Performance Appraisals

When Should Appraisals Be Done?

Graphics courtesy of AIHROpens in new window Ideally, performance appraisals should occur both formally and informally. Formal performance reviews should be conducted once a year at minimum, but twice a year is better. Informal performance appraisals and feedback should complement the formal appraisal system.

The ultimate goal is to establish an effective “performance management system” where performance is monitored and managed overall, not just appraised in a once a year session.

Continuous feedback is primarily important in letting employees know how they are doing. Without constructive feedbackOpens in new window, employees tend to assume that their performance is acceptable, and problems may continue.

Without positive feedback or praise, employees begin to feel that their hard work is unappreciated and may decide to stop putting forth so much effort. Employees need and expect frequent communication and feedback about their performance—not just during the formal appraisal interview session.

The most effective leaders make it a habit to get out among their employees throughout the day or week and do not wait for their employees to come to them. This type of frequent interaction also tells employees that their leaders think they are important.

Who Should be Responsible for Conducting Performance Appraisals?

Most performance appraisals are done by leaders who are immediate supervisors of an employee, because they are in the best position to observe the employees and evaluate how well they perform their jobs.

When leaders do the appraising they must be familiar with basic appraisal techniques, understand and avoid problems that can cripple an appraisal, and conduct the appraisal fairly. To add different perspectives, sometimes appraisal information is provided by other people knowledgeable about particular employees.

1.     Peers, Direct Reports, Customers, and Self

Among additional sources of information are co-workers and direct reports, customers and clients, and the employees themselves.

• Peers and direct reports. Co-workers, colleagues, and direct reports may well see different aspects of an employee’s performance. Such information can be useful for development, although it probably should not be used for evaluation. (Many leaders will resist soliciting such information about themselves, of course, fearing negative appraisals.)
• Customers and clients. Some organizations, such as hotels and restaurants, ask customers and clients for their appraisals of employees. Real estate companies and automobile dealerships may send follow-up questionnaires to home buyers and car buyers.
• Self-appraisals. Are based on an employee rating their own performance in a job, knowing that it would go into their personnel file. Probably the bias would be toward the favorable. Nevertheless, self-appraisals help employees become more receptive to feedback about areas needing improvement.

2.     360-Degree Assessment: Appraisal by Multiple Sources

Sometimes peers, direct reports, customers, and the employee themselves may be used in a technique called 360-degree assessment. Usually employees have many people watching them from all sides. Thus has arisen the idea of the 360-degree feedback appraisal, or 360-degree assessment, in which employees are appraised not only by their immediate leaders but also by peers, direct reports, and sometimes clients, thus providing several perspectives.

Typically, an employee chooses evaluators from 6 to 12 people to make evaluations, who then fill out anonymous forms, the results of which are tabulated by computer. The employee then goes over the results with their immediate leader and together they put into place a long-term plan for performance goals.

Collecting performance information from multiple resources helps the individual being evaluated get a broad view of their performance, and it highlights any biases and perceptual errors that are occurring.

Finally, using multiple raters also makes it much more difficult for leaders to unfairly favor or punish particular employees.

3.     Forced Ranking: Grading on a Curve

To increase performance, some organizations have some variant of performance review systems known as forced ranking (or “rank and yank”) systems.

In forced ranking performance review systems, all employees within an organization unit, group, or team are ranked against one another and grades are distributed along some sort of bell-curve. Top performers (such as the top 20%) are rewarded with bonuses and promotions; the worst performers (such as the bottom percent) are given warnings or dismissed.

Proponents of forced ranking say it encourages leaders to identify and remove poor performers and structure a predetermined compensation curve, which enables them to reward top performers. However, opponents contend that the system eventually gets rid of talented as well as untalented people.

There may also be legal ramification given that a recent suit brought against Yahoo’s media division claimed the company used forced ranking to discriminate against male employeesOpens in new window. In addition, numeric ratings, ranking, and formal evaluations without positive feedback may produce the opposite of their intended results—namely, create a culture of reduced performance.

How to Conduct a Formal Appraisal

Clearly, conducting performance appraisals is one of the leader’s most important and difficult functions.

The first thing a leader can do to conduct an effective formal performance appraisal is to make sure that there are no surprises in store for employees. This means that leaders should communicate with their employees on a regular basis about how they are doing with their assignments and how well they are collaborating with others.

The formal appraisal session, therefore, should be primarily a way to summarize and continue the informal interaction that has previously taken place between the leader/reviewer and the employee. It should also be a time to look at how the leader and the employee can continue to work well together in the future.

The leader’s job in this session is not to tell the employee all the things the employee did wrong over the past year. One reason employees dread these sessions is that leaders feel they have to find something to criticize as well as praise.

The leader might then mention a negative comment the employee made or similar trivial points. This hypercritical approach will merely increase the employee’s resentment and defensiveness and will make employees feel as though they are powerless to improve.

To make sure the session goes as well as possible and to avoid making it uncomfortable for both the leader and the employee, five general steps should be followed:

1. Refer to past feedback and documented observations of performance.
2. Describe the current performance.
3. Describe the desired performance.
4. Get a commitment to any needed change.
5. Follow up.