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Performance Appraisal

The most effective organizations work to establish a culture of development, where people at all levels are encouraged to help others develop their skills. Providing positive and constructive feedback is a critical component.

It is the manager’s role and responsibility to give feedback to others. They are responsible for managing employees’ job performance, holding them accountable for completing their assigned tasks, and coaching or counseling them to overcome barriers or improve performance.  Feedback should be given with the intention of praising positive behavior and performance, ensuring that the employee understands the expectations, or identifying areas of development.

Leaders must be willing to provide both praise and constructive feedback to others, regardless of reporting lines.  All employees should be willing and able to do the same. If a peer, another employee, or even a senior leader is engaging in behaviors which are detrimental to patrons/customers, other employees, or the organization, we need to let them know the impact of their behavior.

Performance Appraisal Explained

Performance appraisal is a process and a means of setting goals, measuring and enhancing individual and organizational performance. It also fosters professional and career development on behalf of ordinary staff members.

An effective performance appraisal process has the following characteristics:

• A connection to organizational and departmental mission and goals.
• Clearly defined expectations of performance
• A focus on performance as well as professional development
• Ongoing process versus an annual event
• Consistent and timely usage and completion
• A focus more on future direction than past performance
• Involves staff member in the process

Performance Appraisal Benefits of Giving Positive and Constructive Feedback

• Clarify expectations; assure the individual is on the right track
• Assess and discuss the relevance of goals and their measures
• Improve communication between individuals, particularly supervisor and employee
• Opportunity to learn about ourselves and how we interact with others
• Opportunity to develop ourselves and be the best we can be
• Assist in making “early corrections”
• No surprises later

The Performance Appraisal Process is a comprehensive approach to staff supervision/coaching. Performance appraisal process is a collective reflection leading toward improved delivery of performance and services through increased professional competency. This process applies to both teams (a group of staff members assigned to work on and complete a project) as well as the individual staff member.  The same guidelines for assigning, ensuring understanding, and providing follow-up of projects should be used with both the team and the individual staff member.

Performance Appraisal Process: The Steps

The performance appraisal process also serves as a tool to assist staff members struggling in roles or alignment with goals.  The process also meets all legal requirements. Each of the following steps is vital to the overall success of both you as the supervisor/coach and your staff member(s)/team.

• Performance Appraisal Planning: the creation of the position description and performance expectations/standards
• Performance Management: counseling and coaching through out the performance period
• Performance Appraisal Method: preparing for and conducting the formal review.
• Performance Appraisal Reward Process: determining actual merit awards based on performance
• Performance Appraisal Feedback: And following up with a review of the position description and re-evaluation of performance expectations/standards for the upcoming year

Performance Appraisal Expectations

Performance expectations describe the behaviors, specific skills, knowledge, or techniques (within the general competency category) that an employee needs to apply to achieve the desired job objectives. Performance standards form the framework by which performance will be evaluated.

At the beginning of the performance appraisal period, the supervisor and the employee should discuss the performance expectations upon which the employee will be evaluated. If the employee has input in developing the standard, the supervisor can expect fewer disagreements or disappointments later.

Review the definitions of each performance expectation.

Performance Appraisal Sample Rating Levels

Recording examples of demonstrated performance during the appraisal period will assist the supervisor in selecting the appropriate rating for each expectation. This commentary will enable the employee to understand why the performance was rated as it was. At the end of the performance evaluation period, the supervisor shall consider the employee’s performance and select the rating level that most accurately describes how well the employee typically performed in each area of responsibility. The supervisor may request input from the employee.

Where an employee’s cumulative performance meets the expectations described, the appropriate employee rating is “ Successfully performs to standard .”  An employee with this rating may also have performed exceeding levels periodically during the evaluation period.

Employee’s whose performance is rated as “ Consistently exceeds expectations ” must have demonstrated cumulative performance reflecting that they have surpassed the standards routinely.  Specific examples of what determined the rating should be reflected in the comments.

Employee’s whose performance is rated as “ Not consistently performing to standard ” in two or more of the expectation areas will have demonstrated cumulative performance reflecting that performance falls below standard about as much as performance is successful.  Specific examples of both successful and below standard performance should be reflected in the comments.

An employee who is rated as “ Consistently falls below standard ” in two or more of the expectation areas will typically have received coaching during the review period and may be on formal reprimand.

Performance on each standard should be examined and evaluated separately. Do not attempt to determine an overall rating across all standards at this time.

Performance Appraisal Goals

There is no restriction on the number of goals or objectives that the supervisor and the employee may develop for the next evaluation period. Identify as many as you need, but make sure the workload is realistic.

Good performance goals meet the following SMART criteria:

S = Specific State clearly what is to be accomplished in concrete terms that can be easily observed and mutually understood.

M = Measurable Objectives should be quantifiable, stating exactly what the criteria for success is, how that success will be tracked and measured, and whether the measurement tools are available.

A = Attainable Can the result be realistically achieved? (Is the process used workable and within the employee’s control? Are the needed resources available? Is the time frame reasonable? Is the objective a “reachable” stretch?)

R = Realistic Based upon the employee’s knowledge of the job, the objective should be linked vertically to the organization’s goals, as well as being difficult, yet feasible.

T = Time Bound Each objective should have a clearly defined time frame.

Studies have shown that good planning gets good results. Following are several alternative methods to develop performance goals:

• The supervisor and employee together may develop the objectives; or
• The supervisor and employee may develop the objectives separately, then meet and make modifications; or,
• The supervisor develops the objectives and reviews them with the employee.

Allow for flexibility when writing performance goals. They will need to be adjusted when work priorities change.

Although writing goals will take time, if it is done jointly, it can be a worthwhile step toward improving job performance. There is little chance that an employee who is involved in a joint process will be in the dark about where the employee stands, or that the employee will forget he/she is a principal participant in his/her own development and is responsible for it.

The supervisor should monitor projects and assignments on a continual basis. This allows the supervisor to identify unacceptable performance when it occurs and provide assistance to address such performance rather than waiting until the annual review.

The supervisor should meet with the employee and review goals at least once during the evaluation period, and preferably quarterly, to discuss performance-to-date. This interim review should include a discussion about whether the stated work assignments or priorities have changed or should change. If so, the supervisor should record those changes and provide a copy to the employee. Any training and development suggestions for employees should directly support goals and objectives.  This is an opportunity for the supervisor to list specific suggestions as to how the employee may achieve some of their goals, sources of specific training, names of helpful contacts, etc.

Performance Appraisal Common Rater Errors

Halo Effect: The tendency to rate a person who is exceptionally strong in one area high in all other areas. One factor has undue influence on the other ratings.

Horns Effect: This is the opposite of the Halo Effect-a tendency to rate a person who is especially weak in one factor low on all other factors.

Central Tendency: Tendency to avoid both high and low extremes, lumping all ratings in the middle category.

Leniency : This occurs when the rater gives all high ratings or a disproportionate amount of high ratings.

Severity: The opposite of Leniency-a tendency to give all low ratings or a disproportionate number of low ratings.

Similar-to-Me: Some raters have a tendency to give persons who are similar to them higher ratings on the basis of biographical backgrounds, attitudes, etc.

Contrast Effect: The tendency of raters to evaluate persons relative to each other, rather than on the basis of individual performance evaluation criteria.

Communicating with the Employee

The supervisor must consider all aspects of the employee’s performance, including the relative importance of each of the objectives, and compose a statement that most accurately describes the overall performance during the evaluation period.

The focus is on job performance-not the personality traits of the employee. Develop a statement based on how well the employee performed in relation to the competencies and performance objectives, the relative weight given to each objective, and any other relevant accomplishments.

If the employee receives less than a satisfactory evaluation, the supervisor should meet with the employee within thirty (30) days of the evaluation to review, in detail, the alleged deficiencies.  If appropriate, the supervisor should contact the Office of Human Resources to begin setting up an Improvement Plan.

When new employees are progressing satisfactorily through their initial appointment to a new or promotional position, but may not yet have had the opportunity to demonstrate all of their skills, we would not normally recommend and Improvement Plan, as this would unduly penalize them for a natural and appropriate learning curve.

During the Evaluation Period

• A fundamental component of successful evaluation is regular communication between the supervisor and the employee. Building work relationships is essential to achieving desired results. Regular two-way communication between the employee and supervisor helps build this relationship.
• Brief discussions should take place whenever appropriate. Formal sessions should be scheduled at least once during the evaluation period, and preferably quarterly, to discuss what is going well and what can be improved.
• Use these sessions to describe rather than evaluate performance. Inquire about any changes in the work situation since the previous discussion. Determine if there are any obstacles blocking success. Ask about resources that the employee may need to accomplish their objectives. Acknowledge accomplishments during this period. Discuss new priorities in the department so the employee can re-focus efforts, if appropriate. Modify plans in response to changes.
• It is important for both parties (supervisor and employee) to maintain open communication in order to keep each other informed of work progress and work together to resolve problems when they occur. It is far better to resolve problems when they are small, before they become “disasters.”
• A key principle that encourages employees to accept constructive criticism is to be “hard on the problem, and soft on the person.” The focus should be on correcting the problem or behavior, not on punishing the employee. The performance evaluation is an assessment of performance and should not be punitive. The performance evaluation should not be the place where the employee first hears about disciplinary action.
• A useful motto for the performance appraisal should be “no surprises.” Through this approach, you can reduce the likelihood of the employee becoming emotional during the review.
• Strive to provide continual feedback concerning expectations and performance. When things are going well discuss how and why this is so. When things are not going well discuss what needs to be done to make them right. When an employee is not doing things properly, get together and plan what needs to be done to correct the matter. If there is a performance gap, help the employee understand the cause and the action necessary for correction. Support plans for professional development.
• By providing feedback on a continual and timely basis throughout the evaluation period, the supervisor establishes the groundwork for indicating that there is a performance problem.

Annual Review

• Schedule a meeting with the employee. (Although a self-assessment is not required, including it may provide the employee with a greater sense of participation in the process.) During the meeting, review the evaluation and facilitate an open exchange of information concerning expectations and results. Resolve any disagreements on factual matters. Determine the reasons for different views relative to subjective assessments and resolve them if at all possible. Be open and make every effort to respond in a positive manner.
• The annual review is a good time for the supervisor to review the position description with the employee and determine if the work described is current, or if the job duties have changed. The position description may need to be revised and a copy sent the Office of Human Resources. Analyze the issues and attempt to view them from both sides. Listen carefully to the employee and try to understand their perspective. Give the same attention you would expect from your own supervisor.
• The performance appraisal is complete when the supervisor has determined-through paraphrasing and feedback, as well as nonverbal communication-that the content and issues have been successfully communicated, that concerns from both parties have been expressed, and that the employee understands and agrees to their goals and objectives for the upcoming period.
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Performance Appraisal

Ivan Andreev

Demand Generation & Capture Strategist

ivan.andreev@valamis.com

October 24, 2018 · updated April 5, 2024

12 minute read

What is a performance appraisal?

The purpose of a performance appraisal.

• How to organize a performance appraisal process

Performance appraisal examples

Performance appraisal methods.

• 5 Modern method of performance appraisal

A performance appraisal is the periodic assessment of an employee’s job performance as measured by the competency expectations set out by the organization.

The performance assessment often includes both the core competencies required by the organization and also the competencies specific to the employee’s job.

The appraiser, often a supervisor or manager, will provide the employee with constructive, actionable feedback based on the assessment. This in turn provides the employee with the direction needed to improve and develop in their job.

Based on the type of feedback , a performance appraisal is also an opportunity for the organization to recognize employee achievements and future potential.

The purpose of a performance appraisal is two-fold: It helps the organization to determine the value and productivity that employees contribute, and it also helps employees to develop in their own roles.

Benefit for organization

Employee assessments can make a difference in the performance of an organization. They provide insight into how employees are contributing and enable organizations to:

• Identify where management can improve working conditions in order to increase productivity and work quality.
• Address behavioral issues before they impact departmental productivity.
• Encourage employees to contribute more by recognizing their talents and skills
• Support employees in skill and career development
• Improve strategic decision-making in situations that require layoffs, succession planning, or filling open roles internally

Benefit for employee

Performance appraisals are meant to provide a positive outcome for employees. The insights gained from assessing and discussing an employee’s performance can help:

• Recognize and acknowledge the achievements and contributions made by an employee.
• Recognize the opportunity for promotion or bonus.
• Identify and support the need for additional training or education to continue career development.
• Determine the specific areas where skills can be improved.
• Motivate an employee and help them feel involved and invested in their career development.
• Open discussion to an employee’s long-term goals.

Career development plan template

This template helps employees and bosses plan together for career growth: set goals, assess skills, and make a plan.

How to organize a performance appraisal process

Conducting a performance review with an employee requires skill and training on the part of the appraiser. The negative perception that is often associated with the performance appraisal is due in part to a feeling of being criticized during the process.

A performance appraisal is meant to be the complete opposite. Often, the culprit is in the way the appraisal is conducted via the use of language.

The way the sender of a message uses language determines how the other person interprets the message once received. This can include tone of voice, choice of words, or even body language.

Because a performance appraisal is meant to provide constructive feedback, it is crucial that appropriate language and behavior are used in the process.

Human Resources (HR) are the support system for managers and supervisors to be trained in tactfully handling the appraisal process.

The performance appraisal process:

• The assessment process is usually facilitated by Human Resources, who assist managers and supervisors in conducting the individual appraisals within their departments.
• An assessment method should be established.
• Required competencies and job expectations need to be drafted for each employee.
• Individual appraisals on employee performance are conducted.
• A one on one interview is scheduled between the manager and employee to discuss the review.
• Future goals should be discussed between employee and manager.
• A signed-off version of the performance review is archived.
• Appraisal information is utilized by human resources for appropriate organizational purposes, such as reporting, promotions, bonuses or succession planning.

Let’s take a look at one example of a Manager speaking to an employee during a performance appraisal. Below are three versions of the same example.

Compare the difference in language and behavior and how it can change the end-result:

1. An appropriate appraisal example with mixed feedback

“We can start the review by looking at how each project went for you this quarter. Does that sound OK? First, every project you have worked on in the last four months has met the expected deadline and were all within their budgets. I see one project here was even early. They were all implemented successfully. Well done. You have succeeded in the criteria expected of a Project Manager here at ABC Company. Let’s take a look at a few areas where you might be able to develop your project management skills further. In Project A, B, and C, a few team members expressed that they were unsure what to begin working on in the first few meetings and felt that they were engaging in their tasks a bit late. When they tried to express this in later meetings, they felt there was hostility towards them. For upcoming Projects D, E, and F, is there anything that can be done to get team members up and running more quickly? Could more detailed task planning be completed prior to the project kick-off?”

Debrief : This example removes the errors from the first example and puts them in a more constructive light.

• The appraisal begins by involving the employee and making them feel like a valued part of the process.
• The appraiser focuses on measurable outcomes, such as each individual project, instead of broad, baseless generalizations.
• Positives are the focus of the assessment.
• Areas for improvement are offered in a constructive and neutral format by referring to specific events in the employee’s day-to-day tasks.
• The employee is given the opportunity to problem-solve the situation and contribute to their own sense of self-development.
• Constructive solutions are offered so the employee has a clear idea on what they can do better next time.

2. An inappropriate negative appraisal example

“Let’s talk about some of the problems. You are never proactive when it comes to the start of a new project. Things are left too late and there are often complaints. I have heard that your attitude has been less than positive during project meetings. You seem to have things going on at home right now, but they shouldn’t be intruding on your work.”

This example is extreme, but it conveys most of the errors that can occur in a performance review.

• The appraisal begins with a negative. It has been shown that starting with the positives can set the tone for the appraisal and helps employees feel more receptive to feedback.
• The appraiser speaks in a negative, accusatory language and bases the assessment on assumption instead of measured facts. An appraisal needs to be based on measured facts.
• The appraiser makes the discussion personal; a performance review should remain focused on the contributions of the employee to the job and never be about the individual as a person.
• Phrases like “ you are ” or “ you always ” are generalizations about the employee; a performance appraisal needs to be about specific contributions to specific job tasks.

3. An appropriate appraisal example for underperformers

“I wanted to talk to you today about your performance during the last quarter. Looking at the completed project schedules and project debriefs here, I see that each of the five projects was kicked off late. Team members reported having trouble getting the resources and information they needed to start and complete their tasks. Each project was delivered a week or more late and had considerable budget creep. Project A was over by $7000. Project B was over by $9,000, for example. These budget overages were not authorized. I think we really have potential to turn this around and I really want to see you succeed. The role of Project Manager requires you to kick-off projects on-time, make sure your team members have the resources they need, and it’s crucial that any budget issues or delays are discussed with myself or the other Manager. For the upcoming projects this month, I’d like you to draft a project plan one week prior to any project kick-off. We can go over it together and figure out where the gaps might be. Did you have any suggestions on how you might be able to improve the punctuality of your projects or effectiveness of how they are run?”

Debrief : This example deals with an employee who seems to be struggling. The appraiser unfortunately has a lot of negative feedback to work through, but has successfully done so using appropriate language, tone and examples:

• The feedback does not use accusatory language or tone, nor does it focus on the person. This is especially important at the start of a performance review when the topic is being introduced. Being accusatory can make an employee feel uncomfortable, upset or defensive and set the wrong tone for the rest of the review. Comments should remain focused on the employee’s work.
• The comments are constructive and specific. The appraiser uses specific examples with evidence to explain the poor performance and does not make general, unsubstantiated comments. Making general, broad comments like “Your projects have a lot of problems and are always late” are unfair as they cannot be proven. The tone also creates hostility and does not help the employee to solve the problem.
• The appraiser offers a positive comment about improving the situation and also a specific solution to improve the performance. The point of a performance review is to motivate and help an employee, not cut them down.
• The appraiser asks for the input of the employee on how to solve the problem. This empowers the employee to become more involved in their skill development and ends a negative review on a positive note.

4. The inflated appraisal example

“I don’t think we have too much to talk about today as everything seems just fine. Your projects are always done on time and within budget. I’m sure you made the right decisions with your team to achieve all of that. You and I definitely think alike when it comes to project management. Keep up the great work.”

Debrief : This example appears like a perfect performance appraisal, but it’s actually an example of how to inappropriate:

• The feedback glosses over any specifics regarding the employee’s actual work and instead offers vague, inflated comments about everything being great. Feedback needs to refer to specific events.
• Any mention of trouble on the team is ignored. A performance review needs to discuss performance issues before they become serious later on.
• The appraiser compares the employee to himself. This could be referred to as the “halo effect”, where the appraiser allows one aspect of the employee to cloud his or her judgement.
• Nobody is perfect; every appraisal should offer some form of improvement that the employee can work towards, whether it is honing a skill or learning a new skill.

There are many ways an organization can conduct a performance appraisal, owing to the countless different methods and strategies available.

In addition, each organization may have their own unique philosophy making an impact on the way the performance assessment is designed and conducted.

A performance review is often done annually or semi-annually at the minimum, but some organizations do them more often.

5 Modern methods of performance appraisal

There are some common and modern appraisal methods that many organizations gravitate towards, including:

1. Self-evaluation

In a self-evaluation assessment, employees first conduct their performance assessment on their own against a set list of criteria.

The pro is that the method helps employees prepare for their own performance assessment and it creates more dialogue in the official performance interview.

The con is that the process is subjective, and employees may struggle with either rating themselves too high or too low.

2. Behavioral checklist

A Yes or No checklist is provided against a series of traits. If the supervisor believes the employee has exhibited a trait, a YES is ticked.

If they feel the employee has not exhibited the trait, a NO is ticked off. If they are unsure, it can be left blank.

The pro is the simplicity of the format and its focus on actual work-relate tasks and behaviors (ie. no generalizing).

The con is that there is no detailed analysis or detail on how the employee is actually doing, nor does it discuss goals.

3. 360-degree feedback

This type of review includes not just the direct feedback from the manager and employee, but also from other team members and sources.

The review also includes character and leadership capabilities.

The pro is that it provides a bigger picture of an employee’s performance.

The con is that it runs the risk of taking in broad generalizations from outside sources who many not know how to provide constructive feedback .

4. Ratings scale

A ratings scale is a common method of appraisal. It uses a set of pre-determined criteria that a manager uses to evaluate an employee against.

Each set of criteria is weighted so that a measured score can be calculated at the end of the review.

The pro is that the method can consider a wide variety of criteria, from specific job tasks to behavioral traits. The results can also be balanced thanks to the weighting system. This means that if an employee is not strong in a particularly minor area, it will not negatively impact the overall score.

The con of this method is the possible misunderstanding of what is a good result and what is a poor result; managers need to be clear in explaining the rating system.

5. Management by objectives

This type of assessment is a newer method that is gaining in popularity. It involves the employee and manager agreeing to a set of attainable performance goals that the employee will strive to achieve over a given period of time.

At the next review period, the goals and how they have been met are reviewed, whilst new goals are created.

The pro of this method is that it creates dialogue between the employee and employer and is empowering in terms of personal career development.

The con is that it risks overlooking organizational performance competencies that should be considered.

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10 Benefits of the Performance Appraisal

Whether you’re at the beginning of your career or well into it, it’s essential to understand what is performance appraisal . Performance appraisal is a systematic process in which an employee’s performance is evaluated in terms of quality, quantity, cost, and time. Typically, it’s a regular process that helps in understanding each employee’s ability to perform assigned tasks.

Performance appraisal , as a management tool, helps in gaining feedback, reviewing and estimating the effectiveness of performance, and discussing what needs to be done for improvements. It serves as a basis for motivating and identifying areas of development for employees.

The Definition of Performance Appraisal

The performance appraisal definition refers to the structured assessment of an employee’s job performance and overall contribution to the company. It involves the setting of objectives, evaluation of results, and providing feedback so that the employee has a clearer understanding of expectations and what can be done to improve performance.

10 Benefits of Performance Appraisal System

Performance improvement.

Performance appraisal helps in identifying the strengths and weaknesses of an employee. It can significantly impact the employee’s role within the organization. For instance, performance appraisal strengths examples such as good communication, leadership, and problem-solving can be acknowledged and encouraged.

Self-Development Opportunities

One of the critical benefits for the employee is self-development. Performance appraisal allows managers to provide positive performance appraisal comments and identify areas for improvement. Employees can discuss and create a developmental plan with the manager to improve their skills.

Motivation through Merit-based Compensation

A performance appraisal system motivates employees when it is coupled with a good merit-based compensation system. The best performers are rewarded with better pay and benefits packages, while those who lag behind may face penalties.

Facilitating Communication

Performance appraisal provides a structured process for employees to approach management for discussions, identify problems, and clarify expectations. It allows both managers and employees to set up long-term and short-term goals.

Monitoring Organizational Success

Through performance appraisal, organizations can use statistics to monitor the success of the company’s recruitment and induction practices. It helps in making informed decisions about promotions, transfers, and rewards for employees.

Identifying Underperformers

With the performance appraisal system, it is easier to identify the under-performers and decide on the further steps – whether to develop them or, in some cases, part ways.

Maintaining Records for Future Reference

Both managers and employees keep performance appraisal records, which can be reviewed in the future to assess changes in performance. This can be valuable for understanding individual progress and making future decisions.

Enhanced Employee Engagement

Better Decision-Making

Managers who conduct performance appraisals gather critical data that can inform various decisions such as promotions, layoffs, and resource allocation. This leads to better-informed decisions that align with organizational objectives.

Clarification of Expectations

Often, employees are unsure about what exactly is expected of them. Performance appraisal provides an excellent opportunity for managers to clarify these expectations. This ensures that both the manager and the employee are on the same page regarding roles and responsibilities.

Performance Appraisal Example

Let’s take an example of a performance appraisal for a Marketing Manager named John.

Date: July 5, 2023

Employee Name: John Doe

Position: Marketing Manager

Department: Marketing

Review Period: January 2023 – June 2023

Reviewer: Jane Smith, Director of Marketing

Performance Assessment

1. Leadership and Team Collaboration

Comments: John has displayed excellent leadership qualities. He is able to motivate his team and work effectively with colleagues from other departments. His performance appraisal strengths examples include effectively leading the team through a challenging product launch and actively seeking cross-departmental collaborations.

2. Communication Skills

Comments: John’s communication skills are exceptional. He communicates marketing goals and initiatives clearly to his team, and he has a knack for explaining complex ideas in an accessible way.

3. Meeting Deadlines and Budget Management

Comments: John has met all project deadlines during the review period. However, there have been instances where the budget has been exceeded. John should work on budget forecasting and allocation to improve in this area.

4. Contribution to Business Goals

Comments: John has been instrumental in driving the marketing department’s contributions to the organization’s business goals. The successful launch of our latest product was largely due to his innovative marketing strategies.

5. Skill Development and Adaptability

Comments: John is proactive in skill development. He has adapted well to the changes in the market and incorporated new digital marketing strategies into the department’s operations.

Goals for Next Period

• Develop a training plan for the marketing team to improve skills in budget management.
• Foster more cross-department collaborations to ensure a holistic approach to organizational goals.
• Monitor and control marketing expenditures to ensure alignment with allocated budgets.

Overall Performance Rating

Outstanding

This performance appraisal example illustrates how various aspects of an employee’s performance are evaluated, and specific comments are provided. It’s not just a critique but a balanced overview, highlighting strengths, areas for improvement, and setting objectives for the future.

Enhance HR Management with KPI’s Performance Dashboard

For those seeking an efficient way to monitor and analyze performance metrics, KPI’s Human Resource Management app features a performance dashboard. This dashboard provides an organized view of various performance indicators, assisting managers and HR professionals in making data-driven decisions.

Concluding Remarks

In summary, performance appraisal systems are vital for the personal and professional development of employees, as well as for the alignment of individual performance with the organizational goals. By recognizing achievements and identifying areas for growth, they promote a culture of continuous improvement and engagement within the organization.

Performance Appraisal FAQ

What is performance appraisal.

Performance appraisal is a systematic process where employees’ performance is evaluated in terms of quality, quantity, cost, and time. It usually involves setting objectives, evaluating results, and providing feedback for performance improvement.

What are some examples of performance appraisal?

Performance appraisal can take various forms including 360-degree feedback, management by objectives, performance rankings, and traditional appraisal where a manager evaluates an employee’s performance based on predefined criteria such as teamwork, communication, and adherence to deadlines.

What are common performance appraisal comments?

Common performance appraisal comments might include praise for meeting targets, suggestions for areas needing improvement, observations about an employee’s teamwork and collaboration skills, and comments on an employee’s problem-solving abilities.

What are examples of strengths in performance appraisal?

Examples of strengths in performance appraisal might include good communication skills, effective leadership, strong work ethic, creativity, problem-solving skills, and the ability to motivate others.

What is the definition of performance appraisal?

The definition of performance appraisal refers to the structured assessment of an employee’s job performance and overall contribution to the company. It includes setting objectives, evaluating results, and providing feedback to ensure that the employee understands what is expected and what can be done to improve performance.

3 Benefits of Paraphrasing: The Skill for Learning, Writing and Communicating

Paraphrasing is the underrated skill of reinstating, clarifying or condensing the ideas of another in your own words. By paraphrasing, you can curate credible and well-developed documents, and arguments. But there’s more to paraphrasing than the final result, the process of paraphrasing engages your ability to learn actively, write well, and communicate creatively.

Paraphrasing allows you to share another’s ideas in your own words. This powerful technique is useful in both written and verbal communication, and acts as a tool for conveying information effectively. Paraphrasing is an underrated skill that is beneficial to a variety of individuals from students and writers to employees and business owners. In any setting, sharing information well is the key to good quality work and results. The process of paraphrasing itself also has a number of benefits, making you a better learner, writer and communicator. 

Paraphrasing: The Active Learning Strategy 

Paraphrasing requires you to think about the information you want to convey. You need to understand the meaning in order to reword and restructure the idea, and share it effectively. The process of paraphrasing encourages you to get to the core message, and improves your understanding of the material. In this way, you are actively engaging with the material . Instead of passively reading, you are breaking down the ideas and concepts. Rather than slotting information into your writing, you’re reworking and tailoring it to your needs and your audience. 

Paraphrasing can improve your memory by encouraging you to engage with the information. The 5-step approach to paraphrasing suggests writing your first paraphrase without looking at the original material. This engages your ability to actively recall information from memory, and think of new ways to write it out, rather than simply trying to memorise what you read word for word. After your first draft, you’ll revisit the original material to check if your work conveys the same meaning, this part of the process can further strengthen memory. You’re again revisiting the material in a way that is active and assessing your understanding. Likewise, the practice of paraphrasing improves your ability to convey information, ensuring that it is well-written and tailored to your audience.

This learning method is particularly useful for exams. You’ll learn the material well, developing a deep understanding and continue to refine this as you paraphrase the information. You’ll also be practising your ability to share this information in a way that is well-written, avoids plagiarism and engages your audience. This means, you’ll be able to easily add these ideas into your assignments or exams, having already taken the time to understand the ideas deeply and even practised sharing this information. You’ll be able to show the depth of your learning through paraphrasing, proving you understand the bigger picture and the finer details. 

Paraphrasing: The Technique for Improving Writing Ability

Once you’ve understood the concept well, the process of paraphrasing can improve your writing ability in a variety of ways. You’ll improve your vocabulary by making use of synonyms and identifying key words. You might also switch between word categories, using a noun instead of a verb or changing  adjectives into adverbs. Overtime, this will make you a better writer. Paraphrasing is more than changing a few words and can involve switching between the active or passive voice, this can improve your ability to distinguish between the two. Effective paraphrasing also involves playing around with sentence structure, you might utilise shorter or longer sentences to convey the idea at hand. 

These benefits can still be found even when using paraphrasing tools . You’ll still have to test your understanding by assessing the paraphrase the tool produced. Likewise, you’ll be exposed to new ways of writing things, new words, sentence structures, and organisation. You’ll learn how to pick out the paraphrasing styles that do or don’t work for your writing. Beyond the more technical aspects of writing, paraphrasing can also teach you how to communicate more clearly. You might rearrange the information to emphasise a particular point, or simplify the language to make it accessible to your audience. This improves your ability to clarify the ideas of the original material, and make ideas that might be overly complex, easier to digest. 

Paraphrasing: The Skill for Better Communication 

Finally, paraphrasing can make you a better and more creative communicator. By engaging in the process of paraphrasing, you’re developing your ability to share one idea in a variety of ways. For this to be engaging, you have to get creative. You might play around with the tone, switching between formal, informal, casual, or persuasive. Imagine a business launching a new product, communicating the idea to various internal teams, and customers, each would require a different approach and yet the meaning behind the information would remain the same. 

You might ask questions such as, how can I tailor this information to my audience? How can I bring this aspect of the idea to life? This highlights how paraphrasing can really exercise your ability to communicate creatively. Similarly, paraphrasing can teach you how to share ideas in your own personal way. Whether you’re sharing an idea with a friend, or on social media, you’ll find you can share information in your own personal style while still retaining the original meaning. This can make ideas more accessible and relatable to those in your circle. Additionally, this can prove to be a useful skill in your career, studies or creative endeavours.

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100 Performance Appraisal Comments For Your Next Performance Review

Conducting performance reviews can be tricky, especially for managers. Sometimes there's a vast difference between what they say and what they want to convey. To improve this, it's important that employers must practice the art of delivering constructive performance appraisal comments.

One in five employees isn't confident that their managers will provide regular, constructive feedback .

68% of employees who receive accurate and consistent feedback feel fulfilled in their jobs. (Source- Clutch )

A wholesome appraisal process will consist of both positive and negative appraisal comments. Therefore, understand appraisals as a program where you have to find faults or only praise someone. Instead, conduct feedback that gives employees an overall understanding of where they can improve and excel.

Furthermore, conduct your reviews in a regular and timely fashion.

65 percent of employees say they want more feedback, but nobody is giving it to them.

Regular appraisal and evaluation of an employee’s performance can help them get clarity of their actions. In addition, it will also direct them towards the areas where they need to improve. In short, effective review phrases can improve an employee’s performance and help them progress.

Examples Of Performance Appraisal Comments

So, how should a manager comment on the performance appraisal process ? Here are some sample employee evaluation comments that you can refer to while conducting the next appraisal review.

1) Attendance

Punctuality is one of the strongest virtues an employee can possess. They must arrive on time, take the designated time breaks to ensure efficiency and productivity.

However, you can't ignore that attendance is one of the touchiest topics, and employees don't like to discuss coming late or the reasons for exceeding their lunch breaks. But, if conducted properly, attendance appraisal processes can prove to be very useful.

a. “You always come in on time, follow your schedule and adhere to your designated lunch break time.” b. “She meets all company standards for attendance and punctuality.” c. “You schedule your time off in advance and can be relied upon for completing your tasks on time.” d. “He replies to emails and calls in time.”

NEED FOR IMPROVEMENT

a. “He takes too many personal calls in a day.” b. “You repeatedly exceed your lunch break time that interferes with your work schedule.” c. “You often come late to the office, causing scheduled meetings to start late. It also affects others’ schedules. You need to keep up with your schedule so your coworkers can keep up with theirs too.”

Managers are often confused about how to conduct a performance review, and as if things weren't bad enough, performance reviews are highly inefficient. To help you in this drilling process, here's our detailed analysis on Performance Reviews and How to get them Right !

2) innovation and creativity.

Creativity and the free exchange of ideas can only flow when employees have a healthy work environment . But interpersonal conflicts and strict hierarchical work culture can hinder an employee from expressing freely. As a manager, it is your responsibility to appreciate employees who help foster a creative environment and approach employees who have trouble doing so.

Here are a few employee performance appraisal comments to stir innovation and creativity:

a. “You often find new and innovative solutions to a problem.” b. “She has a knack for thinking outside the box.” c. “His creative skills are an asset to the team.” d. “You have a unique imagination and have come up with some of the most creative ideas we’ve ever seen.”

a. “You tend to avoid projects that require creative thinking.” b. “He likes to take a traditional and risk-averse approach to things over a creative one.” c. “You do not encourage your team to find creative solutions.” d. “You are too afraid of taking risks on a creative solution.” e. “Your approach to problems is often rigid and conventional.”

3) Leadership

Employees in managerial positions are people who are always looking after others, i.e., their team members. They are constantly guiding others to progress and advance. However, they need guidance to reach their goals too. Managers who receive feedback on their strengths are 8.9% more productive. They are more effective and profitable post-intervention.

Here are some critical appraisal comments for leaders and managers.

a. “You effectively manage your team and conduct specific exercises to strengthen the team .” b. “You are fair and treat every employee in your team equally and respectfully.” c. “She provides employees with the resources and training required to fulfill a responsibility.” d. “You hold employees responsible for their performance.” e. “He maintains a culture of transparency and knowledge-sharing across all levels in your department.” f. “You communicate openly with your team.” g. “You acknowledge accomplishments and recognize employees fairly.”

a. “You are biased and favor some employees more than others in your team.” b. “You get frustrated with new hires easily and don’t coach them properly.” c. “He provides no recognition to a team member’s effort and hard work.” d. “You can’t explain the goals and objectives of a task clearly to an employee.” e. “She often creates a communication gap and withholds information from her subordinates.” f. “You fail to delegate tasks effectively and fairly among your team.”

4) Communication Skills

Communication is one of the core functions of dynamic work culture. Clear communication makes employees comfortable with each other, makes sharing and exchanging ideas more frequent. It also bridges the gap between departments and makes everyone more productive. Effective teams can only be built when team members communicate with each other honestly and clearly.

Communication appraisal comments, if delivered correctly, can greatly improve an employee's communication skills.

a. “You are spoken highly of by your peers because of your ability to build good relationships .” b. "Your communication skills are great, and you can make others understand your point clearly." c. “She is precise in giving out directions and effectively communicates what she expects from her team members.” d. “Your willingness to listen to others and understand their point of view is highly appreciated by your peers.” e. “You are adept at communicating difficult messages and decisions skillfully.”

a. “You fail to communicate with your peers effectively, and this is causing a lot of misunderstanding within the team.” b. “Your direct and impersonal approach to handling discussions is ineffective in boosting the morale of those around you.” c. “You need improvement in replying to emails promptly.” d. “You humiliate peers on a regular basis.” e. “He interrupts others in discussions and important meetings.”

Related: The 10 Secrets to Strong Communication Skills in the Workplace

5) Collaboration and Teamwork

Collaboration drives results . When teams work together, they can reach solutions faster. They brainstorm ideas in order to arrive at a decision and generate these ideas together. In order to ensure collaboration, you need a healthy team environment. But not all employees are natural-born team players. But with appraisal comments, you can help employees overcome their personal conflicts and contribute to the team.

a. “You are a great team player. Your team members respect and appreciate you .” b. “You can be relied upon by team members.” c. “He works to be the best for the team and not be the best of the team.” d. “You support others in fulfilling their tasks and are always ready to help others.” e. “You respect others and give everyone equal opportunities to express their opinions.”

a. “You are inconsiderate towards’ others’ opinions and ideas.” b. “She tries to take credit for the work done by her team.” c. “You try to use your seniority to dominate your team members.” d. “He rarely comes up with concrete solutions that will help the team complete the project.” e. “You exceed expectations when working solo, but you seem to have trouble expressing ideas and opinions in a team.”

6) Time Management

In corporates, both big and small, where pressure is insurmountable , employees often have a hard time finishing work in time. They are unable to delegate and prioritize tasks. Time management appraisal comments can enable you to appreciate the ones who are managing effectively. Similarly, it gives you a way to encourage those who aren't being able to manage their time.

a. “You deliver urgent work without compromising on the details.” b. “You always meet your deadlines and make the best use of your time.” c. “She expertly prioritizes work without getting tangled in endless details.” d. “You exceeded our expectations by delivering more than assigned work despite the tight schedule.”

a. “You constantly push deadlines and fail to deliver on time.” b. “You are usually unable to calculate the time required to complete a task and therefore end up missing deadlines.” c. “She lacks a sense of urgency.” d. You have started delivering low-quality work just to finish your work on time."

Thank your teammates at work with our AI-powered R&R tool.

7) customer experience.

Customer focus and customer service is the key to building everlasting relationships with customers. Therefore, employees need to acquire skills that will help foster an enriching customer experience.

To improve customer experience in your organization, you can refer to these performance review comments:

a. “He works well with all types of clients.” b. “Clients usually seek your guidance and expertise.” c. “You are honest and always admit when you don’t have the knowledge about something.” d. “You regularly follow up with existing and new clients to make sure they feel valued and reminded about us.”

a. “She delays her responses to clients without giving them any reason for her delay.” b. “You need to tailor your customer service to suit individual customers’ needs. You ought to provide a diverse customer experience.”

8) Problem Solving

A much-required skill, its importance becomes more prevalent among higher authority employees. Problem-solving is the “skill of defining a problem to determine its cause, identify it, prioritize and select alternative solutions to implement in solving the problems and reviving relationships.”

a. "You are very articulate and explain your ideas and opinions clearly, leaving no room for miscommunication." b. "He gathers all the necessary facts and information before finding a solution to a problem." c. "Your best quality is that when faced with a problem, you listen first, take into account everything and then try to come up with a solution." d. "She always comes up with unique yet practical solutions."

a. "You need to be more assertive and decisive when giving out directions." b. "He is always hurrying in making his decisions without taking into account the full details of the problem." c. "You should collaborate with others more to come up with solutions together."

9) Work-Ethics

An employee’s work ethic involves everything from coming in time, working diligently, being honest to respecting everyone in the workplace. By analyzing an employee's ethics and morals assists in preventing the spread of demotivating and inappropriate workplace behavior.

a. "You are respectful and fair towards everyone in the organization." b. "He is regarded as highly credible by those working with him." c. "She is very punctual and understands the value of others’ time. She is never late to a meeting." d. "You have portrayed exemplary behavior in all aspects of work." e. "You abide by the company’s rules and policies."

a. "He sets integrity aside when pursuing his goals." b. "Your behavior towards colleagues isn't appropriate." c. "She is unresponsive to employees’ concerns regarding unfair treatment." d. "You play favorites and are biased in your judgments." e. "He doesn’t take into account other people’s opinions when making important decisions."

10) Productivity

The quality and quantity of work put in by an employee against the expectations set by the employer is the measurement of his/her productivity.

a. "You have displayed a highly consistent level of performance in your work." b. "She is always seeking opportunities to be more productive." c. "Your positive attitude to your work encourages others to perform well too." d. "She is a detail-oriented individual, which reflects positively in her work." e. "He shares his knowledge of industry trends and best practices to achieve enhanced outcomes in his job."

a. "Your work doesn’t comply with the required output standards." b. "You should take up more training and development courses to enhance your skills and knowledge." c. "The quality of your work has been unsatisfactory lately." d. "He needs to focus more on the details and nitty-gritty before handing over a project." e. "Instead of completing the urgent assignments first, she does the easier ones and puts off the urgent ones."

11) Interpersonal Skills

While interpersonal skills come naturally to some people, for others, they can be cultivated with experience and knowledge. Investopedia defines interpersonal skills as "an employee's ability to work well with others while performing their job." These skills can range from communication, basic etiquette to active listening. In other words, it's the qualities and behavior people use while interacting with others.

a. "You communicate your ideas and vision clearly so others can understand it easily and quickly." b. "He appreciates the efforts taken by others to achieve a target and encourages them to be better." c. "Even when disagreeing with others, you do it gracefully and respectfully." d. "You can adapt easily to various situations and different kinds of people." e. "You are equal in your treatment to everyone and communicate with your peers respectfully."

a. "He seems to find it difficult to express his emotions and feelings, which often causes misunderstandings." b. "When given any kind of feedback, you don’t take it in a positive manner." c. "She does not take the time to develop and sustain positive and beneficial relationships." d. "You don’t tend to listen to and take other people’s opinions into consideration." e. "He doesn't contribute effectively in his teams' activities."

This article is written by Shreya Dutta . She is a content writer and marketer at Vantage Circle She is passionate about all things literature and entrepreneurship. To get in touch, reach out to [email protected]

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How to link performance appraisal and compensation: drive growth and performance.

How effective is compensation management at your organization? Are compensation changes orderly, transparent, and perceived as fair?

If compensation at your organization isn't rewarding your people properly, you risk losing your top talent and falling behind your peers.

Compensation is a "living, breathing market force," says Jessica Zwaan, COO of Whereby . 

By linking your people's compensation to their performance in a way that meets their expectations, you can drive behavior toward outcomes that matter for your organization.

This article will look at: 

• how to effectively link performance appraisals and compensation for your people; 
• the benefits and limitations of this approach;
• A few examples of organizations that are doing it well.

🆚 What's the difference between performance appraisals and compensation reviews?

It's easy to confuse performance appraisals with compensation reviews . 

Still, they're not the same: compensation reviews address overall salary and benefit structures at organizations, whereas performance appraisals address the performances of individual employees.

Compensation reviews address company-wide compensation issues, such as how equitable compensation structures are across different groups of people. They help ensure that your organization's overall compensation management is competitive, aligned with company objectives, and designed to incentivize your people.

The findings of organization-wide compensation reviews ultimately translate to each employee's compensation plan. 

On the other hand, performance appraisals relate to how each employee performs relative to their target outcomes.

🏆 The 5 benefits of linking performance appraisals and compensation

1. Motivate employees

Paying your people more when they perform well makes them feel valued and recognized for their efforts and motivates them to continue performing well.

The more motivated your people are, the more likely a high-performance culture can flourish at your organization. Companies with high-performing cultures create significantly higher returns for shareholders— up to 3 times , according to research by McKinsey.

Motivated employees are also more likely to experience job satisfaction, as motivation and satisfaction are "interrelated and mutually reinforcing," according to LinkedIn Personnel Management .

2. Boost engagement

When people feel rewarded for their efforts, they're more likely to feel engaged with their company and roles.

Nearly two-thirds of companies with a strong connection between performance and compensation have a more engaged workforce .

3. Increase competitive transparency

Give your people a clear understanding of how their pay increases as they improve their performance to demonstrate that your compensation structures are competitive.

Companies like Apple, Google, Netflix, and Dell have found that competitive compensation leads to happier and more productive employees, explains John Hall , co-founder of Calendar.

Transparency about how compensation links to performance also reduces stress for your people. 

If they're performing well, they'll know what to expect (e.g., a pay increase) without needing a stressful conversation (e.g., asking for a raise). This transparent approach promotes equity for people who may feel uneasy about such discussions, such as those from minority backgrounds.

4. Improve compensation alignment with outcomes

Link your people's pay with performance to improve alignment between their compensation and outcomes. If your compensation structures also align with your organizational objectives, you'll improve the overall organizational alignment of your people .

Stronger organizational alignment helps your people feel more engaged and invested in your company's objectives.

5. Attract top talent

Research from Pew Research Center has shown that compensation is a key reason people leave their employers.

By aligning performance with pay, people are less likely to feel your company does not adequately compensate them for their efforts. This helps retain strong performers as they know their superior performance is being recognized and rewarded.

💸 How do you link employee performance with compensation?

There are several ways to link compensation with performance. They usually involve base salary adjustments or variable pay structures.

Whichever the method, you should be aware of:

• Budgeting —Pay structures have many components, including retirement contributions and health insurance, so your compensation budgets should consider all components affected by performance-related adjustments.
• Calculations —When calculating performance-related adjustments, reward the right people appropriately (i.e., the top performers).

With these in mind, here are the most common ways to link employee compensation with performance.

Merit increases

Most employees receive yearly increases to their base salary, usually to account for higher living costs. In contrast, merit increases are higher than average base salary increases.

Unlike increases to base salary, which usually reflect a standard rate (e.g., the rate of inflation or a rate agreed by a workers' union), merit increases reflect employee performance. Companies often track merit increases using a metric called the 'forced distribution rate' so that they can make relevant adjustments to budgets each year.

Commissions

Commissions are typically paid to employees involved in selling and are calculated on the sales value they generate.

Commissions are calculated differently depending on the type of work done. 

For example, a salesperson earns a commission on the value of products sold. 

In contrast, a recruiter earns a commission on the salaries of appointed employees.

Commissions are usually paid monthly or quarterly and take on different structures, e.g., base salary plus commission, commission-only structures, once-off commission bonuses, tiered commission structures, or percentage-based variable commissions.

Bonuses are cash compensations paid on top of base pay. They are often discretionary, i.e., not guaranteed, and may not relate to specific outcomes.

Bonuses come in many forms, including:

• Annual bonuses: typically tied to a company's overall performance.
• Spot bonuses: for performance outside the scope of an employee's role.
• Signing bonus: once-off when joining a new position.
• Retention bonus: to retain top performers, often during company mergers or acquisitions.
• Referral bonuses: for referring candidates that are successfully hired.
• Holiday bonus: for recognition of good work approaching a holiday season, e.g., Christmas bonuses.

Equity or stock option grants

Equity and stock options are compensation forms tied to a company's stock price.

Employees may know the amount of equity or options they've been granted. Still, the ultimate value of their grant will depend on the stock price when they sell their shares or exercise their options.

Companies with less cash but strong growth prospects typically use equity and stock options, such as startups or companies in high-growth industries (e.g., IT or technology firms).

The structures, tax treatment, and vesting timeframes of equity and stock options can be complex. Still, if circumstances play out favorably, this form of compensation can be lucrative.

Profit sharing

Through profit sharing, employees receive a proportion of a company's profits.

The amount of compensation received fluctuates with the company's profitability year-on-year.

Profit sharing is useful for incentivizing employees to focus on the net earnings of their company (i.e., after costs and expenses). 

This approach contrasts commission-driven structures linked to sales that do not depend on a company's costs and expenses.

Profit-sharing plans come in various forms, including:

• Pro-rata —paid to employees in proportion to their base pay.
• Fixed percentage —the same (fixed) percentage paid to all employees.
• Age-weighted —e.g., older employees receive a larger percentage of profits than younger employees.
• Comparability plan —profit percentages vary by a range of factors, e.g., hours worked, contract terms, or tenure at a company.

On-the-spot recognition

On-the-spot bonuses are paid for exceptional performances that warrant immediate recognition. On-the-spot recognition can come in the form of cash or gifts, including physical gifts or experiences.

➡️ Looking for fun ways to recognize your people? Check out these great employee recognition ideas .

💡 5 Best practices for effectively linking performance appraisals and compensation

1. Focus on development

While compensation conversations can build trust with your people, they can leave employees feeling stressed or defensive if their compensation outcomes aren't strong.

Focus on development rather than poor performance during performance appraisals, highlighting the potential for more substantial compensation outcomes with better performance. 

Identify strengths, development opportunities, and training gaps, for instance.

A development focus shifts the attention away from compensation outcomes for poorly performing employees. It shows them how to achieve better results in the future.

➡️ Check out these 7 tips for giving your people meaningful, clear, and constructive feedback.

2. Set clear performance goals

By setting a clear link between performance and pay, you're helping your people understand how they add value and how they can increase it.

Use objective performance measures that are evidence-based (i.e., linked to data) so that they're credible and understandable. Your people should see that their compensation is consistent with the value of their contribution.

Well-defined employee performance metrics are easy to track and draw insights from. Examples include:

• work efficiency —the quality and quantity of outcomes;
• success rate —e.g., the number of closed sales
• collaboration and teamwork —peer reviews, 360 evaluations, and survey-based team satisfaction scores
• skills and competencies —completing training programs to address skills gaps.

3. Promote fairness and transparency

Apply your performance and compensation management process fairly and consistently across different groups, e.g., gender, age, and ethnic groupings.

Employee appraisals inherently involve judgment, so it's easy for biases to set in even when differences aren't obvious. Contrasting personality types, belief systems, or even personal habits can lead to biased judgments.

Such biases may harm your people, particularly when appraisals are linked to financial compensation.

One way to minimize biases and promote equity in your performance and compensation management process is to keep it as transparent as possible. This helps your people understand the drivers of their performance-related pay.

Another way is to conduct regular compensation reviews to identify biases in your compensation framework, if they exist, and address them before they become entrenched.

Pay equity is an increasing priority in organizations—66% of organizations had pay equity initiatives in 2022, according to PayScale's recent Compensation Best Practices Report , compared with fewer than half in previous years.

4. Communicate regularly

When giving your employees feedback on their performance, perceptions matter. How you communicate employee performance will affect how your people feel about their compensation outcomes.

Help your people understand the basis of their performance appraisals by communicating regularly. Explain how their performance review fits in with your organization's compensation strategy and draw linkages between each employee's job-related performance and their compensation.

By building regular opportunities for conversations with your people as a part of their performance management process, they'll better appreciate how their performance and compensation are related.

➡️ Are your managers struggling to have effective compensation conversations with your people? Learn why compensation training for your managers is essential.

5. Separate performance and compensation discussions

Compensation can be a sensitive topic. When discussing an employee's performance, they may be distracted by their compensation outcomes when discussed in the same conversation.

But by separating performance and compensation discussions, your people can focus on their performance evaluation and development details.

And having separate discussions need not diminish the link between performance appraisals and compensation.

"Once performance reviews are complete," explains Dannie Lynn Fountain , a senior HR practitioner , "performance ratings can then be used to calculate compensation changes."

😟 3 Key challenges of linking performance appraisals to compensation

Despite the benefits of linking performance to compensation, there are some limitations to be aware of. Here are three key challenges to look out for.

Misdirected incentives

When an employee's performance is linked to financial compensation, they may be inappropriately incentivized depending on how their performance is evaluated.

Sales personnel, for instance, may be driven to achieve quotas so that they receive their commissions, even if that means pushing hard-sell tactics. This may lead to misselling or diminish the reputation of the company.

In the lead-up to the financial crisis of 2008–09, for example, there were numerous cases of financial misselling driven by commission structures. In one such case, RBS, a UK-based bank, was fined USD 5.5 billion for misselling toxic mortgage bonds by their US brokers.

Ensuring pay equity

Unconscious biases can be magnified when performance is linked to pay. Since performance evaluations can be subjective, inequities can worsen when subjective judgments drive unfair compensation outcomes.

For instance, groups of people who have historically been favored may entrench their positions when financial compensation is at stake. Managers may favor select groups or individuals if their decisions lead to better financial outcomes for those people.

Disingenuous self-evaluations

When people know that their performance appraisal impacts their direct compensation, they may not be honest in their self-evaluations.

This makes the evaluation process particularly delicate for managers, who must form an objective view of employee performance without appearing overly critical. It is a difficult balance to strike in the face of self-evaluations that have employees artificially boosted.

Performance-for-pay can also lead to an unhealthy environment of competition in your organization—teamwork, trust, and cooperation may suffer due to the excessive competition that it creates.

💰 3 Examples of companies successfully linking performance with compensation

So, what does successfully linking performance and compensation look like in practice? Here are three examples of companies doing it well:

Google—performance-based compensation with separate appraisal discussions

Google's compensation strategy adopts a pay-for-performance philosophy that rewards high performers. The compensation packages are broad-based—including base pay, bonuses, and equity—to motivate team and individual performance.

Google carefully aligns individual and organizational goals, promotes employee development, and maintains a transparent performance management process to encourage meritocracy.

When it comes to employee performance reviews, Google keeps them separate from compensation discussions.

Google believes separate discussions allow more effective performance appraisals as people focus on the appraisal process rather than financial outcomes.

Holding them together "kills learning," suggests Laszlo Bock, Google's former SVP of People Operations . 

Zappos—compensation based on an egalitarian, self-evaluation process

Zappos replaced annual performance reviews with a more frequent, real-time 360-degree feedback approach. Plus, company culture is critical in Zappo's performance appraisal process, and its people are encouraged to adopt its core values.

For example, employee autonomy is a feature of Zappos' performance management framework , with managers playing a less dominant role than in other companies.

Zappos links compensation with employee performance through skill badges. Instead of job titles, employees collect skill badges as they grow in their roles. The more badges a person has, the more they level up and the higher their paycheck.

Zappos' process of evaluating employees doesn't depend on manager judgments. It is a transparent approach that builds trust and motivates Zappos' people to achieve more.

Starbucks—compensation based on partnership

Starbucks uses its Bean Stock program to share the company's financial success with its people—employees are granted stocks in Starbucks (annually) based on their time with the company over the previous year.

Bean Stock forms a part of most employees' compensation packages at Starbucks, directly tying company performance with individual compensation. It was a pioneering program when first introduced in 1991, encouraging their people—referred to as "partners"— to act like business owners by sharing in the company's success.

➡️ Drive growth and performance with Zavvy

At Zavvy, we know that compensation is important for your people. We also know how to motivate and build trust with your people through growth and development opportunities that go in hand with performance.

Zavvy helps you build a more effective performance review process for your people by linking their performance appraisal to their compensation based on their efforts and outcomes.

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What's the relationship between compensation and performance appraisal?

An employee's compensation refers to their salary and benefit arrangements. In contrast, their performance appraisal is a process of assessing how they're performing against their targets. Some organizations link these while others don't.

Should performance be linked with compensation?

By linking performance appraisals with compensation, organizations can motivate their people, boost engagement, increase compensation transparency, and attract top talent.

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Benefits of performance appraisal: employees and organizations

Talent Assessment

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Does your company already recognize the benefits of performance appraisal? In the business world, establishing a workflow that enables organizations and their employees to make informed decisions to optimize all processes is crucial. In this regard, performance evaluation stands out as one of the most widely utilized tools across various sectors.

But what exactly is performance appraisal ? Allow us to explain it to you below.

What is Performance Appraisal?

Performance appraisal, also known as performance evaluation or performance review, is a widely adopted method by organizations to gauge an employee’s value addition and their ability to achieve set objectives . Its primary purpose is to assess and identify which objectives employees have exceeded expectations in and where they may have encountered challenges.

For accurate employee performance tracking, it is advisable to conduct these evaluations quarterly , always maintaining a constructive approach so that both the organization and employees can recognize its benefits.

The primary objective for the organization, even for a small business, is to acquire essential information for making well-informed decisions.

Benefits of performance appraisal for the organization.

These are the significant benefits and advantages of performance appraisals for the organization:

• Boosts Productivity: Performance evaluation measures an employee’s contribution in terms of increased company revenue and job performance, compared to industry standards and employee return on investment.
• Enhances the Manager-Employee Relationship: Following evaluations, employees can discuss concerns with their superiors, fostering constructive feedback that is instrumental in resolving grievances and improving team relationships.
• Identifies Hidden Talent: Individuals often showcase their potential in the workplace. Performance appraisal helps uncover talents and skills that may be hidden within introverted personalities or those with limited communication abilities.
• Evaluates the Effectiveness of Hiring Processes: An unfavorable evaluation may necessitate a reevaluation of certain aspects of the hiring processes.

Benefits of performance appraisal for employees

The benefits of performance appraisal extend beyond the organization itself . When used appropriately, performance appraisal provides employees with a powerful tool for self-assessment and performance improvement, devoid of external pressure. Some employees may perceive this evaluation method as pressure-inducing if they fail to meet pre-established objectives, but it is the organization’s responsibility to dispel this notion.

These are the significant benefits of employee performance appraisals:

• Positive Impact on Team Morale: A positive evaluation for an employee can elevate team spirits and enhance overall group performance.
• Encourages Personal Growth: It motivates employees to step out of their comfort zones, pushing them to achieve goals they may not have considered.
• Fosters Communication: If approached as a two-way communication channel and the organization consistently listens to employee feedback, it helps employees feel heard and more engaged.
• Clarifies Career Path: Performance appraisal assists employees in understanding their role within the company and gaining clarity about their professional future, setting them on a path to improve their skills.
• Potential for Financial Benefits: A positive employee performance review can improve salary.

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What aspects of an employee should your company evaluate?

Numerous aspects can be considered, such as strengths and weaknesses, but these may vary from one organization to another. However, some aspects should be part of any performance appraisal process:

• Future Goals : There should always be a clear path forward for employees, focusing on evaluating while recognizing that the past is unchangeable, and the only aspect one can influence is future performance.
• Employee Satisfaction: Evaluating an individual’s mood, personal-professional balance, and sense of value and appreciation within the company is crucial for future annual reviews.
• Realistic Objectives: Assessing whether set objectives were realistic, especially when unmet , is essential to improve the process.

Methods to Measure Performance Appraisal and when to use them

Throughout history, there have been various methodologies that have helped companies evaluate the performance of their employees. Some have survived to the present day: the so-called modern appraisal methodologies.

They can be combined, giving managers a much more comprehensive picture of an employee’s performance. 

Let’s take a look at some of these methodologies: 

Conclusions: the benefits of Employee Performance Appraisal outweigh its drawbacks

Although some still view performance appraisal systems as demanding on employees, their adoption is increasingly common in various organizations.

It is the responsibility of each organization to utilize this methodology effectively over the long term, ensuring that the data collected is reliable and valuable to both managers and employees. This information enables organizations to maximize resources, improve results, and foster better human relations.

Furthermore, it positively impacts employee engagement, offering them a golden opportunity to showcase their strengths during annual performance reviews. It also opens doors to improved training and professional and personal benefits. Our  proctoring products  are online supervision solutions that allow you to get the most out of exchanges and evaluations in your company.

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Top 5 Benefits of Employee Performance Appraisals

Performance Management, Supercharged

It’s that time of year: employee performance appraisals are around the corner at many companies. Whether your performance review cycle is monthly, quarterly, or twice a year, it’s nearly time to check in with your employees. 

But performance appraisals can be stressful for everyone involved, and they don’t always have the desired outcome. Only 14% of employees say that performance reviews motivate them to improve. 95% of managers are not satisfied with how their company conducts reviews. 

Before the next review cycle, refresh your knowledge of some of the top benefits of the employee performance appraisal. Then, you can approach this review period with optimism, ready to empower your employees.

1. Set New Goals And Aid Professional Development

We all know that employee performance appraisals are about reviewing performance since the last review cycle. It’s a useful exercise to see how employees have improved, goals they have met, or if their performance has declined. Performance reviews are also a good time to spot skills gaps or areas where additional training is needed.

It’s just as important to use employee performance appraisal time to address how they can improve going forward and set new goals. Your performance review system should enable managers to create professional development plans for employees who are ready for the next step in their careers. It’s an excellent time to talk to employees about skills they want to develop or set up a training schedule. 

Using employee evaluations to set performance and development goals is not only useful — it’s necessary to stay competitive. 59% of companies say they plan to focus on their goal-setting process into the next year.

2. Strengthen Employee Engagement

An employee performance appraisal is a chance to both hear from management and for employees to offer their feedback, a key factor in engagement levels. Employee engagement is a key driver when it comes to productivity and retention. Engaged employees are 17% more productive and five times less likely to quit than disengaged employees. 

The key to using performance evaluations to foster employee engagement is to do them right. Informal performance appraisals that take place more often can help with engagement since 96% of employees say they want more frequent feedback. Your formal performance review cycle can focus on long-term goals and professional development plans. Stay on top of day-to-day performance with weekly one-on-ones or daily check-ins.

3. Get Feedback From Peers, Management, And Individuals

Speaking of feedback, that’s another of the myriad benefits of the performance appraisal process. You might gather feedback with an anonymous employee survey . Then, management can address any concerns that seem widespread without singling anyone out. It also allows for more honest feedback from employees. 

Many companies are now using 360-degree reviews. That means getting feedback for each employee from their peers , managers, and the employee themselves. This method creates a well-rounded picture of performance and makes employee performance reviews much more effective. A Gartner survey discovered that peer feedback improves the utility of performance management systems by 3.5% and increases performance by 14%.

Did you know? A Gartner survey discovered that peer feedback improves the utility of performance management systems by 3.5% and increases performance by 14%.

4. Builds A Performance Appraisal History For Every Employee

A huge benefit of employee appraisal systems is that they create a record of every employee’s performance history. These records are easy to create and become even more beneficial when you use performance management software. Performance management software creates records with much less effort on the part of your HR teams and managers. It also equips your organization with tools that strengthen your appraisal process. 

The data gathered by performance management software enables you to create reports and see performance over time. Human resources and managers can spot what drives great performance and what might be holding employees back. Some questions that can be answered by robust appraisal records include:

• Is this performance review radically different from past reviews?
• What are the employee’s strengths and weaknesses?
• Has this employee’s performance trended up or down?
• Does this employee’s performance falter or improve around the same time each year (e.g. holidays, beginning of a new quarter, in the summer, etc.)
• Did feedback from a previous appraisal affect employee performance negatively or positively?
• Is this employee ready for a promotion or additional responsibilities?

5. Spot High-Performing And High-Potential Employees

We’re going to expand on that last question listed above since it’s a huge benefit of a performance appraisal system. Review records offer a comprehensive picture of recent performance and of performance dating back to the employee’s start date. That makes it easier to determine which employees are high-potential or high-performing. This information helps management make a strong case on the employee’s behalf for a promotion or for professional development opportunities. 

It’s incredibly beneficial for organizations to be able to identify their outstanding employees. High performers are up to 400% more productive than the average employee. They are also more likely to stay with your organization long-term. This also gives managers the opportunity to advocate for their team and recognize their accomplishments, determining factors in engagement and retention levels.

The benefits of a performance appraisal system can’t be overstated. 360-degree feedback, encouraging employee development, and recognizing their accomplishments is sure to improve engagement, retention, and productivity. It can also help your HR and recruiting teams bring in top talent. Attract, engage, and retain top talent with an excellent performance review system.  

Regardless of the types of performance appraisals you use, performance management software can power an efficient program. ClearCompany’s Performance Management tools enable your company to engage and retain top talent with useful, productive review cycles. 

Whether you use 360-degree reviews, employee surveys, formal performance appraisals, or a combination of those, ClearCompany has the customizable tools you need for a successful performance management system. Get started today — sign up for a demo from the experts at ClearCompany .

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The impact of employee engagement on performance and productivity, how goal alignment improves employee engagement.

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The Importance of Employee Appraisal in Organization Essay

Employee appraisal is an important part of any organization and calls upon the management to clearly tailor defined rating methods to appropriately rate their employees based on their performance and other requirements for fairness. A review of the company’s rating criteria reveals that it has fallen short of a reliable employee appraisal method with specific points of concern particularly in appraising the new engineer .These points of concern are uniquely characterized by the rating scale used in the evaluation process.

The first point of concern includes the engineer’s clashing personality and relationship with fellow employees. That is particularly evident from the frequent manner in which the engineer and fellow workmates clash and the manner in which other employees play practical jokes with the engineer.

This is summed up in the personality of the engineer. In addition to that, the engineer seems standoff with fellow employees deserving a medium rating. The second point of concern is neatness. As a characteristic with engineering jobs, the engineer’s table is always cluttered with a pile of memos a pile of papers qualifying the engineer for a low –medium rating. The third point of concern is the attitude.

The engineer seems to have a positive attitude towards work and completes tasks on time, but has a poor attitude towards co-workers. So the manager is in a dilemma on how to rate the engineer given the fact that since the engineer first reported in the new station there were drastic improvements in the manufacturing company. For the first time, there were improvements where the cost of production went down and a significant removal; of safety hazards not previously attended to.

Elements to be evaluated in an appraisal form based on the 360 degrees evaluation approach include the engineer’s individual skills. Based on the case study, the engineer has excellent skills which are evident from the benefits the company has experienced in the short time the engineer has been in the new station.

The engineer is certainly proficient in executing assigned tasks within the company. Another element to be evaluated is the engineers’ knowledge and the extent to which the engineer show familiarity with the tasks and working environment. The final element to be evaluated in the behavior of the engineer and not the personality traits that have been erroneously used in the evaluation criteria. Behavioral patterns that relate to the environment are critical factors to be evaluated as such (Employee Appraisal, 2005).

A number of advantages are experienced when using the same evaluation criteria for all employees. These include the use of a bipolar approach which is most times structured besides being of a similar standard.

Each employee is subjected to the same responses, and the responses are always in relation to one’s area of specialization. In addition to that, the employees’ evaluation process does not reflect any bias when a similar evaluation criterion is used. Besides that, the evaluation method does not show bias against race or any creed and is seen to be fair to all employees.

Employees are likely to feel that the evaluation criteria are standard and do not incorporate biasness. In addition to that, empirical documentation of scores ensures the validity and reliability of the appraisal method. If compensation and motivation is based on the evaluation criteria, then fairplay will be seen as applicable to all employees irrespective of their position in the organization. Another advantage is that a common evaluation criterion considers only areas of evaluation that are common across each department.

Disadvantages to this approach include the inability to factor critical issues relevant and unique to specific departments such as an engineering department and a marketing department. These areas are characterized by unique job descriptions and job analysis that calls upon different approaches of working under these departments.

Therefore, the approach is likely to raise dissatisfaction among employees from different departments if a similar criterion is used to evaluate them. In addition to that, a similar evaluation criteria is likely to spark conflicts in terms of performance particularly when an organization adopts a job rotation as a motivational and job enlargement approach, where other employees feel they have performed better than the others.

By comparison of any two of the three points, that is personality, neatness, and attitude, personality and attitude are compared here. Neatness is a strong common value for evaluation as even any engineer is called upon to be neat in all duties. It is also a common requirement in all other departments irrespective of the specific work for that department.

On the other hand, attitude is a personal attribute that can be influenced by a number of other external factors besides internal organizational factors. Therefore, comparatively, neatness is the strongest of the two evaluation approaches.

That is also based on special needs that are unique to an engineering department. Organization forms the next element in the set. Organization is characterized by the manner in which employees can be rated on their abilities to show overall leadership in scheduling their work, planning and achieving results. In addition to that, it also includes ability to achieve departmental goals and objectives within the required time schedule.

In the evaluation process, is important to include supervisors, peers, and subordinates. This is so because of the advantages associated with the 360 degrees evaluation approach. Among the advantages realized when using this method is the ability to mobilize the workforce to register an improvement in the performance of team members.

The next advantage is that the evaluation criteria is inclusive of all organizational employees spanning the administrators and peers in the organizational hierarchy. In addition to that, the evaluation method significantly avoids personal bias. This method is seen as an objective way of evaluating employees.

It has been argued that one key advantage of this method is that specific areas of improvements can be easily identified in the evaluation process and difficult tasks can be identified in the process of conducting reviews that are carried out regularly within an organization. Other advantages include the ability for employees to conduct a self evaluation and identify areas to be improved.

Each employee in this evaluation process acts a basis for the evaluation process. However, the 360 degrees evaluation process suffers from a number of disadvantages (Performance management practitioner series, 1997).

One of the disadvantages is that the process focuses on personal traits making the evaluation process subjective rather than objective. In addition to that, it has been demonstrated that personal biasness can encroach upon the evaluation process particularly if personal differences exist between employees in the same department.

The inability to distinguish between good and bad performance may also get into the evaluation process making employees not to be sure of the best approach to use to improve their ratings. Hence, the process is said to be highly subjective. Other disadvantages include the central tendency problem and the similar-to-me problem. The similar-to-me problem is based on the fact that other employees may develop the tendency to evaluate others based on their individual feelings of competence (Jensen, 1997).

The three performance evaluation methods to compare and contrast in this discussion include the graphic rating method, the global method, and the hallo effect.

The graphic rating method in based on the fact that employees can be rated on a scale of outstanding performance, followed by above average on the same scale, then satisfactory performance, then a below average scale, and finally on the same scale unsatisfactory performance (Employee Appraisal, 2005). On the other hand, the global method is closely similar to the graphic method.

The difference is that the global method can be biased. The essay method is characterized essay writing. The person performing an appraisal on an individual writes an essay on the consistence of the skills of the employee, the writing skills of the employee, the quality of work of the employee, job performance, and team work. The latter method gives the appraising party freedom to describe the person being appraised.

The graphical scale suffers from the disadvantage of the possibility of introducing biasness into the rating process. On the other hand, the global method is little recommended as the employer may not have an idea of the specific areas where the appraised person is required to make improvements on (Jensen, 1997).

Some of the examples of at least three errors that commonly impact the accuracy of performance evaluations are discussed here. One of them is the central tendency effect. This method is characterized by the tendency to rate employees on average values rather than using extreme values to avoid the possibility of getting criticized.

Another error likely to impact on the scaling of employees is the leniency effect that can either be positive or negative. This has the overall effect of rating employees above or below their actual ratings. The negative or positive leniency effect is likely to cause biasness in rankings as the appraiser looks at self as the benchmark to apprise others. Therefore, it is important to use appropriate techniques to improve the performance of the given situation.

These techniques can only be used depending on the number of employees working within an organization, the actual size of the organization, the number of employees and the job description of each employee.

In addition to that, organizational resources, organizational objectives, the complexity of the operating environment, the cost of investment and benefits that may accrue from the use of a specific appraisal method significantly contribute to the specific option of using a specific appraisal method (Employee Performance Appraisal. Good Practice Guide, n.d).

Other methods and techniques used include the critical incident method, the traits format technique, and anchoring method that may be specific to specific needs of the company. These methods are specific to a specific situation as every aspect of a situation is addressed with a specific method.

Employee Appraisal. (2005). Acas. Web.

Employee Performance Appraisal. (n.d). Good Practice Guide. Web.

Jensen, J. Employee Evaluation (1997). It is dirty job, but somebody’s got to do it. Web.

Performance management practitioner series . (1997). [Pdf document]. Web.

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IvyPanda. (2019, August 12). The Importance of Employee Appraisal in Organization. https://ivypanda.com/essays/performance-evaluation/

"The Importance of Employee Appraisal in Organization." IvyPanda , 12 Aug. 2019, ivypanda.com/essays/performance-evaluation/.

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IvyPanda . 2019. "The Importance of Employee Appraisal in Organization." August 12, 2019. https://ivypanda.com/essays/performance-evaluation/.

1. IvyPanda . "The Importance of Employee Appraisal in Organization." August 12, 2019. https://ivypanda.com/essays/performance-evaluation/.

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Why are employee appraisals important?

Employee appraisals are a widely-used element in performance management, all over the world.

First published on Thursday, Jun 04, 2020

Last updated on Thursday, May 25, 2023

But why are they important? And how can HR make a case for using appraisals, if your organisation doesn’t already?

From identifying employee training needs, to spotting your company’s rising stars, employee appraisals have many important uses.

Using appraisals to measure and reward performance

The first and most obvious purpose of employee appraisals is to measure employees’ performance. Your organisation might need to do this for several reasons:

• To make sure employees are working to the required standard
• To gauge which employees are performing the best and therefore eligible for bonuses, pay rises and other rewards
• To address performance issues where necessary

Using appraisals for employee development

Whether staff are performing well or poorly, employee appraisals present an ideal opportunity for HR to identify the next stage in their development. Many organisations use personal development plans (PDPs) within staff appraisals, to direct and record staff development. You can use PDPs to set development goals that the employee should try to reach before their next appraisal.

For under-performing staff, you can use appraisals to identify skills gaps and training needs . Employees can then take the training programmes they need to perform their role better.

Using appraisals to spot potential

Appraisals aren’t just for remedial action. They’re also a moment to sit down with your best-performing employees and to map out their career path. Rather than addressing skills gaps, this may include offering training to develop skills required for promotion.

Appraisals are therefore extremely useful in the talent management process, a major element of which is developing and retaining high-performing employees. Without an effective appraisal system, you might never spot talented individuals who could be the future of your organisation.

Using appraisals to manage changing roles

Almost every job role changes over time, whether because of new technology, new products and services your company introduces, or changes to the size of your team. Employees often need help to understand these changes and how their role is affected . Appraisals are an ideal time to manage this, by:

• Explaining new responsibilities clearly
• Setting clear goals related to the new responsibilities
• Arranging training in new technology or products

Using appraisals to improve performance

The goals you set in employee appraisals don’t just have to be about staff development. You can also challenge employees to improve their performance, and increase your team’s productivity as a result.

Performance goals must be fair and achievable, or they could have a negative impact. Use performance data to set goals where possible — for example, if an employee’s performance has slipped below a previously recorded level, you can use that data to remind them they can do better.

Giving your employees a voice

Finally, don’t forget that employee appraisals aren’t a one-way street. When they have worries, questions, or ideas, the one-to-one setting of an appraisal meeting is a great chance for employees to speak up .

When line managers listen to employees and address their concerns, the result can be a happier workforce. It’s yet another reason appraisals can be important to your organisation.

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