Understanding performance appraisals
Performance appraisals are part of a suite of procedures that collectively form part of a performance management system. Instead of annual reviews that focus on the past and not on the future, these systems review and monitor performance consistently and systematically over the course of the whole year.
Performance appraisals are conducted by either the employee, manager, or human resources representative. But the appraisal itself tends to be a one-on-one meeting where the following topics are discussed:
- The reinforcement of acceptable standards of performance, behavior, and outcomes in line with business needs.
- Reward for outstanding performance in the form of a promotion, pay rise, or simply some positive feedback. Similarly, areas where performance is sub-par should be addressed and a plan devised to improve it.
- The scheduling of future meetings to follow up on performance or ensure the development program is progressing as intended.
Organizations can make the performance appraisal as formal or casual as they desire. But generally speaking, it is a good idea to conduct the meeting in a quiet environment where both parties can be understood without distraction.
Performance appraisal methods
The performance appraisal method chosen will depend on the role of the employee who is being appraised, the desired level of formality, and the extent to which work output or behavior is observable in isolation.
Irrespective of the method, however, it’s important to avoid a wholly top-down approach where a leader evaluates the performance of a subordinate with little or no input from the subject themselves. It is also vital to internalize employee performance results and avoid a situation where appraisals are characterised by nothing more than company buzzwords or jargon.
Management by objectives involves managers and employees working together to identify, plan, organize, and communicate key focus objectives over a set period. Progress is reviewed either quarterly, half-yearly, or annually.
The overriding aim of MBO is to match organizational goals with an employee’s goals that are set using the SMART method. After each review period and depending on the results, the employee is either rewarded with a salary increase, transferred to another department, or required to undertake additional training.
MBO places more emphasis on tangible goals that can be measured, with relatively little room in the process for intangible aspects such as motivation, experience, and buy-in. This makes it better suited to evaluating the output of senior staff such as directors and executives.
360-degree feedback was introduced into the business world at the Esso Research and Engineering Group (now Exxon) in the 1950s.
As the name suggests, 360-degree feedback is a comprehensive performance appraisal method. It is a multidimensional approach requiring feedback to be sought from an employee’s manager, direct report, customers, and colleagues. The employee is even encouraged to provide feedback on their own performance!
Although 360-degree feedback started in multinational corporations, its popularity has trickled down to smaller companies. In very general terms, there are five key components to this performance appraisal method:
- Self-appraisal – as we noted, the employee can analyze their past performance to determine any strengths or weaknesses. To avoid personal biases skewing results, however, there must be structure and formality to this process.
- Managerial review – a traditional and necessary part of any appraisal.
- Peer review – as many organizations shift away from hierarchical leadership, an employee’s colleagues are increasingly important sources of feedback. They can clarify whether the individual works well in a team, uses initiative when required, or embodies organizational values.
- Subordinate appraising manager (SAM) – also known as upward appraisal, the SAM process involves managers being appraised by their employees. This is a controversial practice for some, but for senior managers in particular, it is a vital source of performance feedback.
- Customer/client reviews – this may comprise internal customers such as product users or external customers such as suppliers. This component will not be relevant for every company that uses 360-degree feedback.
Behaviourally anchored rating scale (BARS)
The BARS is a system that rates employees according to their performance in specific behavioral patterns. Each pattern is anchored to a numerical rating which serves as a benchmark for acceptable performance. This benchmark, of course, differs according to the employee’s role and level of prior experience.
To determine the benchmark, the behavioral patterns that constitute typical workplace behavior must first be clarified. From this list, the organization must work to edit them into a consistent, standardized format and remove redundancies.
Most organizations use a five, seven, or nine-point scale to measure behavior criteria. For a software engineer who is evaluated against a five-point scale for knowledge of Python, the following levels are representative examples:
- Level 2 – Possesses reasonable working knowledge of Python and is able to complete projects under supervision.
- Level 4 – Can complete projects in Python and related disciplines without supervision.
Performance appraisal example
Let’s now take a brief look at an example of a marketing employee and their superior who are both required to submit an assessment of the employee’s performance. For the sake of the example, the marketer’s name is John Smith.
The performance rating scale to be used in this example is as follows:
- 1 (Unacceptable) – fails to meet standards.
- 2 (Needs improvement) – routinely fails to meet standards.
- 3 (Satisfactory) – meets standards some of the time.
- 4 (Outstanding) – exceeds standards regularly.
- 5 (Excellent) – exceeds standards consistently and reliably.
Now, we’ll conduct a mock performance appraisal across a key objective to increase qualified marketing leads. Note that more exhaustive appraisals will also include a section on professional development and general employee performance factors.
To increase the number of qualified marketing leads by 10% over the previous year.
- Create buyer persona profiles with the team by March 1.
- Create and execute 5 to 10 top-of-the-funnel (TOFU) marketing campaigns to generate brand awareness and acquire qualified prospects by December 31.
- Monitor marketing-qualified leads (MQLs) weekly and report on results quarterly to adjust each campaign where required.
- Five buyer personal profiles were completed in the last week of February.
- Ten marketing campaigns were launched via online advertising, trade shows, and a monthly podcast and webinar.
- MQLs were tracked and reported weekly, increasing by 12% over previous EOY results.
Employee rating: 4
The key objective was not only met but exceeded and all action items were completed ahead of time. Even with one team member away because of illness for most of the fourth quarter, we worked well collectively and put in the hours to make it work.
Manager rating: 5
John created an action plan that was not only effective but adaptable to our business needs. He also managed to manage his team’s workflow with a minimum of fuss after losing an important member in the fourth quarter. John’s efforts have not gone unnoticed and we look forward to building on this success next year.
- A performance appraisal is a periodic review of an employee’s job performance and by extension, their contribution to the organization. Where traditional annual reviews focus on the past and not on the future, performance appraisals are systematically and consistently conducted over the course of the year.
- The performance appraisal method chosen will depend on the role of the employee who is being appraised, the desired level of formality, and the extent to which work output or behavior is observable in isolation.
- Three performance appraisal methods include management by objectives (MBO), 360-degree feedback, and the behaviorally anchored rating scale (BARS). Most will include a section on professional development, key organizational objectives, and general performance factors