Performance Appraisals

• Performance Improvement Plans
• Formal & Informal Appraisals
• 360 Degree Feedback HR Guide
• Types of Performance Appraisal Systems
• The Purpose of Performance Appraisals
• A Number Of Managers And Staff Members Regard Performance Management As A ‘FAD’. How Can We Get Them On Board?
• How do i deal with an employee who is underperforming?
• Managers are frequently setting unrealistic targets. How do we make sure that appropriate targets are set ?
• How can we ensure that all important performance dimensions are addressed in performance criteria ?
• We’re not providing adequate development support for staff. How can we provide such support?
• How can we avoid the performance management system focusing on strategic and business outcomes at the expense of individual performance?
• How do we make sure that managers and staff members plan and create performance targets properly?
• How do we successfully manage accountability for performance outcomes where more than one person is assigned to a task or project?
• How can we ensure that all aspects of performance management are integrated?
• Nobody is accountable for the performance management system. How can accountability be introduced?

Performance Improvement Plans

PERFORMANCE IMPROVEMENT PLANS

Performance Improvement Plans (PIPs) are a management tool used to assist performance improvement of underperforming employees or those employees who have demonstrated unsatisfactory behaviour and conduct in the workplace. PIPs should be implemented as a consequence of performance management/disciplinary counselling meetings or informal discussions with employees regarding their performance/conduct deficiencies. A PIP should not be issued to an employee without prior consultation of the worker and an opportunity for both parties to discuss and agree upon performance goals.

Essential features include:

• PIPs should have a definite time-frame in which the employees progress/performance will be re-assessed to determine improvement or underperformance;
• Clear, specific and realistically attainable goals should be emphasised e.g. employee to sign up 10 new customers per month;
• Training of employees may be necessary to achieve performance improvement and should be included as a part of the PIP;
• Regular meetings with supervisor to monitor progress towards goal achievement, provide support and ability to modify objectives where appropriate;
• Re-assessment of performance at completion of PIP time-frame and management action accordingly.
• PIPs should always be documented, including any progress meetings and the issues discussed therein and kept by the employer, copies should also be made available to employees for their records.

BENEFITS

PIPs are a useful tool for ensuring procedural fairness is observed when managing worker performance and provides benefits for both employees and their superiors. Used as a remedial tool when performance is deemed to be capable of improvement, PIPs provide employees with an opportunity to consciously work on their performance, to learn new skills and prove their commitment to their role and the organisation. A PIP combined with a formal disciplinary / performance management process is also used to put an employee on notice that if their performance does not improve in the designated time-frame in a specified way their employment could be at risk. For Managers, PIPs allow close monitoring of employee progress against specific standards within a set timeframe. This allows easier decision making in the future

and will assist in proving employees have been afforded procedural fairness if further disciplinary action or termination occur due to lack of improvement.

IMPORTANCE OF ENVIRONMENT

When setting PIPs, it is important to keep environmental factors in mind as they will likely have an impact on the employee’s performance, albeit if even in a minor way.

External

Employers need to be realistic and consider the impacts of external forces when assessing employee’s contribution to organisational performance. Some examples may include:

• The impact of the exchange rate on organisational performance;
• The state of the national economy;
• The state of the global economy;
• Changes to government policy and funding / subsidies;
• Increased competition;
• Changing customer tastes and preferences;
• Natural disasters and changes in level of supply of inputs; and
• Changes to the laws regulating the industry etc.

Accordingly, employers need to fairly assess the likely cause for the underperformance / behaviour and refrain from taking rash action against employees for factors beyond their control.

Internal environmental factors at an organisational level may also have a bearing on how an employee is performing and/or their behaviour. Some examples may include;

• New technology;
• Department or organisation re-structure;
• Job re-design;
• Redundancies and survivor syndrome;
• Organisational culture;
• Conflict with other staff; and
• Lack of clear goals set or misunderstanding of performance expectations.

PERSONAL FACTORS

It is also important to accurately assess the personal circumstances impacting upon an employee’s performance and/or behaviour in the workplace. These factors should all be assessed in the performance management / disciplinary meeting and discussed with the employee. For more information, please see the Template – Performance management meeting record.

Formal & Informal Appraisals

The method of appraisal can vary from very informal to a highly formal and structured procedure. The type of appraisal system that best suits your organisation will depend on:

• the size and type of organisation;
• which employees and job types are being appraised;
• training and development policies, procedures and resources;
• the access and availability of appraisal expertise to provide input into the desired system;
• the management capability and time available to make a formal system work; and
• whether existing informal systems work adequately.

FORMAL

A formal appraisal system involves setting guidelines, meetings and interviews, forms, times for review, assessment systems and reporting.
For more information on this, please refer to our Template – Performance appraisal meeting record in this section.

INFORMAL

An informal appraisal approach relies on impromptu meetings and discussions, consultation, coaching, discipline and feedback. These all occur in a formal system as well and should be encouraged to create a healthy culture of open communication. A good example of a time when an informal approach is needed is where a supervisor has identified minor performance gaps and wishes to address the issue promptly without going through formal channels (ie the underperformance does not warrant a formal disciplinary procedure). This can also be helpful if a performance gap has been identified and waiting to discuss the issue until a formal process is undertaken could be to the detriment of the individual and their team.
For more information on discipline, please refer to our Managing Underperformance and Discipline section.

WHICH APPROACH?

The approach taken will depend on the organisation’s circumstances. For example, if there are few opportunities for promotion or career development within the organisation, a formal system may be unnecessary. On the other hand, a large organisation with several branches and several people making people management decisions will need a formal system to help with planning, consistency and employee development. Regardless of whether a formal or informal appraisal process is used (or both), individual performance needs to be appraised.

360 Degree Feedback HR Guide

Some organisations prefer to use 360-degree feedback as a form of performance appraisal. This process provides information on an employee’s performance from a number of sources – peers, subordinates and managers. Such appraisal should provide a wide range of information about skills, performance and working relationships.

360 DEGREE FEEDBACK

In 360-degree feedback, the peers, subordinates and managers fill in a questionnaire describing the employee’s performance. The questionnaire usually consists of a number of statements rated on a scale (e.g. from 1 to 5) and includes the opportunity to provide additional comment. The employee in question also completes the questionnaire to assess his or her own performance.
The process should be anonymous, and the feedback should be presented to the employee in aggregate or summary terms (i.e. as a feedback report).
To ensure the best possible results from the 360-degree feedback process, it’s important to ensure that:

• the questions are short, clear and relevant to the person’s job
• the respondents are credible to the person being appraised (i.e. they are deemed as being in a position where they can credibly provide input)
• both the employee and those who will complete the questionnaires are adequately briefed on the process
• feedback is never attributed to an individual respondent
• it is clearly stated how feedback will be given and by whom
• training is provided to those individuals who will provide the feedback and results
• issues of confidentiality are clearly communicated detailing who has access to the data and for what purpose
• the feedback report is concise, simple to understand and provides guidance on how the information can be used
• the process is constantly monitored and evaluated.

Types of Performance Appraisal Systems

COMPARATIVE APPROACHES

RANKING

Method
The process of comparing employees’ performance against others and listing employees in order from highest achievers to lowest achievers. This can be a general ranking within the group or one which is separated out into different skill areas, or competencies required to perform the job.

Advantages
Generally simple to use and easy to implement.

Disadvantages
Highly subjective and can be inaccurate, particularly when the employees being compared are not performing similar tasks or where the manager does not have in-depth knowledge of the job requirements. There is no way of telling whether performance is objectively good or bad, it merely ranks employees against each-other, so they could all be high-achievers or low-achievers. High potential for bias and separating mid-ranked employees can also be challenging.

GRADING

Method
The process of rating an employees’ performance in terms of set categories, such as poor, satisfactory, or highly satisfactory by matching performance with the definitions of each category.

Advantages
Addresses each employee’s performance against objective criteria without comparing to other employees.

Disadvantages
Focusses on individual performance alone and does not provide a good idea of where the employees’ performance sits in relation to others. This can also be too simplistic and subjective.

FORCED DISTRIBUTION

Method
A variation of grading whereby a set proportion of employees must fall within set categories, similar to that of a normal curve/bell-shaped curve.

Advantages
Avoids managers rating all employees as satisfactory, unsatisfactory or exceptional due to the fixed percentages required in each grade. High performers and under-performers are easier to spot.

Disadvantages
Employees can feel this method is harsh, may damage trust and potentially create harmful rivalry between staff.

ATTRIBUTE APPROACHES

GRAPHIC SCALES / RATING

Method
The process of attributing an employees’ performance (including personal characteristics and/or work behaviours) to a representative numeric scale from 1 to 5. Unsatisfactory performance is usually denoted by “1”, and performance which exceeds expectations is usually rated at 5.

Advantages
Easy to use.

Disadvantages
This is a particularly unreliable method of assessing performance. Assessable criteria may not be suited to all jobs, criteria often overlaps and it can be hard to justify low ratings.

CRITICAL INCIDENTS

Method
The process whereby a supervisor keeps a journal of times when an employee has performed particularly well or poorly on the job over a period of time. The supervisor draws upon these critical incidents to assess the employees overall performance level.

Advantages
If the journal is kept over a long period of time, it can be an accurate and objective way of assessing actual work behaviour and outputs and provides transparency.

Disadvantages
Success will depend on the manager taking accurate, objective and timely notes, but largely focusses on past behavior and examples of high performance or low performance and when the manager chooses to record incidents.

BEHAVIOURAL APPROACHES

BEHAVIOURALLY ANCHORED RATING SCALES (BARS)

Method
An extension of the critical incidents approach, the BARS technique involves creating a list of job-specific behaviors (from highly desirable through to unsatisfactory) based on different elements of job performance, e.g. job knowledge, attendance, productivity etc.

Advantages
Job-specific and provides clear performance standards in a number of areas, is objective and more transparent by avoiding general number scales.

Disadvantages
Can be difficult to create, takes a lot of time to prepare and needs to be created individually for each job to be assessed.

Superior performance

Always early to work and completed preparatory tasks before opening time, including:

• sorted mail and distributed deliveries to appropriate desks
• checked phone messages, passed messages on to appropriate people
• turned off phone night-mode
• checked all emails and send to appropriate person / flag for revisiting
• checked fax machine for new messages and distributed appropriately
• looks professional and with a positive demeanour
• checks that front desk looks neat and tidy, office plants are watered and area is free of any tripping hazards
• cleans office kitchen area and unpacks dishwasher
• turns “open” sign around on front door.

Very good performance

Mostly arrives early to work and completed preparatory tasks before opening time, and has:

• sorted mail and distributed deliveries to appropriate desks
• checked phone messages, pass messages on to appropriate people
• turn off phone night-mode
• checked all emails
• check fax machine for new messages and distributes appropriately
• looks professional and with a positive demeanour
• turns “open” sign around on front door.

Good performance

Sometimes arrives early to work and completes preparatory tasks before office opens:

• sorts and distributes mail
• checks phone and fax messages and distributes to appropriate people
• presentable appearance
• turns off phone night mode
• turns “open” sign around on front door.

Acceptable performance

Arrives on time to work and gets preparatory tasks completed as office opens:
• Checks phone and fax messages and distributes to appropriate people,
• turns off phone night mode and
• turns “open” sign around on front door.

Marginal performance Occasionally arrives late to work,
• sometimes forgets to turn “open” sign around and turn off night-mode switch.

Poor performance Is often late to work, frequently forgets to turn off phone night-mode, appearance is often unprofessional.

Unsatisfactory performance Often/always late for work, appearance is unprofessional, poor demeanour, forgets to/does not distribute mail, messages, faxes or emails to people, misses phone calls etc.

 

BEHAVIOURAL OBSERVATION SCALES

Method
The process of creating a list of preferred behavior required to execute a job gathered by the critical incidents method. Employees are assessed on how regularly they display these behaviors on a scale ranging from 1 to 5. “Almost never” equates to “1” and “almost always” equates to “5”.

Advantages
Similar to BARS (see above)

Disadvantages
Similar to BARS (see above)

ESSAY / NARRATIVE DESCRIPTION

Method
Involves a manager writing down their opinion of the employees’ work-related behavior in their own words. Generally descriptions will be provided in response to a few broad questions relating to the employees’ performance.

Advantages
This technique is useful when used in addition to other methods of appraisal to provide context and help qualify ratings.

Disadvantages
Is very subjective and impacted by managers writing skills and their ability to convey their opinion effectively. This can also be very time consuming and is difficult to find common trends in manager essays for performance comparison purposes.

MANAGEMENT BY OBJECTIVES

Method
A collaborative approach whereby a manager and employee agree on set objectives and responsibility areas and meet to review results at regular intervals. Performance will be evaluated depending on the achievement of goals.

Advantages
Job specific, is very clear and can be highly motivating. Ensures achievement of short term goals and continued improvement.

Disadvantages
Can result in a lack of freedom to be innovative and a lack of ownership of decisions and commitment. It is hard to compare performance, measure improvement and can lead to the setting of “easy to achieve” or short term goals.

FORCED CHOICE

Method
Selection of a number of explanations which reflect the employees work performance most accurately. Outcomes are graded by using a hidden formula.

Advantages
Manager prejudice is diminished due to the undisclosed formula used to assess employees.

Disadvantages
Needs to be implemented by experts so can be difficult, expensive and take a long time.

FIELD REVIEW

Method
A technique whereby appraisers and human resources specialists come together to discuss apraisee results.

Advantages
Effective in reducing Manager prejudice and analysing performance accurately and objectively.

Disadvantages
Can by very costly, time intensive and may be met by resistance from managers.

ASSESSMENT CENTRE

Method
A technique whereby groups of employees are assessed using a variety of methods, simulations and exercises. May also be valuable to identify performance potential.

Advantages
Is an impartial technique which can simultaneously be a training exercise to improve performance and identify talent.

Disadvantages
Can be very costly, time intensive and unsuited to small organisations given the use of simulations.

SELF-ASSESSMENT

Method
Where an individual employee appraises their own performance to be followed up with their supervisor to discuss results and compare appraisals.

Advantages
A collaborative approach with makes sure employees are involved in the process and can help in setting goals for future performance and improve commitment.

Disadvantages
Cannot be relied upon as the only source of evaluation, there needs to be a follow up with a manager. Employee ratings often don’t match supervisor ratings and can be a source of tension.

THE BALANCED SCORECARD

Method
Designed as an organisational performance evaluation tool, the balanced scorecard assesses performance from different perspectives comprising; the customers’ view of the business, the internal environment view, growth and learning and the financial perspective.

The Purpose of Performance Appraisals

The four objectives of performance appraisal are:

Assessment of performance

The organisation must be able to discern between those whose performance is effectively contributing to the achievement of the organisation’s objectives, and those who are not.

Reward

Those who are performing well want to be recognised and rewarded for their efforts. Outstanding performers should be identified and rewarded accordingly otherwise further outstanding performance may wane due to declining motivation.

Development

It is the role of performance appraisal to assist the employee to develop to achieve optimum performance and to remove blocks to improved performance.

Feedback

Communicating clear, specific expectations and giving both positive and constructive feedback are essential parts of performance appraisal.

BENEFITS OF PERFORMANCE APPRAISALS

A performance appraisal process provides numerous benefits for the appraiser, appraisee and the organisation as a whole.

For the Appraisee:

• Recognition for good work performance provides a sense of confidence, self-worth, job satisfaction, commitment and motivation for continued improvement
• Provides opportunity to re-assess work goals and discussion of what has worked well and what needs improvement
• Opportunity to provide reasons for potential underperformance and discuss development points for improvement
• Ability to air any grievances or speak about problems in the workplace
• Opportunity to discuss career goals and future progression
• Builds trust and facilitates relationship growth with manager through open discussion.

For the Appraiser:

• Opportunity to gain insight into individual jobs and work teams
• Opportunity to align individual, team, group and organisational goals and objectives and communicate that to each
• Opportunity to hear potential grievances or issues to be investigated as mentioned by employees
• Improved decision making ability
• Identification of development points, training needs and forecasting for future
• Increased job satisfaction, motivation and self-worth
• Improved group performance
• Opportunity to clarify expectations of individuals and teams, re-assess work goals and discuss what has worked well and what needs improvement
• Improved quality of relationships with subordinates.

For the Organisation:

• Fosters a culture where staff are valued and there is commitment to continuous improvement
• Staff are more aware of organisational goals and values and can see how their contribution affects organisational success on a larger scale, building sense of commitment
• Better employee relationships with managers creates a sense of cohesions and belonging
• Managers are more in touch with individual jobs, teams and groups
• Identification of training needs and opportunities for improvement at all levels (often discovered through consultation with employees)
• Encourages managers to hone their leadership, motivation and communication skills, making them more valuable to organisation and creates a sense of job satisfaction.

POTENTIAL DRAWBACKS OF PERFORMANCE APPRAISALS

A performance appraisal process can have a number of potential drawbacks for the appraiser, appraisee and the organisation as a whole. Despite having a sophisticated performance management system in place, the success or failure of a performance appraisal process will largely hinge upon the validity and reliability of the judgements made by the appraiser. Oftentimes, this can be influenced by managers’ personal bias and attitude towards the appraisal process generally. Both of these factors can disrupt the accuracy of performance appraisal information. Some common issues are:

Management attitude
If managers are not committed to the performance appraisal process, this can have a significant impact on the outcomes. Common attitude problems include; not taking the process seriously, seeing the process as a routine activity or merely “ticking the boxes”, reluctance to tell employees face-to-face about underperformance and failure to see how the process will benefit on-the-ground work activities and organisational performance.

Halo effect
Where the overall appraisal of an employee is influenced by the perceived presence of one desirable quality, work behavior or achievement and can skew the rater’s ability to rate the employee objectively.

Horns effect
The reverse of the ‘halo effect’, whereby the overall appraisal of an employee is influenced by the perceived presence of one negative quality, work behavior or achievement and can skew the rater’s ability to rate the employee objectively.

Central tendency
Where a rater grades every employees performance in a similar way, such as ‘acceptable’ or ‘meeting objectives’ and fails to distinguish between high performers and low performers. The tendency to rate all employees similarly can arise due to the lack of opportunity to observe employee behavior and/or a rater’s unwillingness to explain high or low ratings and create more work for themselves.

Relationship effect
Where a rater’s ability to accurately appraise an employees’ performance is affected by the nature of the relationship they share and the length of time they have worked together. Whether the personal relationship between rater and employee is positive or negative, both have the potential to affect the objective judgment of the rater and can be an unreliable evaluation.

Leniency or strictness bias
Where a manager distorts appraisal accuracy by repeatedly rating employees as high or low despite actual performance. Rationales for higher ratings include; wanting to protect an employee from receiving a negative rating or permanent blemish on record, wanting to avoid an uncomfortable conversation and feeling sorry for those whose performance was unsatisfactory due to personal issues. Rationales for lower ratings include; wanting to encourage the employee to resign, to create evidence of underperformance to assist in disciplinary and termination procedures and/or to assert dominance and control over an unruly employee.

Prejudice/bias/stereotypes
Where a manager holds a personal prejudice (positive or negative) towards a particular type of person (be it nationality, gender, age, personality trait, occupation type or anything else) and allows this bias to cloud their judgment and ability to objectively appraise their performance. This can often be unconscious and difficult to identify unless a complaint is made against a manager.
For more information, please refer to our Information sheet – Legal considerations.

Recency effect
Where a manager is only able to recount instances of good or bad performance based on what is most fresh in their minds. This distorts the accuracy of an appraisal as often employees make a concerted effort to improve their performance in anticipation of the performance review process being undertaken.

A Number Of Managers And Staff Members Regard Performance Management As A ‘FAD’. How Can We Get Them On Board?

Make sure your organisation is ready to use performance management properly. All key players must understand the need for it. Think about which aspects are most important for your organisation. Do not simply apply an off-the-shelf performance management package without thinking about your organisation’s culture and needs.

How do i deal with an employee who is underperforming?

Discussing poor performance is difficult for both the manager and employee and it is not unusual for employees to react badly to news of unsatisfactory performance. By making sure you are prepared with specific examples, a planned agenda for discussion and are confident with the key messages you wish to provide to your employee, you will be in a position to remain calm during a difficult performance management discussion.

Managers are frequently setting unrealistic targets. How do we make sure that appropriate targets are set ?

Managers need to be realistic when setting performance targets. Sometimes targets are not achieved. Either the time limit is too short or the level of performance is too optimistic. It is important that both the manager and the staff member are fully cognisant of the staff member’s capabilities, the resources available, the timeframes for completion, other competing tasks etc. These will have a significant impact on target achievement.

How can we ensure that all important performance dimensions are addressed in performance criteria ?

Make sure your set of performance criteria is balanced. Include customers, stakeholders, staff satisfaction and internal process efficiency as well as financial matters in your scope. An objective way of dealing with this is to create a balanced scorecard.

We’re not providing adequate development support for staff. How can we provide such support?

Part of the performance management process is the development of staff to provide them with the capabilities to achieve their targets. This aspect of performance management should not be ignored; it should be given appropriate coverage in the performance appraisal process and in the performance development plan. Employees need to be engaged in the setting of their own development plans to ensure they have buy-in to what is being proposed and that it aligns where possible with their personal and professional development needs.

How can we avoid the performance management system focusing on strategic and business outcomes at the expense of individual performance?

Many managers prefer dealing with the big picture, big targets and external issues. Spending time with individual staff working through individual targets and performance can be seen as time-consuming and draining for the manager but it is essential. Strategic and operational targets only get accomplished if individual staff members meet their personal targets.

How do we make sure that managers and staff members plan and create performance targets properly?

A key component of performance management is measuring actual against planned performance. Performance targets need to be SMART (i.e. specific, measureable, achievable, realistic and time-based). If you do not plan performance by creating SMART targets, it is not possible to evaluate your actual performance. Conducting regular training on the performance appraisal process can help to ensure that staff and manager’s understand what is expected of them.

How do we successfully manage accountability for performance outcomes where more than one person is assigned to a task or project?

Every performance outcome should be made the accountability of a single person – even if they do not control all aspects of that outcome. Their job is to control what they can and influence what they can’t control.

How can we ensure that all aspects of performance management are integrated?

Make sure you sequence the process so that strategic performance cascades to business performance which cascades to team/department performance, which then cascades to individual performance. All the different performance levels should be aligned to achieve the organisation’s strategic objectives. Linking some of the performance outcomes to the organisational values can also help to create an organisation that “lives” their values, not just plays lip-service to them.

Nobody is accountable for the performance management system. How can accountability be introduced?

Appoint a project manager to implement the system or assign it to an employee or team in the HR function. Make this part of performance requirements or a standard part of the management team KPI’s.