• Performance appraisals may be intimidating and time consuming, but their benefits offer many opportunities to motivate employees and improve overall workplace productivity.
• The specific process for conducting performance appraisals varies widely according to organizational policy and culture.

Performance appraisals (or performance reviews) are often challenging and time-consuming to conduct, but they are a crucial tool for managers to evaluate employees, identify problems, and ultimately improve production as well as job satisfaction. However, if conducted poorly, performance appraisals could easily result in negative outcomes, such as poor individual and group morale or feelings of disconnect between managers and subordinates.

Some companies have formal performance review programs, while others have little more than a policy of open communication used to cover any performance-related issues that arise. Ultimately, there is no set process for conducting performance appraisals. Company policy and culture should determine which appraisal strategy will work best.

Best practice

• Employees should receive input and feedback throughout the year to avoid being blindsided during a formal performance appraisal.
• Performance appraisals offer many possible benefits. They serve to let employees know how they’re doing, what they can improve on, and receive acknowledgment of their good performance. They also allow employees to offer strategic input, share personal struggles, and develop goals.
• If done poorly, performance appraisals run the risk of alienating employees, making them feel blamed for negative company outcomes, or creating disconnects in communication between management and employees.
• To avoid potential legal problems that may arise in the event of future termination or disciplinary action, it is crucial that performance appraisals reflect an employee’s actual work performance.

When it comes to achieving positive performance review outcomes, the work begins well before everyone sits down for a meeting. Employees should be provided input and feedback as needed throughout the year, so there are no big surprises during their formal performance appraisal.

Performance appraisals let employees know how they’re doing, what they can do to improve or move up in the company, and provide an opportunity for management to recognize their good performance. Appraisals can also identify employee strengths and weaknesses as well as communicate goals and achievements.

Other benefits of performance appraisals include the following:

• They provide opportunities to identify new ideas and improved methods through direct, collaborative input from employees.
• They help avoid potential legal issues stemming from wrongful termination or discrimination claims.
• They allow employees to see how their work fits into the broader company goals, and why their work is important.
• They provide opportunities for employees to convey personal conflicts, challenges, or considerations that adversely affect their work performance.

Poorly executed performance appraisals may have a negative impact in the following ways:

• They may lead employees to feel that the appraisals are adversarial and are used to place blame on them for negative company performance or outcomes.
• They could unintentionally create obstacles to open communication between managers and the employees.
• They risk being used by managers to promote their biased opinions of certain employees.

Performance appraisals should be designed to gather facts, identify potential problems before they arise, and facilitate open communication. The appraiser must strive to be as objective as possible. They should also be familiar with the appraisal process and have a firm understanding of how the information gathered will be used.

Evaluation should reflect actual performance

It is crucial that performance appraisals accurately reflect the employee’s actual work performance. Employers open themselves up to discrimination claims if, for instance, an employee is discharged for poor performance, but their performance reviews reflect the complete opposite evaluation. The company would have a hard time justifying its actions against an employee if those actions were contrary to what was documented in previous performance appraisals.