What is a performance appraisal? Methods, examples and benefits

Performance appraisals are essential to managing employee performance and ensuring employees meet their goals and objectives. By providing employees with feedback and guidance, performance appraisals can help them identify areas for improvement, build on their strengths, and take steps to enhance their performance. This article will explain everything you need to know about performance appraisals, including their types, methods, purposes, and benefits. We will also discuss how performance appraisals can be used to improve employee performance, foster professional development, and support organizational goals and how an LMS can help you with this process.

What is a performance appraisal?

A performance appraisal formally evaluates an employee’s performance over a specific period. It involves assessing an employee’s skills, knowledge, and behaviors in relation to their job requirements and objectives. In addition, a performance appraisal aims to provide feedback on an employee’s performance, identify areas for improvement, and support their professional development. There are three types of performance appraisals, each with its unique benefits and drawbacks. Let’s look into the specificities of all the available models. 

Annual appraisals are the most common performance appraisals. They are typically conducted once a year and provide a comprehensive assessment of an employee’s performance over the previous year. During the annual appraisal, the employee’s performance is evaluated against predefined objectives and metrics. They are usually set at the beginning of the performance period and aligned with the organization’s goals and objectives. The annual appraisal process involves a formal evaluation by the employee’s manager, who assesses the employee’s performance and provides feedback on areas for improvement. In addition, the employee is also given an opportunity to give self-feedback on their performance. The process usually culminates in a performance review meeting between the employee and their manager, where the employee’s performance is discussed, and goals and objectives are set for the upcoming year.

Project-based appraisals are conducted at the end of a specific project and assess an employee’s performance. These appraisals are particularly useful for employees who work on short-term projects and require feedback on their performance. During the project-based assessment, the employee’s performance is evaluated based on the specific objectives and metrics of the project. Moreover, the project-based appraisal process involves a review by the employee’s manager, who provides feedback on the project execution and the areas for improvement. This appraisal process usually culminates in a review meeting between the employee and their manager, where the employee’s performance is discussed, and goals and objectives are set for the next project.

Continuous appraisals involve providing real-time feedback on an employee’s performance. These appraisals are generally less formal than others and involve ongoing communication between employees and managers. The goal of continuous assessments is to provide employees with feedback and guidance on an ongoing basis, allowing them to make adjustments and improvements as needed. Continuous appraisals can be conducted through regular check-ins between the employee and their manager or an ongoing performance management process that includes regular feedback and coaching. The continuous appraisal process is designed to be constant, with feedback provided on an ongoing basis rather than at a specific time or date. It allows employees to receive feedback and guidance as needed, rather than waiting for an annual or project-based appraisal to receive feedback on their performance.

Methods of performance appraisals

Each performance appraisal method has pros and cons. Organizations may choose to use one or a combination of these methods depending on their needs and objectives. By understanding the different performance appraisal methods, organizations can select the best one to evaluate employee performance and provide feedback to help employees improve their skills and achieve their goals. So let’s examine them in more detail.

Rating scales involve assigning a score to an employee based on specific criteria, such as job knowledge, communication skills, and teamwork. This method is easy to use and provides a quantifiable measure of employee performance. However, it may not provide a complete picture of an employee’s performance and may not take into account individual differences.

Narrative evaluations engage providing written feedback on an employee’s performance, highlighting areas of strength and improvement. This method is more subjective than rating scales but provides a more detailed assessment of an employee’s performance. Narrative evaluations are often combined with rating scales to provide a complete picture of an employee’s performance.

360-degree feedback is based on gathering feedback from multiple sources, including managers, peers, and subordinates, to comprehensively assess an employee’s performance. This method provides a broad perspective on employee performance and can help identify blind spots and areas for improvement. However, it can be time-consuming to administer and may be challenging to manage.

Behavioral observation scales involve observing an employee’s behavior and recording specific behaviors relevant to their job performance. This method can provide a detailed assessment of an employee’s performance but can be time-consuming to administer and may be subjective.

Management by objectives covers setting specific targets for an employee and evaluating their performance based on their ability to meet those objectives. This method is goal-oriented and can provide a clear framework for assessing employee performance. However, it may not consider external factors impacting employees’ ability to meet their objectives.

Benefits of Performance Appraisals

Performance appraisals are essential for managing employee performance and ensuring employees meet their goals and objectives. While the primary purpose of performance appraisals is to evaluate employee performance, they provide several benefits to organizations and employees. These advantages include improving employee performance, supporting employee development, enhancing employee engagement, supporting organizational goals, and providing a basis for rewards and recognition. As a result, organizations can create a more effective performance appraisal process that drives employee development and supports organizational goals. Here are several benefits performance appraisals bring to organizations and employees, including:

• Improving employee performance: Performance appraisals help identify areas where employees need to improve and provide guidance on making those enhancements. By setting clear expectations and goals, employees are more likely to focus on their performance and take steps to progress.

• Supporting employee development: Appraisals can help identify training and development needs and provide employees with opportunities to enhance their skills and knowledge. This, in turn, can lead to greater job satisfaction and career advancement opportunities.

• Enhancing employee engagement: Through performance appraisals, employees are shown that their efficiency is valued and recognized, leading to greater engagement and motivation. In addition, employees are more likely to feel valued and committed to their work by providing feedback and recognition for a job well done.

• Supporting organizational goals: Performance appraisals help align employee performance with organizational goals and objectives. By setting clear expectations and metrics, employees are more likely to focus on common goals.

• Providing a basis for rewards and recognition: Properly executed assessment can be used for rewards and recognition, such as promotions, bonuses, and salary increases. Organizations can motivate employees to perform at their best by linking performance to rewards.

Take your performance appraisal to a higher level

Performance appraisals are critical for managing employee performance and ensuring that employees meet their goals and objectives. By using effective performance appraisal methods, organizations can identify areas of improvement, support employee development, enhance employee engagement, support organizational goals, and provide a basis for rewards and recognition. In addition, creating a performance appraisal process that aligns with organizational goals and objectives, provides employees with regular feedback, and fosters a culture of continuous learning and development. With the help of LMS, companies can improve employee performance, drive success, and achieve their goals. In addition, organizations can create a more efficient and effective evaluation process by using a learning management platform to automate and streamline the performance appraisal process that drives employee development and supports organizational goals.