Performance Appraisals in the Workplace: Use, Types, and Criticisms

What Is a Performance Appraisal?

The term “performance appraisal” refers to the regular review of an employee’s job performance and overall contribution to a company. Also known as an annual review, employee appraisal, performance review, or evaluation, a performance appraisal evaluates an employee’s skills, achievements, and growth, or lack thereof.

Companies use performance appraisals to give employees big-picture feedback on their work and to justify pay increases and bonuses, as well as termination decisions. They can be conducted at any given time but tend to be annual, semiannual, or quarterly.

Understanding Performance Appraisals

Performance appraisals are usually designed by human resources (HR) departments as a way for employees to develop in their careers. They provide individuals with feedback on their job performance, ensuring that employees are managing and meeting the goals expected of them and giving them guidance on how to reach those goals if they fall short.

Because companies have a limited pool of funds from which to award incentives, such as raises and bonuses, performance appraisals help determine how to allocate those funds. They provide a way for companies to determine which employees have contributed the most to the company’s growth so that companies can reward their top-performing employees accordingly.

Performance appraisals also help employees and their managers create a plan for employee development through additional training and increased responsibilities. They help to identify ways that employees can improve and move forward in their careers.

Ideally, the performance appraisal is not the only time during the year that managers and employees communicate about the employee’s contributions. More frequent conversations help keep everyone on the same page, develop stronger relationships between employees and managers, and make annual reviews less stressful.

Types of Performance Appraisals

Most performance appraisals are top-down, meaning that supervisors evaluate their staff with no input from the subject. But there are other types:

• Self-assessment: Individuals rate their job performance and behavior.
• Peer assessment: An individual’s workgroup or co-workers rate their performance.
• 360-degree feedback assessment: Includes input from an individual, supervisor, and peers.
• Negotiated appraisal: This newer trend utilizes a mediator and attempts to moderate the adversarial nature of performance evaluations by allowing the subject to present first. It also focuses on what the individual is doing right before any criticism is given. This structure tends to be useful during conflicts between subordinates and supervisors.

Criticisms of Performance Appraisals

Performance appraisals are designed to motivate employees to reach and/or exceed their goals. But they do come with a lot of criticism.

An issue with performance appraisals is that differentiating individual and organizational performance can be difficult. If the evaluation’s construction doesn’t reflect the culture of a company or organization, it can be detrimental. Employees may report general dissatisfaction with their performance appraisal processes. Other potential issues include:

• Distrust of the appraisal can lead to issues between subordinates and supervisors or a situation in which employees merely tailor their input to please their employer.
• Performance appraisals can lead to the adoption of unreasonable goals that demoralize workers or incentivize them to engage in unethical practices.
• Some labor experts believe that the use of performance appraisals has led to lower use of merit- and performance-based compensation.
• Performance appraisals may lead to unfair evaluations in which employees are judged not by their accomplishments but by their likability. They can also lead to managers giving underperforming staff a good evaluation to avoid souring their relationship.
• Unreliable raters can introduce a number of biases that skew appraisal results toward preferred characteristics or ones that reflect the rater’s preferences.
• Performance appraisals that work well in one culture or job function may not be useful in another.

How Will I Use This in Real Life?

Even if you never work in management, you will certainly have meetings throughout your career to discuss your performance with an employer. These can occur as a formal evaluation or a more casual tête-à-tête.

In most cases, a performance appraisal will be a chance to highlight your accomplishments to your employer, as well as find opportunities for personal growth. An effective performance appraisal can boost morale and give employees better direction in how to improve.

The Bottom Line

Communication between employees and their manager or supervisor can be very rewarding. Performance appraisals are capable of boosting morale and output, benefiting all parties.

That’s assuming they go well, though. Sadly, many performance appraisals aren’t executed in the most effective way. In many cases, they may be rushed or simply follow a set framework that perhaps doesn’t always benefit every type of industry or person.

Poorly handled appraisals can be counterproductive. Without a bespoke approach and careful consideration of how to structure meetings and set reasonable targets, the performance appraisal process can have its drawbacks.