Performance appraisal: types, objectives & benefits

In the recent “From Praise to Profits” report by Gallup and Workhuman, it has been observed that if an organization recognizes their employees’ good work, they will see a significant increase in overall productivity.

Almost every employer or manager faces an issue deciding if an employee deserves a raise/promotion. This is when the concept of performance appraisal comes into play!

Let’s navigate the fundamentals of performance appraisal, its purpose, different types of appraisals, their advantages, and a lot more. 

What is performance appraisal?

A performance appraisal is a structured plan to review the performance of an employee. From performing a detailed assessment to providing constructive feedback, the process involves a lot of things.

There are several different factors, depending on the roles and responsibilities of an individual. These appraisals can be conducted at any given time but are more likely annual, semiannual, or quarterly.

By conducting a successful performance evaluation, managers can enhance the overall productivity of their team. In addition, it helps employers to make better decisions about making any changes in the existing company structure. 

Also read: How to upgrade your employee performance review process

Types 

According to PwC, 60% of employees prefer regular feedback. Most organizations offer it during their performance review. There are four main types of performance appraisals, depending on the method being used for it: – 

• Peer assessment

When team members rate an individual’s performance, it is called peer assessment. In this type of performance appraisal, a group of co-workers gives an opinion about that particular employee, and then management makes certain decisions depending on that.

• Self-assessment

In this method, employees perform a self-evaluation and rate themselves in several categories. Although these categories can vary from one organization to another, some common ones are work targets, teamwork, timeliness, etc.

• 360-degree review

Although peer assessment and self-evaluation are two commonly used performance appraisal methods, some organizations use a combination of the two. It is known as a 360-degree performance review. In this method, company management gathers information about an employee’s performance from several sources. For instance, a manager can ask an individual to perform a self-assessment and consult with his/her peers to gather more detailed 360-degree feedback.

• Negotiated appraisal

This is a new trend in employee appraisal that has gained huge traction. In this type of performance appraisal, a mediator is involved in the process. They act as a communication bridge between the employee and management and help evaluate the overall performance. However, the method emphasizes the positive points of the employee’s performance.

Why is performance appraisal important?

The ultimate aim of a performance appraisal is to review employees’ performance. It not only gives a clear picture of their performance but also helps justify salary increments, bonuses, and other perks. 

Other than this, it helps company management make certain decisions related to termination or any changes in the role and responsibilities of an individual.

Key objectives of performance appraisal

Here are a few objectives for conducting performance appraisals within an organization at regular intervals: – 

Define goals

In every organization, regardless of its type or size, employees must have a specific set of goals defined for them. Performance appraisal helps them develop a clear understanding of what you expect them to do. When they know what needs to be done and how to do it, they can move in the right direction.

Motivate employees

Regular performance appraisals allow employers to identify employees who are doing exceptionally well and the ones who need improvement. For those performing well, you can decide how they need to be rewarded. On the other hand, it is essential to counsel employees who aren’t meeting their set goals for some reason.

Make decisions about hikes and promotions

One of the most critical objectives of conducting a performance appraisal is to make decisions regarding salary raises and promotions. Since the salary you pay an employee is often in line with his/her performance, it is important to know how an employee is doing. This way, it gets easier to determine if he/she should get an increment or promotion.

Improve organizational performance

With an effective performance appraisal system, employers can ensure maximized overall performance. It helps you figure out which employees are working in the right direction and which ones need some sort of guidance.

There is no denying the fact that performance appraisals offer a long list of benefits. However, if not done right, they can negatively affect employees and the organization.

For instance, any bias in the process can lead to a negative experience. So, you must create a well-structured employee evaluation plan with complete transparency. Workable highlights what to measure in employee performance reviews, which can help you make the right decision.