What Is Performance Appraisal? (2023)

Neha is terminated after a year of service because of unsatisfactory performance. Never having received an evaluation, she’s unaware of the falling standards of her work and accuses the organization of discrimination on social media.

Such unpleasant incidents happen quite often in the professional world. How can an organization prevent them from happening? The answer is a robust performance appraisal process.

  1. What Is Performance Appraisal?

  2. Steps Of Performance Appraisal

  3. Performance Appraisal Methods

  4. Benefits Of Performance Appraisal

  5. Take It Up A Notch

What Is Performance Appraisal?

Performance appraisal is a periodic, systematic review of an employee’s overall performance and their contribution to an organization. It evaluates employee skills, development and growth according to organization standards and expectations.

Through an effective performance appraisal process, organizations provide employees with constructive feedback, recognize their achievements and validate termination decisions. Employers get a clear picture of their workforce and underperforming employees get the guidance they need to improve and excel at their job.

Steps Of Performance Appraisal

Organizations often customize the performance appraisal process according to their specific needs. Smaller organizations conduct performance appraisal on an informal basis, observing employees and providing feedback. Large-scale businesses opt for a more formal and structured approach. A typical performance appraisal process usually involves the following steps:

  1. Defining Performance Standards

The fundamental step of an employee appraisal process is defining performance standards against which an employee’s performance is measured. Managers set standards according to the skills and competencies required for a particular position. This also helps establish an organization’s long-term goals and objectives. The standards should be clear, to-the-point and easy to understand to avoid confusion.

(Video) HR Basics: Performance Appraisals

  1. Communicating Expectations

Once performance standards have been established, the next step is communicating these standards to employees. This gives them a clear picture of what’s expected of them and ensures the organization and its workforce are on the same page and working toward the same goals. However, communication is a two-way process. Managers must take into account any feedback or questions employees might have on the standards communicated to them and make necessary adjustments.

  1. Assessing Performance

Central to an employee appraisal process is assessment and review of an employee’s performance over a set period of time. Supervising managers use a combination of observation, statistics and written or oral reports to evaluate an employee, keeping aside personal feelings and bias. Check-ins and meetings are held with precise, targeted questions that offer an insight into employee pain points, motivations and goals.

  1. Comparing Performance With Standards

The next step in a performance appraisal process is comparing an employee’s performance with a set of predetermined standards. It tells managers where an employee stands, highlighting achievements as well as gaps between actual and expected performance. This step sets the base for the rest of the evaluation process.

  1. Appraisal Discussion

The fifth step in an employee appraisal process revolves around that often-dreaded word—results! Managers discuss the outcome of the entire appraisal process with their employees and offer actionable feedback. Constructive criticism helps employees identify their strengths and weaknesses, work on their problem areas and improve future performance. Positive feedback boosts confidence.

  1. Post-Appraisal Strategy

Performance appraisal doesn’t end with employee evaluation. For long-term growth, an organization must devise an appropriate strategy and take the necessary actions based on appraisal outcome. Such actions may include rewarding high-performing employees, training underperformers and identifying factors that hamper employee performance.

Performance appraisal is a continuous process involving thorough planning, monitoring and review. When executed effectively, it builds trust, promotes transparency and boosts employee morale.

(Video) 5 Key Success Factors of a Performance Appraisal | AIHR Learning Bite

Performance Appraisal Methods

We’ve learned what’s meant by performance appraisal and gone through the steps of performance appraisal. But what are some of the common performance appraisal methods organizations use? Let’s look at a few.

  1. Graphic Rating Scale Method

This is one of the most widely used performance appraisal techniques. The traits expected of each employee are listed on an appraisal form. Evaluators rate workers on a numbered scale for each characteristic. Analyzing the scores obtained by each employee helps organizations determine the future course of action.

  1. Ranking Method

One of the oldest forms of performance appraisal, this method involves ranking employees in order of performance from highest to lowest. While the ranking technique helps identify high-performers, it has its limitations. It’s completely subjective and presents a challenge when a large number of workers are being evaluated.

  1. Management By Objectives (MBO)

As formulated by Peter F. Drucker in his book The Practice of Management, management by objectives (MBO) is “a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual’s major area of responsibility in terms of results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members.” A modern performance appraisal process, MBO is more result-oriented and often doesn’t take interpersonal skills into account.

  1. Behaviorally Anchored Rating Scale (BARS)

This employee appraisal process is considered by many as the most effective and reliable method of performance appraisal because it evaluates both the qualitative and quantitative aspects of an employee. A Behaviorally Anchored Rating Scale (BARS) is a performance management scale that uses standard workplace behaviors according to a job role as a yardstick. An employee’s performance is evaluated against these established standards. Managers compare how an employee behaves in a particular situation with the expected behavior. This produces more accurate and impartial results, giving organizations a fair idea of their employees’ abilities.

  1. Cost Accounting Method

This method analyzes the monetary benefits an employee brings to an organization. The cost of retaining an employee is measured against their contribution. Various factors such as overhead cost, unit-wise average value of service and interpersonal relationships are considered.

(Video) Performance appraisal

When it comes to an effective performance appraisal process, there’s no one-size-fits-all approach. Organizations must opt for a method that best meets their own unique needs and helps them establish a proactive work environment.

Benefits Of Performance Appraisal

A well-planned and executed performance appraisal process can be extremely rewarding for both the organization and its employees. While organizations benefit from improved productivity and sustainable growth, employees get a push in the right direction to map out a successful career. Here are a few top benefits of a powerful employee appraisal process:

  1. Workforce Planning

A periodic performance appraisal process allows organizations to address workforce gaps that can hinder business. Based on employee skills and competencies, managers can effectively divide workload among employees, manage changing roles within an organization and identify future hiring requirements.

  1. Reduces Turnover

A proper performance appraisal process empowers employees with regular feedback. Recognition, a word of praise and encouragement can go a long way in boosting employee morale and improving performance. A survey by Clutch, a B2B ratings and reviews site, found 68% of employees who receive accurate and consistent feedback feel fulfilled in their jobs. Such employees are more likely to stay on at an organization for a long time.

  1. Identifies Training Needs

Through regular performance evaluations, managers get a clear picture of employee skill sets and shortcomings. This helps highlight training needs before they begin affecting productivity.

Performance appraisal allows both employees and managers to connect with one another. The result is a happier, more productive workforce and a thriving organization.

(Video) Performance Reviews | Performance Evaluations & Appraisal

Take It Up A Notch

In a fast-paced competitive environment, performance appraisal has become a necessary part of a manager’s work to boost employee performance, increase employee retention and sustain a healthy work environment. However, the many steps of performance appraisal can be demanding and challenging to execute in an effective manner.

Harappa’s First Time Manager Programis specifically designed for high-potential individuals recently inducted into supervisory roles. It seamlessly combines the best of a rich, blended and integrated online-first learning journey that delivers transformative behavior shifts.

The 15-week program hinges on six crucial outcomes that allow learners to raise the bar. These include building and inspiring cohesive teams to consistently deliver high performance, creating an environment of learning and trust for greater internal collaboration and identifying problems clearly to arrive at better solutions.

Built on Harappa’s signature 10 on 10 pedagogy, the program framework combines 10 key elements across three critical phases: Activation, Cultivation and Elevation of the cohort’s performance. Activation involves cohort engagement and skills benchmarking. Cultivation includes prompt-rich nudges, self-paced online courses, live masterclasses and habit drills. Elevation offers a dynamic dashboard, a behavior custodian, meaningful milestones and observed feedback.

The First Time Manager Program comprises a carefully curated selection of academically robust and application-oriented concepts from organizational behavior, personal leadership, cognitive sciences, creative thinking and communication practice. It also comes with a skill map of 15 must-have “Thrive Skills”. Some of these are investing in team members’ growth, analyzing problems from different perspectives and defining clear roles and expectations.

Managers are the lifeblood of an organization, driving both employee and organization performance. Help your managers take it up a notch by giving them the Harappa edge!

(Video) Performance Appraisal

Explore Harappa Diaries to learn more about topics such asPerformance Appraisal,Objectives Of Performance Appraisal,360-Degree Performance AppraisalandBehaviorally Anchored Rating Scalethat will help organizations tap into their employee’s potential.


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