feelings (positive or negative) about the employee unfairly influence the evaluation.
- Central Tendency: This is the error of rating all employees as 'average' to avoid making difficult decisions or having tough conversations.
- Unclear Standards: If performance goals are not clearly defined, the appraisal can become subjective and unfair.
