Performance Appraisal Process: Meaning, Types, and Objectives

The performance appraisal process is defined as a process under which periodic assessment is undertaken to evaluate the performance of an employee. The input by an employee is compared with the output as per pre-defined performance goals.

What is performance appraisal process?

The performance appraisal process has been used as a deciding factor for career development, and in most cases, the promotions and salary raise are directly dependent on it.

If an employee manages to garner higher ratings, it indicates netter performance by the employee and thus better growth of the organization.

In case an employee gets lower ratings, the organization can then help him to improve his performance by offering him training to improve his skills and knowledge.

More and more organizations are leaning in favor of conducting a performance appraisal process because it will help them to accomplish the business goals at a faster pace.

The performance appraisal process should be calculated over some time so that both the employer and employee can have a better idea about his performance on an annual basis.

The performance appraisal process is a formal interaction between an employee and his manager that takes the form of a structured interview to examine and discuss strengths and weakness.

This is undertaken to improve current skills and knowledge and offer further opportunities for improvement, development, and growth.

Objectives of the performance appraisal process

The purpose of a performance appraisal process is as follows-

• Identifying the strength and weakness of an employee
• Opening communications between employees and managers
• Strengthening the relationship of an employee with his superior
• Offering clarity in terms of expectations and organizational goals
• Encouraging superior performance
• To assess the potential for growth and development in an employee
• Identify whether the employees need further training
• Encouraging employees to take part in coaching
• To offer constructive feedback to the employees
• Counseling average and poor performers
• Identify performance gaps if any
• To obtain the necessary information that will help the company in allocating organizational rewards, compensation packages, salary raise, and wage structure
• Supporting manpower planning
• Improving the overall performance of an organization
• Reducing the grievances of an employee

12. Advantages of the performance appraisal process

The advantages of the performance appraisal process are as follows-

1. It becomes easier to maintain a record of individual performance over some time, and this helps the company to make proper evaluations
2. The performance appraisal process includes comparative ratings, and this helps the company to reward its better workers
3. It helps the management to decide about important issues like transfers, raise and promotions
4. The statistics derived from performance appraisal process helps the company to screen its recruitment process
5. The performance appraisal process helps the company in identifying the right talent for specific jobs so that they can place the employees in particular areas depending on their know-how
6. It becomes easier for a business entity to find those employees who are working above the set standards and also those who are unable to find their rhythm
7. The performance appraisal process acts as an opportunity for the management to hold discussions with its employees about their performances
8. It is also an opportunity for the employee to discuss and clarify issues and expectations with his manager
9. The performance appraisal process determines the effectiveness of a training period and whether it has proved successful or not
10. The feedback helps the employee to know whether they have completed their goals or not
11. A performance appraisal process is a motivational tool that can prompt the employee to make viable changes so that he can do better in the coming days
12. It encourages healthy competition between the employees as they try to garner better scores than their co-workers

5. Disadvantages of the performance appraisal process

The disadvantages of performance appraisal process are as follows-

1. The performance appraisal process is time-consuming as the evaluation process is an ongoing one
2. If not conducted in an appropriate manner it can prove a negative experience for the employee
3. As the process is dependent on human assessment, it is subjected to bias and errors and thus lacks reliability
4. It proves stressful if the results are not in your favor
5. The performance appraisal process should be conducted with the help of pre-designed guidelines otherwise it will prove a complete waste of time and effort

Types of the performance appraisal process

The different types of performance appraisal process are as follows-

1. Critical incident method

In this type of performance appraisal, process-specific incidents are identified and described. It deals in particulars about the time when an employee was at his best and even when he performed below par.

Facts

• Performance of every employee is evaluated based on the logs placed in the evaluation form
• The logs are maintained by the manager who is charged to record important incidents
• At the end of a specific term, these recorded logs are used as a basis for performance evaluation

Limitations 

• The critical appraisal method harps more on negative aspects than the positive ones
• It involves close supervision which the employee may not feel comfortable with
• Recording all the incidents diligently of every employee is a chore that the manager may find tedious and boring
• It is a time-consuming process

2. The paired comparison analysis method

There are several relevant options in this paired comparison analysis performance appraisal method. All the options are set in the form of comparisons with others on the list, and the calculations are derived after looking at the highest scores.

Facts

• It is easy to choose the necessary option when priorities are not clear
• This method is generally used when you do not have objective data at your fingertips

Limitations 

• The method is not fully accurate

3. Weighted checklist method

In this type of performance appraisal process, the job of an employee is under scrutiny, and evaluation is based on effective and ineffective behavior of the employee on his job.

Facts

• The manager who is responsible for the evaluation process can be biased
• He has the opportunity to offer biased weights to the questions

Limitations 

• It is a time-consuming method as assembling and analyzing a number of statements takes time
• The weighted checklist method is considered expensive

4. Essay evaluation method

In the Essay evaluation method, the manager figures out both the strong and weak behavioral points of an employee.

Facts

• It is a non-quantitative technique
• It is less structured
• It is an open-ended and flexible process

Limitations 

• It is difficult to implement
• The Essay evaluation method is considered a time-consuming process
• The evaluation is subjective and prone to bias and errors
• It is considered uneconomical

5. Graphic rating scales method

In Graphic rating scales method, it is the duty of the management to check on the performance level of an employee simply.

Facts

• It enables quantitative comparison
• It is less time consuming compared to other types of the performance appraisal process

Limitations 

• Less validity in ratings

6. Management by objectives method

In this type of performance appraisal process, a list of objectives is set up by a manager to assess the performance of an employee on a regular basis.

Facts

• The emphasis is on the future and not on the past, and thus the performance appraisal process is all about the constructive end
• Emphasis is on short-term goals
• It is assumed that the employee is the best person to know about himself

Limitations 

• It is not easy to facilitate active participation by every employee
• The long-term goals are avoided under this process
• Goals remain rigid

7. Behaviourally anchored rating scales method

The Behaviourally anchored rating scales method is considered formatted and is a mix of critical incident technique and rating scale.

Facts

• Identifying the effectiveness and ineffectiveness of the performance of an employee takes time.

Limitations 

• It is difficult to develop

8. 360-degree performance appraisal method

This type of performance appraisal process includes allowing co-workers, peers, clients, supervisors, and customers to fill out a questionnaire which offers detail about that particular employee.

Facts

• Improves credibility
• Is a correct assessment

Limitations 

• Is time-consuming

9. Performance ranking method

This type of performance appraisal method is used to assess the performance from highest to lowest levels of an employee.

Facts

• Comparisons are made between the employees

Limitations 

• There are no set criteria for comparisons

10. Forced ranking method

In this type of performance appraisal method, the employees are ranked in terms of allocations.

Facts

• The process identifies the most and least talented employee in the group
• The onus is on sustaining and improving the performance of a team

Limitations 

• Leads to unhealthy competition
• Results in discrimination
• Discourage teamwork

Here is a video by Marketing91 on Performance Appraisal.

Steps in Performance Appraisal Process

1. Establish performance expectations and standards

Appraisal processes start with establishing standards and expectations. The essence of this is to make it easy for you to identify particular output, skills, and accomplishments that will be assessed.

This first step is basically about setting the specific criteria that will assist you as a manager to determine whether or not the performance of the employees are satisfactory as well as the levels of contribution towards goals and objectives of the organization.

For you to achieve better results, it is ideal to ensure that the expectations and standards that you set are clear, concise, comprehensible, realistic and in measurable terms. It is also advisable that you make the formulation of these standards an all-inclusive affair by involving your employee too as a way of preventing vagueness and also enhancing unity in the job environment.

2. Providing regular feedback

This is simply about establishing effective communication between you and the employees in regards to standards and expectations. It is an important aspect because it helps in ensuring that employees perform their roles by the goals and objectives of the organization. Feedback can be provided formally or can be communicated informally.

Feedback should also be consistently given to help employees in keeping tabs on particular activities that they are doing as well as performing them in the right manner. Feedback should never be a preserve for special occasions but rather need to be given instantly; whether positive or negative provided that it helps the employee in performing better.

Employees need to get feedback in regards to standards expected of them, and if possible, the standards can be revised to reflect the feedback acquired from your workers.

3. Measure actual performance

This stage incorporates measuring of employees’ actual performance based on information obtained from different reports such as written, oral and statistical as well as through personal observation. This is the stage that calls for a careful choice of the ideal methods that are used in measuring performance.

It is of utmost significance to ensure that you do not make appraisal judgment based on what you feel towards the employee. It is only appropriate to make a sound measurement of findings, facts, and objectivity. The essence of this is that what is measured supersedes the manner in which it is measured hence the need for ensuring that objectivity is adhered to.

You also need to have in mind that measuring of employees’ actual performance needs to be a continuous activity that should be carried out throughout the year hence to identify all the parameters effectively.

4. Compare actual performance with standards

The next thing you need to do is comparing the actual performance with the anticipated or standard performance. This comparison is essential because it makes it possible for you as the manager or evaluator to identify the deviations of your employees from the established standards.

The results of the comparison may be depicted positive or negative results that would call for appropriate action depending on how you deem the results to be. Some of such actions include recalling, assessing and scrutinizing data concerned with the performance of employee among many others.

As an issue of concern, comparing actual performance with desired standards also enables the manager to institute appropriate measures that would help in enhancing performance that needs to be met and at the same time working on areas that should be improved to attain organizational objectives and goals ultimately.

5. Discuss results of appraisal

As earlier mentioned, Process Of Performance Appraisal is a continuous process that takes time. As a manager, the next thing you need to do is to ensure that you communicate the feedback of appraisal to your employees on a one-on-one basis.

It is always challenging for managers to present truthful appraisal to the employees and enable them to constructively accept the results, especially if it reflects more negatives than positives. But what you need to know is that discussing feedback together is a better approach of allowing them to understand their strengths and weaknesses. This ultimately has an impact on how they will perform in future depending on how you communicate the feedback whether positive or negative.

It is also advisable to prepare your workers psychologically before presenting appraisal results and also ensure that results are communicated with lots of positivity. The aim here is to motivate the employees and not necessarily to evoke emotions.

6. Come up with corrective measures

This is the final stage in appraisal processes. Initiating some effective corrective measures should be executed according to the results of the appraisal. Carefully examine the results and identify areas that require improvement and then come up with corrective action that will make it possible for employees to improve performance. At this stage.

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