A performance appraisal (also known as a performance review, performance evaluation, career development discussion, or employee appraisal), is a periodic process where the job performance of an employee is documented and evaluated. Performance appraisals are most often conducted by an employee's immediate manager or line manager. While extensively practiced, annual performance reviews have also been criticized as providing feedback too infrequently to be useful, and some critics argue that performance reviews in general do more harm than good. It is a principal-agent framework that describes the relationship of information between the employer and employee, in particular the direct effect and response received when a performance review is conducted. Performance appraisals are a part of career development.
Objectives Performance appraisal, as part of a performance management system, aims to increase the efficiency of the organisation and reduce inefficiencies that arise from subordinate work that fails to align with corporate goals. Performance appraisal interviews provide feedback to employees, at the same time facilitating collaboration and discussion on pay, career development and progression, and employee discipline, clarifying the expectations of subordinates, communicating their effectiveness in achieving those goals, and ideally improving employee engagement and satisfaction. Appraisals can also enhance motivation by recognizing the contributions of employees and providing them with growth opportunities. Although they can help facilitate management-employee communication, if not executed appropriately, they may result in legal issues or instead weaken employ morale towards organizational goals and values. Performance appraisals may increase diversity in leadership positions by ensuring fairness in hiring and promotion, particularly of individuals of socially-excluded backgrounds, especially when such appraisals are done in a culturally-sensitive manner. Such appraisals may also provide an opportunity to prevent misunderstandings that may arise, including those stemming from cultural differences. Appraisal methods are not necessarily able to be transferable cross-culturally. Labor unions provide a platform against the misuse of appraisals to reinforce managerial bias or justify unfair terminations, particularly of marginalised persons. Some unions have argued that these systems be accessible to employees and their representatives, and should reflect collective efforts rather than focusing solely on individual accomplishments, as collaboration is key in creating an inclusive public workforce. Some management theorists have argued that performance appraisals are crucial for manager in sales and other departments or industries. In the public sector, the usage of performance appraisals may further align with public-service values of transparency and accountability.
Implementation A performance appraisal is a systematic, general and periodic process that assesses an individual employee's job performance and productivity in relation to certain pre-established criteria and organizational objectives. Other aspects of individual employees are considered as well, such as organizational citizenship behavior, accomplishments, potential for future improvement, strengths and weaknesses. There are three main methods of data collection: objective production, personnel, and judgmental evaluation. Judgmental evaluations are the most commonly used with a large variety of evaluation methods. Historically, appraisals have been conducted annually (long-cycle appraisals); however, many companies are moving towards shorter cycles, and some have been moving into short-cycle (weekly, bi-weekly) appraisals. The use of multi-source feedback – incorporating evaluations from peers, subordinates, and customers – over traditional supervisory ratings may assist to improve rating accuracy by reducing leniency bias and centrality bias. Transparent appraisal systems reduce the risk of surprise negative evaluations, a concern especially pertinent for socially excluded groups that may already face systemic bias in the workplace. Cognitive biases such as the anchoring effect and halo effect can impact the accuracy of appraisals used to identify training and professional development needs by relying too heavily on initial information when making judgments or a rater's overall positive impression of an individual, both of which can influence the assessment of performance, leading to biased judgments that influence evaluations. Researchers have found that the organizational citizenship behavioral dimensions of altruism and civic virtue can have just as much of an impact on manager's subjective evaluations of employees' performances as employees' objective productivity levels. Performance appraisal systems serve the purpose of documenting appraisal processes and results. Proper documentation ensures performance is recorded transparently, safeguarding all parties in case of disputes around wrongful termination or discrimination.
Characteristics Performance appraisals can provide room for discussion in the collaboration of individual and organizational goals.
Process The performance management process begins with leadership within the organization creating a performance management policy. Theorists such as Peter Drucker have argued that performance management and appraisal systems ought to align individual and organizational performance. Activities to support the appraisal process include suitable models of assessment, appropriately credentialed staff, employee engagement training, and improvement actions.
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