What You Need to Know About Performance Appraisals

Performance Appraisals

PURPOSE

Performance appraisals are periodic evaluations of an employee's job performance against a set of expectations and goals. The results of this process are used to make informed decisions for both the individual employee and the organization in areas such as compensation, promotion, employee development, staffing and succession planning, among others.

LEGAL REQUIREMENT

While private-sector employers are not required to have performance appraisal systems, federal agencies are required to have such systems under 5 CFR 430.204. States may have similar laws for public employers.

POLICY

Whether formal or informal, a performance review policy can be used to set employee expectations and maintain transparency about the process.

GOAL SETTING

Regardless of what type of appraisal system is used, a common first step in the process is to set goals for each employee. These goals should relate to and support the departmental and divisional goals that have been formed to further the organizational strategy.

RATING SCALE

While rating scales vary from alphabetic and numeric to those with descriptive phrases (e.g., "Meets Expectations"), they are all used to indicate a qualitative assessment of an employee's performance and to measure how individual employees measure up against others.

APPRAISAL METHODS

There are several methods commonly used to assess employee performance and strategically internalize the results. These include management by objectives, forced distribution, ranking, graphic rating scales and behaviorally anchored rating scales. Employers may choose one method for all employees or may vary the method by job level, such as line workers versus managers or executives.

SELF-ASSESSMENT

Many appraisal systems include an opportunity for employees to provide a self-assessment of their own performance. This can promote an honest performance-feedback discussion and help ensure that an employee's contributions are not overlooked by a busy manager.

TRAINING

All employees should be trained on the format and process used by the employer to appraise performance to ensure understanding and fairness and to promote transparency.

TIMING

Annual performance appraisals are traditionally the most common, with many employers also conducting midyear appraisals to reduce any rating surprises for employees at year-end. Recent trends tend to favor continuous feedback and coaching, with less structure to the actual appraisal document.

CALIBRATION

Performance calibration is a process in which a group of managers come together to discuss the completed performance appraisals of team members with the goal of ensuring managers are using similar standards and criteria to evaluate and rate employee performance.

PERFORMANCE REVIEW MEETING

Once the appraisals are calibrated and ratings are set, the manager meets with each of his or her direct reports to discuss the appraisal and final rating, if applicable. Being prepared for the meeting and starting on time shows respect for the process and the employee.

COMMON ISSUES

RATER ERROR

This refers to raters making errors in judgement due to their own perceptions and biases. Some common errors include the halo effect (the employee can do no wrong), the horn effect (the employee can only do wrong), recency bias (the rater only focuses on recent good or bad performance) and others that are described in our toolkit.

APPRAISALS INCONSISTENT WITH PERFORMANCE

Some managers may wish to avoid confrontation by rating lower-performing or problem employees at an average or better rate. This can work against an employer when attempting to discipline or terminate such an employee because the employee has a paper trail of acceptable performance.

LACK OF FOLLOW-THROUGH

When performance is rated below expectations, managers need to take and follow through with corrective actions such as designing performance improvement plans; otherwise, the appraisal system fails as a development tool, which can negatively affect morale.

CONFUSING FEEDBACK WITH A PERFORMANCE APPRAISAL

They are related but different, and it's important to understand the difference. How to use and organize increasing levels of feedback also needs to be addressed.

HIDDEN BIAS

Some typical performance appraisal forms may allow implicit biases to creep in, especially between men and women. Managers need to understand how to make their assessments fairer and more consistent.

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