For decades, employers have used an annual performance appraisal process as a tool for grading, ranking, and measuring employee performance. Such appraisals have formed the basis of promotional decisions, merit increases, and bonus calculations.
The stakes are highest when performance appraisals are part of the decision to terminate a worker. When a business unit asks for a risk assessment for terminating an employee for poor performance, human resources professionals and employment lawyers typically respond with a question: “What do the performance appraisals say?” The clearer the answer, the lower the risk.
An appraisal system that works
When developing measurement methods and setting goals for a performance year, management should refer back to the job description for a position to ensure the measured performance is aligned with the expectations and goals set forth in that job description. If a formal annual review is conducted, it should accurately document the “big picture.”
The review should be a summary of an employee’s performance over the applicable period of time. Even though the review process is annual, supervisors should be trained on proper methods of keeping track of an employee’s progress throughout the year and sharing that feedback with the employee as warranted. This exercise is likely to lead to more accurate information and a shorter time commitment at annual review time.
Mistakes in the evaluation process
Employers should be careful to avoid these potential mistakes when conducting formal performance evaluations:
1. Basing the evaluation on the employee’s most recent behavior instead of the entire performance period. It is prudent to maintain an ongoing list or file of an employee’s job performance.
2. Allowing irrelevant or non-job-related factors to influence the evaluation. Some examples of these factors include physical appearance, social standing, participation in employee assistance programs, or excused time off for leaves of absence.
3. Failing to include unfavorable comments on the evaluation, even when justified. For the evaluation to be effective, the evaluator must be candid about the employee’s strengths and weaknesses.
4. Allowing one very good or very bad rating to affect all the other ratings. This “halo effect” should be avoided.
5. Allowing personal feelings to bias the evaluation process. Personal likes and dislikes can cloud the truth about the employee’s actual performance.
6. Winging the evaluation. Prepare for the review in advance.
7. Assuming the employee understands the review process. Explain the purpose of each part of the process.
Consider the benefits and risks
Despite the assumed benefit of performance appraisals, it is important for organizations to ask:
- Why do we have a performance appraisal system?
- What are we measuring?
- How are we measuring?
- What is our ultimate objective with these reviews?
With the various benefits and risks under question, employers have started to wrestle with the question of whether to forego the written, graded performance appraisal process. Foregoing the annual written process in favor of more frequent quarterly or monthly one-on-one sessions allows management to provide more accurate and timely feedback to employees. These sessions can be documented throughout the year, eliminating the potential pressure and anxiety surrounding a singular, annual performance review meeting.
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