Essential guide to performance appraisals

Maintaining employees' focus and motivation is essential if they are to make a full contribution to your business.

Performance appraisals actively involve employees in understanding what is expected of them. By setting agreed objectives - and later reviewing the results - each employee is responsible for his or her own performance.

Benefits of performance appraisals

Self-assessment questionnaire

Manager's preparation for a performance appraisal

The performance appraisal meeting

Setting key objectives in a performance appraisal

Following up a performance appraisal

Who appraises who, when?

1. Benefits of performance appraisals

In the rush of everyday work it can be difficult to manage all your employees well. An appraisal is a regular opportunity to identify - and deal with - all the most important issues facing the employee.

Appraisals show your employees you care about their problems, aspirations and views. Done well, appraisals boost employees' confidence and help them focus on their objectives.

You clarify the employee's key objectives

• This makes it possible for the employee to achieve or exceed them.
• You use each appraisal to set new objectives with the employee.
• You can use a personal development plan approach to increase the desire of the employee to improve.

You create the motivation to achieve more

• You recognise achievements during the previous period.
• Actually saying 'well done' or 'thank you' may seem unimportant to you, but acknowledgements like these are extremely important to the employee.

You improve the employee's productivity

• You identify and correct problems.
• An appraisal provides an insight into the work being done and the employees who are doing it.

You find out how to improve your business

• You ask for feedback and ideas.
• You can receive useful feedback on your performance as a manager, including your management of other employees.

2. Self-assessment questionnaire

Let the employee know well in advance when the performance appraisal will be. Ask the employee to complete a self-assessment questionnaire for you as part of the preparation.

Different levels and types of employee may need different questionnaires. But all the questionnaires should include open questions such as the ones below.

How well have you performed since your last review?

• What were your key objectives and did you achieve them?
• What problems did you encounter?
• What did you do really well?
• In which areas do you think you could improve your performance?

How would you rate your own skills?

• What are your strengths and weaknesses?
• Are you well organised?
• Can you work on your own initiative?

Are you a team worker?

• How well do you get on with others in your team?
• How well do you get on with others in the company?

How is your attitude to work?

• What do you find most or least interesting in your job?
• Do you have any interests or abilities which could be better used?
• How flexible are you?
• How punctual, reliable and committed are you?

What do you think your key objectives for the next six months should be?

• What help and training do you need?

3. Manager's preparation for a performance appraisal

Prepare a plan for the performance appraisal meeting. The less you have worked directly with the employee, the more effort you need to put into the preparation stage. For example, you may need to seek feedback from other people.

Review the employee's completed self-assessment questionnaire

• Identify the important issues and focus the appraisal on them.

Review the report on the previous performance appraisal meeting

• The appraisal report is a key part of following up on each appraisal meeting.
• Note which objectives have - and have not - been achieved.

Think about the big picture, as well as operational issues

• For example, the career or training opportunities that are open to the employee.

Work out your objectives for the performance appraisal

• For example, if there is no opportunity for promotion, your goal may be to maintain the employee's commitment and motivation.
• Deal with any recent one-off problems before the appraisal.

Have examples (or other evidence) ready to back up the points you wish to make

• This shows the employee that your concern is a reasonable one.

Write down your meeting plan for the appraisal

4. The performance appraisal meeting

Performance appraisals should allow employee and manager to express their views freely and frankly. The eight steps outlined below should help you achieve this.

Explain the agenda (your plan) for the performance appraisal meeting, and what you hope to achieve

• Put the employee at his or her ease.
• Start on a positive note by praising the employee's work in general.

Aim to spend twice as much time listening to the employee as you do talking

• Much of the skill of doing effective appraisals lies in your questioning technique. If you ask 'open' questions (eg 'what do you think about...?'), and show genuine interest, most employees will be happy to talk at length.

Ask the employee to talk you through their self-assessment

• Focus on the areas which you have identified as being the most important - typically the key objectives.
• Employees can be over-critical of their own performance and identify problems you were not even aware of. This makes your role easier. You can focus on helping the employee find solutions, rather than having to point out all the weaknesses.

Add your own views about the employee's performance

• Take every opportunity to acknowledge achievements and hard work.
• Be clear about which areas of performance need improvement.

Discuss the problem areas and come up with solutions together

• Ask the employee to explain why the problem has occurred. Then ask the employee to suggest a solution, which may match your own ideas.
• Look beyond the symptoms to the root of the problem. For example, a problem might stem from lack of confidence, lack of training, or something unrelated to work.

Review the employee's long-term career plans, if these have changed

• This may unearth new problems or opportunities. For example, you may realise that the employee is looking for another job - in which case you need to either persuade him or her to stay, or make plans for when the employee goes.

Consider the employee's training needs

Discuss and agree a new set of key objectives for the next period

• Decide when the next appraisal - or interim meeting - will be.

Discuss any ideas for improving the performance appraisal process

• The employee may feel that the process has been unfair in some way.

5. Setting key objectives in a performance appraisal

The whole performance appraisal cycle is built around setting, reviewing and then re-setting key objectives.

Each key objective should be SMART - specific, measurable, agreed, realistic and time-limited

• Each objective must be in an area over which the employee has control.
• Give each objective a deadline.
• A clear target allows you to measure whether the employee is making the progress you expect.
• 'To be a good salesman' fails the SMART test in every way. But, 'to add at least five new customers by the end of the year' might be a suitable objective.

Many elements of the job may already be covered by set standards

• For example, in an office you may have standards for answering the phone (within four rings) or handling sales queries (within 24 hours).
• For many blue collar employees, much of the appraisal will be focused on reviewing the achievement of standards. For example, a delivery driver might be reviewed primarily in terms of reliability, promptness and breakages.
• All the general points about appraisals still apply. A van driver needs support and motivation - and has potentially valuable feedback and ideas - like every employee.

Involve the employee in setting key objectives

• Otherwise there is a danger the objectives will be unattainable, or simply ignored.

6. Following up a performance appraisal

Immediately after the meeting, write up the performance appraisal report

• This summarises what has been discussed and agreed, including the objectives set for the next period.
• Confirm any commitments you or the employee may have made. For example, you might have offered to train the employee in a particular task.
• The report may include numerical scores for various categories of activity.

Give the employee his or her own copy of the performance appraisal

• There should be no surprises. Check that the employee agrees that what you have said is true and fair.

Give a copy of the performance appraisal to your own line manager to review

• Alternatively, you may ask another third party (such as the personnel manager) to review the appraisal report.
• If several managers in your business conduct appraisals, this is a vital check for fairness and consistency.

There should be an appeals procedure in place

• Employees who feel that any part of the appraisal has been unfair can make an appeal.

Performance management of the employee is an ongoing process for you

• Monitor the employee's progress towards the objectives that have been set.
• Keep using the supportive, collaborative approach that you used for the appraisal.

7. Who appraises who, when?

It is common practice for employees to be reviewed by their line managers

• If your appraisal system is ineffective, it is probably due to the poor skills of the managers conducting the appraisals.
• Train your managers in appraisal skills.
• Train your employees in appraisee skills, so that they can contribute effectively.

Bottom-up appraisal is a more comprehensive approach

• Each employee is appraised by subordinates, as well as a line manager.

A 360-degree appraisal is more thorough still

• The appraisal takes in feedback from subordinates, colleagues, superiors, and customers.
• One advantage of this approach is that the appraisal is less vulnerable to bias.
• A disadvantage is the sheer amount of time the process consumes.

The optimum frequency of appraisals depends entirely on the circumstances

• At the very least, they should be once a year.
• If you are trying to motivate a team and drive the business forward, quarterly appraisals may be more appropriate.
• An employee who is new, or has moved into a new role, may initially need more frequent appraisals.
• Another employee, who has done a routine job for several years, may only need one appraisal a year.

Expert quotes

"Some managers come to an appraisal with a 'wish list' of goals they would like achieved. They risk setting up the employee to fail." - Peter Neall, Neall Scott Partnership training consultants

"Once an appraisal is scheduled, stick to the timetable. The appraisal may not seem urgent to you, but to the employee it is a very important matter." - Simon Macaulay, Anglo Recycling Technology