How to conduct an effective performance appraisal

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Performance appraisals are used to measure the effectiveness and efficiency of the employees in an organization (Aggarwal and Thakur, 2013). Mutually agreed goals are more effective than the pre-defined goals for an employee. The mutually agreed goals which are driven by the business strategy are the most effective for performance appraisal (Lawler III, Benson and McDermott, 2012). The goal setting should be done using the SMART technique (“Specific, Measurable, Actionable, Realistic, and Targeted”) to increase the effectiveness of the performance appraisals (Cappelli and Conyon, 2018)

According to Rothwell, Lindholm, Yarrish and Zaballero (2012), dilemmas in performance appraisals include:

  • Uncomfortable
  • Time-consuming
  • Not specific, general comments
  • Ratings inflated
  • Sends false message of success
  • Creates false superiority
  • Limits future development
  • Hard to defend in court


According to Russell, J. and Russell, L. (2009), dilemmas of the performance appraisals can be mitigated by reframing the performance review with the proposed higher purposes.

Figure 1: Reframing the performance review (Source: Russell, J. and Russell, L., 2009)

 


According to Appelbaum, Roy and Gilliland (2011), figure 2 shows the criteria for effective performance appraisal.

Figure 2: Criteria for effective appraisal (Source: Appelbaum, Roy and Gilliland, 2011)

 

Piggot‐Irvine (2003), describes ‘Educative process’ as the key feature for an effective performance appraisal. The ‘Educative process’ strengthens the interpersonal relationship between the appraiser and appraisee based on trust, openness, shared control, and defensiveness. The openness and trust help to resolve the conflicts and lead to improved performance (Piggot‐Irvine, 2003). The performance appraisal results are used to improve the performance as well as for reward and recognition. The employees and managers tend to be completely open, honest, and accurate on performance only if the purpose is to ‘improve the performance’. When considering the reward and recognitions, employees tend to hide the weaknesses and inflate the strengths (Bacal, 2004).

Before a performance review, the manager should have a clear understanding about the company strategy, divisional goals, and the expected level of the employee. Further the manager should allocate adequate time for the performance review discussion (Cespedes, 2022).

According to the Harvard Business Review article by Cespedes (2022), a manager can use below 5 steps as guidelines for a great performance review.

  • Convey the positive intent
  • Describe the observations
  • State the impact of the behavior or action
  • Ask the other person to respond (Two-way transfer of information)
  • So what? Next what? (Setting the goals)

After the review, regular follow-ups should be scheduled to check the progress of the employee (Cespedes, 2022).


Interpersonal interactions like high trust and openness will result an effective appraisal (Piggot‐Irvine, 2003). The process and management leadership are more vital than technical structure for an effective appraisal. E.g.: Strategy driven, mutually set goals are more effective than pre-defined goals. The performance appraisals are effective when the system is owned by the management than the HR. Both the appraisers and appraisees should be trained to increase the effectiveness. The performance appraisals should be integrated with other human resource management systems like talent management and should be integrated with the organizational strategies like talent management strategy and business management strategy (Lawler III, Benson and McDermott, 2012).


 References

  • Aggarwal, A. and Thakur, G.S.M., 2013. Techniques of performance appraisal-a review. International Journal of Engineering and Advanced Technology (IJEAT), 2(3), pp.617-621
  • Appelbaum, S.H., Roy, M. and Gilliland, T., 2011. Globalization of performance appraisals: theory and applications. Management Decision.
  • Bacal, R., 2004. Manager's guide to performance reviews. McGraw-Hill Education.
  • Cappelli, P. and Conyon, M.J., 2018. What do performance appraisals do?. ILR Review, 71(1), pp.88-116.
  • Cespedes, F.V. (2022). How to Conduct a Great Performance Review. [online] Harvard Business Review. Available at: https://hbr.org/2022/07/how-to-conduct-a-great-performance-review.[Accessed 15 August 2022].
  • Lawler III, E.E., Benson, G.S. and McDermott, M., 2012. What makes performance appraisals effective?. Compensation & Benefits Review, 44(4), pp.191-200.
  • Piggot‐Irvine, E., 2003. Appraisal training focused on what really matters. International Journal of Educational Management.
  • Rothwell, W.J., Lindholm, J., Yarrish, K.K. and Zaballero, A.G., 2012. The encyclopedia of human resource management. USA, Pfeiffer.
  • Russell, J. and Russell, L., 2009. Ultimate Performance Management: Training to Transform Performance Reviews into Performance Partnerships. 1st ed. USA: ASTD Press.

Comments

  1. Nimshi RanawanaSeptember 2, 2022 at 8:35 AM

    Well explained. While reading the blog one thing I identified is many organizations I have worked for did not follow the proper protocol for the performance appraisal. Most of the leaders did it as it was a "requirement" by the HR department. Daoanis (2012) emphasized that performance appraisal system should bring a positive experience which contributes to the overall welfare of the organization. when it is conducted in a proper manner it is a very effective tool to improve performance and productivity of the organization.

    ReplyDelete
    Replies
    1. Dulshan EdirisuriyaSeptember 4, 2022 at 12:14 PM

      The goal setting should be done using the SMART technique (“Specific, Measurable, Actionable, Realistic, and Targeted”) to increase the effectiveness of the performance appraisals (Cappelli and Conyon, 2018). Once the goals are set according to the SMART technique, it's easy for the managers to conduct the performance review effectively. Further managers and subordinates should be trained to increase the effectiveness of performance appraisals.

      Delete
  2. Aruna AththanayakeSeptember 2, 2022 at 12:58 PM

    Clear explanation. according to Rizvi (2007) An effective employee performance appraisal process can drive performance, reduce dissatisfaction, identify training opportunities, and boost company culture. While a poorly executed performance appraisal process can lead to negative outcomes such as a rise in employee disengagement, spread of office politics, and poor company culture.

    ReplyDelete
    Replies
    1. Dulshan EdirisuriyaSeptember 4, 2022 at 12:21 PM

      I agree with you Aruna. The research by Lawler III, Benson and McDermott (2012) shows that performance control systems can be effective if they are properly designed and conducted. If not, it might be a waste of time of both the managers and subordinates. Further negatively impact on the relationship between the manager and subordinates. To avoid the appraisal rating errors, managers and subordinates should be trained properly. Also, the opportunity should be provided for the managers to enhance the employee relationship (Appelbaum, Roy and Gilliland, 2011).

      Delete
  3. Asitha GalhenaSeptember 9, 2022 at 12:03 PM

    Performance review is not just one to one discussion with the subordinates. The manager should clearly know how he will evaluate every employee. Performance Planning sessions should be held at the beginning of the year to set goals and expectations for the employee. This will make employees improve immediately because both parties know the expectation. And this is the best way to keep employees accountable at the end of the year (Knight, 2011).

    ReplyDelete
    Replies
    1. Dulshan EdirisuriyaSeptember 24, 2022 at 11:48 AM

      Yes Asitha. I totally agree with you. Not only at the beginning of the year but also there should be a mid year review. In my organization progress is checked quarterly through the KPI system.

      Delete

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