“How am I doing?” For most employees, this is the perennial question that affects just about everything — from morale to performance to day-to-day attitude. We’ve already written about how important it is to give performance feedback on an ongoing basis. But that doesn’t make the annual or biannual performance review less important to conduct correctly.
A formal performance appraisal is one of the most concrete ways for employees to get a sense of where they are in the eyes of management and their colleagues, and how they might improve. A good employee performance review consists of both oral and written feedback that provides clear ways for employees to improve performance or adjust behavior, as well as recognizes the employee for a job well done.
But why are performance appraisals so widely hated and feared by management and employees alike? The bad reputation stems from the poor use of performance evaluations in some organization, ie. only occurring when management is building a case for employee termination. This negative approach to performance management is no way to manage and motivate employees. An employee performance review should instead be a fruitful exercise for both employee and manager, stimulating personal growth and development for both parties.
Related: What is Performance Management?
Goals of Performance Appraisal
To ensure that your performance appraisal is hitting its mark, keep in mind the following goals for an effective review process:
To improve productivity across an organization
Feedback — both positive and negative — can make your employees more productive. A recent Gallup poll found that teams with managers who received strengths feedback showed 12.5% greater productivity than teams with managers who received no feedback. And according to a survey by Jack Zenger and Joseph Folkman of the Harvard Business Review, 92% of respondents agreed with the assertion, “Negative (redirecting) feedback, if delivered appropriately, is effective at improving performance.”
*Side note: We covered some tips for giving positive feedback in this blog. For delivering negative feedback, we recommend keeping it specific, private, timely, and focused on the behavior or action, and never the person. Managers should make sure to stay calm, reaffirm their faith in their employee’s abilities, and establish a time for a follow-up.
To make informed decisions
Documenting job performance in a consistent fashion gives managers the necessary insight to make judicious decisions on salary increases, promotions, job changes, and termination. By providing transparent justifications to both employees and human resources, managers can clearly demonstrate the reasoning behind their recommendations and make all stakeholders at ease with the final decision.
To identify goals and responsibilities
Roles and responsibilities can change — intentionally or otherwise — throughout an employee lifecycle. Sometimes, an organization realizes that the role they listed on the job description isn’t necessarily the role best suited to the employee, or that the role needs to adapt to a changing focus in the organization.
To measure performance against these goals
The most obvious reason to review employee performance is to measure individual contributions to a team and the organization as a whole. By sitting down with an employee on a regular basis and checking in on their progress towards reaching pre-determined goals, you cultivate personal accountability and instill confidence that their contributions are being recognized.
To provide a concrete plan for improvement
By identifying specific areas for an employee to focus on, and mapping out a concrete plan to guide their next steps, you can ensure that the employee feels supported in their efforts. Be sure to determine several actionable that an employee can execute in the coming weeks and months, and arrange for regular check-ins to monitor progress, give feedback, and clear roadblocks along the way.
Types of Performance Reviews
There are three main types of appraisals that you can incorporate into your organization’s performance evaluation strategy:
Management by Objectives
One of the most common performance appraisal methods used today is Management by Objectives (MBO). In MBO, a manager has a one-on-one meeting with an employee in which they discuss achievements during the previous performance period (usually 6 months or a year).
The performance appraisal process should be guided by a list of previously agreed upon objectives that align with the organizational goals, and close with goal setting for the subsequent period. Both managers and employees should ensure that all goals adhere to the SMART method, ie. specific, measurable, achievable, realistic, and time sensitive.
At the end of the review period, managers evaluate the employees based on the results. Goal achievement is rewarded with a promotion and/or salary hike, while failure can be addressed with training and closer supervision. Due to its focus on measurable output, the MBO model is especially effective for managing mid-level and upper management.
360-Degree Employee Feedback
One of the appraisal methods that has risen in popularity over the last decade is that of 360-degree feedback. By using employee feedback from managers, peers, customers, and reports — as well as upward appraisal from employee to manager — this method helps eliminate the bias that can plague traditional annual reviews and offer a comprehensive understanding of an employee’s performance.
Because this type of employee appraisal gives employees clear insight into how they fit into the organization and their impact on others, it’s an effective impetus for coaching, counseling, and other forms of career development. In addition, it’s especially useful for identifying natural leaders who work well with others early on.
Organizations who opt for this approach should be proactive in their planning, as one of the most common pitfalls is poor organization. Leadership should clearly communicate the kinds of feedback sought from participants, and consider a software solution that facilitates collecting feedback from multiple sources in an organized fashion.
While not a stand-alone method, the self-appraisal can complement the above appraisal models by encouraging employees to be accountable for their own performance and better understand their strengths and weaknesses. By assessing their own achievements or failures ahead of their in-person performance review, employees are better prepared to discuss these issues with their manager.
Many employees will not have had to conduct self appraisal in the past, and might feel uncomfortable doing one the first time. To help guide them through this exercise, managers should ask employees to fill in a performance appraisal form ahead of their scheduled performance review.
Performance Appraisal Solutions
According to Deloitte, only 8% of companies believe their performance management process is highly effective in driving business value. Implementing the right performance appraisal systems can help make the difference for your organization, from organization to communication. Check out some of our top-rated performance management software options to get started.