Performance Appraisals in the Workplace: a Guide for Managers and Leaders

Performance appraisals have advanced from awkward annual conversations to an important strategy for improving employee engagement and performance. 

In this article, you’ll learn the impact of performance appraisals in the workplace and how to hold successful performance appraisal meetings with direct reports.

What is a performance appraisal?

A performance appraisal, also referred to as a performance review, evaluates and reviews employee performance and contributions to a company. The process looks at an employee’s skills, achievements, and growth and is an opportunity for constructive feedback on strengths and areas for improvement.

Performance appraisals are usually held by the employee’s manager and conducted quarterly, semi-annually, or annually.

Employee performance is measured against a predetermined set of criteria, which helps provide structure, direction, and fairness to performance appraisals. For example, key performance indicators (KPIs), competencies, productivity, communication skills, teamwork, and how well they follow company policy and procedure. 

Performance appraisals also serve as a basis for making decisions related to promotions, raises, bonuses, training opportunities, and disciplinary actions.

Performance management vs. performance appraisals: what’s the difference?

The concepts of performance management and performance appraisals are closely related but serve different purposes in managing employee performance.

Performance management: A comprehensive, ongoing process that aims to maximize employee performance and generate results aligned with organizational goals by setting clear expectations, monitoring performance, providing employee feedback, and developing employees to ensure goals are met effectively.

Performance appraisals: A specific component within performance management that’s used to evaluate individual performance over a period of time at regular intervals. 

3 common types of performance appraisal

Performance appraisals come in many different formats. The one most suitable for your organization will depend on size, employee responsibilities, and wider business goals. 

Here are three of the most common types of performance appraisal.

360-degree feedback

360 feedback gathers information and insights from numerous sources closely related to employee performance. 

Feedback is collected and shared anonymously to encourage open and honest responses. This level of anonymity helps reduce bias in the workplace and fosters a more open and constructive feedback process.

The feedback is then aggregated and summarized to protect individual confidentiality and ensure positive working relationships between employees and peers. 

Feedback is typically collected from the following sources:

• Self-appraisal: Employees evaluate their own performance using predetermined criteria or goals.
• Management appraisal: Employee performance is evaluated by a direct manager.
• Peer review: Feedback from coworkers or peers within the company. 
• Customer or client review: Feedback from external stakeholders, e.g., customers, vendors, contractors, or clients.

Tip: Use a tool like 15Five to gather 360 feedback all in one place, helping you quickly access all the information you need to run an effective performance appraisal.

Management by objectives (MBO) 

The MBO process involves setting specific, measurable, achievable, relevant, and timely (SMART) objectives for employees and using these to evaluate performance.

Employees and managers collaborate to establish these objectives and use a performance management tool to measure progress, set goals, and track progress.

This structured alignment enables managers to monitor progress, provide support and coaching, and identify areas for improvement in a timely manner while enhancing collaboration and 

Performance appraisals that use the MBO process focus on outcomes and results rather than behaviors, which encourages employees to prioritize tasks that have the greatest impact on achieving objectives and driving organizational success.

OKR 

OKR stands for “objective, key, result” and is a method of measuring work performance by setting ambitious goals, creating and driving alignment, and promoting continuous engagement and involvement with responsibilities and performance. 

During a performance appraisal, performance is evaluated, and feedback is shared to support employee development and achievement. 

3 quick benefits of performance appraisals

1. Provide constructive feedback

A performance appraisal is an opportunity for managers to support employee development, share feedback on how well the employee achieves their goals, and contribute to the wider organization, alongside sharing opportunities for improvement and career development. 

By sharing regular, constructive feedback, employees understand how they’re doing at work and what skills or competencies they need to focus on and develop, which helps keep them engaged and motivated. 

2. Set goals and ensure alignment 

Use a performance appraisal to set new goals or revisit existing ones to ensure alignment between employee and business objectives.

Clear goals set during performance appraisals give employees a sense of direction and purpose, guiding their efforts toward achieving desired outcomes and giving them a deeper understanding of company values and mission. 

Further reading: How to Align Employees With Company Goals

3. Share recognition

Performance appraisals hold space for recognizing and rewarding employees for their achievements and contributions. For example, praising progress on a difficult project or recognizing effort and hard work on closing a long, difficult sales cycle. 

Sharing recognition in the workplace promotes a positive, inclusive culture, improves employee engagement and retention, and strengthens relationships and teamwork, which contributes to business success and growth.

How to hold effective performance appraisals

1. Set clear expectations 

Ensure employees understand their roles, responsibilities, and performance expectations clearly. For example, outline specific goals, objectives, and performance criteria. Hold regular one-on-ones and feedback sessions to engage employees and ensure alignment.

Further reading: Download the One-on-One Meeting Template to hold professional and successful meetings with your direct reports.

2. Prepare your insights and environment

Prior to the performance appraisal, review relevant performance data, documentation, and feedback collected throughout the appraisal period. This preparation ensures that discussions are based on objective evidence and specific examples.

Create a supportive and non-threatening environment for the performance appraisal meeting. For example, schedule adequate time for the discussion and choose a private and comfortable location. 

Demonstrate empathy and understanding if an employee requests an accommodation. For example, an earlier start time or a change of meeting space.

3. Focus on behavior and results

During the performance appraisal meeting, focus on observable behaviors and measurable results rather than making subjective judgments or assumptions. This helps ensure fairness and objectivity in the evaluation process.

Review SMART goals, OKRs, 360 feedback, and other resources to help you paint an accurate picture of employee performance and share your insights with employees. 

4. Provide development opportunities

Performance appraisals are an opportunity to discuss employees’ professional growth and development needs. 

Identify training, mentoring, and career advancement opportunities to help employees enhance their skills and capabilities. For example, upskilling in a new area or developing skills as an individual contributor before transferring to a leadership role.

5. Follow up

After the performance appraisal meeting, follow up with employees to ensure that any action plans or commitments made during the meeting are implemented. Regular check-ins throughout the appraisal period help track progress and provide ongoing support.

6. Document the process

Document the performance appraisal process, including key discussion points, agreements, and action items. This serves as a record of the appraisal outcomes and provides a basis for future performance discussions.

Take Charge of Performance Appraisals with 15Five

It’s time to take the stress and dread out of performance appraisals. Sign up for a free trial of 15Five to hold effective, growth-oriented performance evaluations that managers and employees will embrace.