Performance Appraisal: Meaning, Difference, Best Practices and Types

Performance Appraisal, as the name suggests, is related to appraising the employees working on an organization basis their performance. Depending on how the performance was average, poor or outstanding, they are promoted and/or given a salary raise.

To help you understand more about performance appraisal, in this blog, we tell you everything right from the basics to the advanced implications of it. Make sure you read every section to know it all.

What is performance appraisal?

Performance appraisal is done to record and analyse the performance of every employee in the company. Put simply, performance appraisal is the same thing as development discussion, performance evaluation, employee appraisal and performance review. There are four major components that it involves- Define goals, measure and monitor them and then give feedback and finally again review the recorded performance.  

Alternatively, you can also say that performance appraisal is nothing but a job performance review in which the contribution of employees is measured towards the goals of the company. Mostly done once in a year, the performance appraisal takes into account initiatives, skills growth, and achievements against the goals that had been set and cleared at the start.

Performance management software helps immensely in tracking the performance. It helps in keeping the past performance track documented so that it is easier at the time of appraisal to evaluate performance fairly and decide how the employee should be appraised.

Performance appraisal is not equal to performance management. A lot of times people confuse these with each other. They are different performance appraisals and are a part of the bigger picture that is performance management.

This is exactly how performance management software is a part of HRMS and not HRMS itself. Another way to understand the difference between both these lies in the execution.

Performance management is done continuously and performance appraisal is done once in a year mostly. Appraisals are also more like a reaction to the performance and performance management is more about helping the employees in learning the new and rectifying the mistakes. The appraisal looks at the past and performance management looks at the present. 

Moreover, performance is really formal, operational, and quantitative in nature and performance management is completely opposite.

Objective Of Performance Appraisal

The main objective of performance appraisal is to reward the performance and efforts of the employee so that they keep performing the same or even better and help in achieving long term business objectives. 

The three main objectives are to check the quality and quantity, see the time taken to perform the tasks, and the actual value that work adds.

Best practices for performance appraisal 

No matter which performance appraisal method you choose to follow in your company, there is a set of best practices that you must not overlook. Below we tell them to you one by one, take a look!

  1. Performance management should be treated as an entire system right from the interview of a potential employee to the orientation, training, counselling and recognising his peak performance should be taken seriously.
  2. Consider performance appraisal as an ongoing process and treat it as one. Keep sharing feedback so that the employee can work as per your expectations and know the improvement areas.
  3. Train your employees and leaders to take and give feedback in a constructive manner on a continuous basis.
  4. Let the seniors in every team know that they are/ will be held accountable for conversations around goals and the work in the teams.
  5. Make sure you and everyone is directed and motivated towards the achievement of organizational goals and objectives.
  6. Cultivate an environment where everyone is heard. The goals, objectives must be discussed, questioned, challenged to make them better or gain a better understanding of them. In the process don’t just count the managers in but employees as well! 
  7. The performance management system should be used in a way that the organisational values are reflected in the competencies you create and the same should also reflect at the time of interviewing and at the time of performance appraisals as well. 
  8. Link performance of every employee with development, succession, retention and planning as well. This will help you in understanding and doing the right as in who deserves to be advanced in your company and who still is a work in progress.
  9. It is very important for senior-level management to be supportive and listening enough. A business cannot have a great performance management system if they want to keep your talent and skyrocket productivity. You hire the right people as leads so that they can handle and manage it all too well.
  10. Tell every person in the company how your compensation system works, hiding this will cause a lot of conflicts later otherwise. Even if you offer 2 to 5 per cent raise only, let them know. This helps you prevent the chance of misinformation and stting expectations right. 
  11. Make sure you have a second level of review, from someone other than the manager, liek the HR or someone even senior to the person to keep things absolutely fair and just.
  12. You must also know the legal pitfalls that can happen with you or the employee in case the performance management is not done appropriately like allowing biased performance reviews and more!

Benefits of performance appraisal 

Performance appraisal gives you a chance to look back and improve, here are some of the benefits that it has! You can identify training areas, improve profitability, increase job satisfaction level and give better morale, solve grievances, work on employee development and give pay increases fairly. You can also do succession planning.

Apart from this, there are other benefits too that we might cover in our next article. For now, we hope you found this insightful and are now clear about what performance appraisal is, how performance management software should be used and how you can do the appraisals rightly.

Team ONH
Team ONH
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