The performance review is a process of evaluating employees and their effectiveness. In order to learn more about employee strengths and weaknesses, as well as their goals, managers use diverse performance review methods. Aside from managers, the Human Resource team can be included in this evaluation, if needed.

In this article, you will learn:

  • the major steps of creating a performance appraisal,
  • six performance appraisal methods, and
  • how to evaluate yourself.

Performance review cover

The major steps of creating a performance appraisal

Before we start exploring the main steps of a superior performance appraisal, we’ll explain the importance of a performance review in the first place.

A performance review, other known as evaluation, or appraisal is vital both for managers and employees, and here’s why:

  • Managers can determine the accomplishments of their employees, but the skills that workers need to improve, too.
  • Managers can compare individual employee goals with overall organizational goals.
  • A performance appraisal can help managers make decisions regarding raises, promotions, and compensation plans.
  • Every performance review provides employees with valuable feedback from their managers. Thus, workers will have a clear understanding of their overall success and will be able to plan their future performance.

Now, here are the crucial steps every manager should take when evaluating an employee:

  1. Creating a file for each employee,
  2. being detailed, and
  3. being specific.

Creating a file for each employee

Shari Harley is a business communication keynote speaker. In one of her video guides on how to review your employees, she pointed out that managers should create a separate document for each employee. These documents should contain the essential information for each employee.

If you’re a manager, be sure that, instead of checking in on your workers often, there’s a better way to collect the data about your employees. For example, reaching out to employees’ customers, or vendors. To find out how your workers perform, you can ask these people the following questions:

  • How would you describe Ben Davidson’s performance?
  • Is there anything you would like to change about his performance, and what?
  • What can our company do better for you?

This is an essence of the 360-Degree feedback method, which we will explain more precisely later.

On the other hand, employees should keep the “me file.” Thus, throughout the year, workers should add all their accomplishments here. For instance, these could be emails of positive feedback from clients or other colleagues. Also, anything that employees are proud of should be included here. Then, employees should send “me files” to their supervisors. Thus, managers can incorporate these files into their performance reviews.

Being detailed

In the aforementioned guide, Shari stressed out how performance appraisals need to be detailed. Thus, managers should think about:

  • three most important cases when an employee has performed exceptionally well, and
  • three most important situations that an employee should have done differently.

Therefore, employees will know exactly what they’re doing great and what they should improve.

Being specific

When it comes to providing feedback, specificity is a key. The same rule applies to performance reviews.

So, when writing down three accomplishments and struggles, be as specific as you can. That way, your employees will have a clear understanding of their performance.

Instead of saying “produce more accurate work” to your employee, Shari suggests you use these phrases:

  • Check your work.
  • Be sure to spell check.
  • Have someone proofread your work before you turn it in.

Besides, remember that every review should be about the employee’s previous performance, but future plans, as well.

You should always keep these steps in your mind, regardless of the method you’ll use for performance reviews. The next section of this article focuses on different performance appraisal methods.

What are the methods of a performance evaluation?

There are many methods of crafting a performance appraisal. In this article, we’ll cover some of the most common techniques.

360-Degree feedback method

The name of this method truly illustrates its purpose. Let’s imagine an employee as a center of a circle (a center of a performance review). We can call it an employee-centric system. In his/her environment, there are colleagues, clients, supervisors, etc. These are the people who are in touch with this employee. Thus, they know a lot about his/her behavior and performance in the workplace. Therefore, when you need to collect data about this employee, these connections are your source of information.

As a manager creating the 360-Degree feedback review, you can gather valuable impressions by reaching out to your employee’s:

  • Peers,
  • supervisors,
  • customers,
  • suppliers,
  • vendors, and
  • clients.

It’s worth mentioning that, during this process, sources usually stay anonymous.

If you’re wondering how the questions should look like in this type of appraisal, here’s what the survey provider Qualtrics suggests. The Self-awareness is one of the fields in this review, along with Communication, Leadership, Teamwork, and others. As you can see from the example below, the interviewee can give his/her rating for each question, but also add any additional comment.

360-Degree feedback method

Source: Qualtrics

The benefits of this method are:

  • Providing an unbiased employee feedback since there are distinct sources of data.
  • Improved communication among the employees, and teamwork, too.
  • Discovering issues that may be the cause of an employee’s struggle.

On the other hand, here are the major drawbacks of this method:

  • It’s usually ineffective for small organizations. Since there are fewer sources, these sources may not be as objective as they should be.
  • Requires more time to process data from all sources.
  • Since the process is anonymous, managers can’t get further information from the sources.

Management By Objectives (MBO)

The term Management By Objectives was invented by Peter Drucker, an Austrian-born American management consultant, in 1954. The goal of this method is to determine the company’s objectives, so that employees can aim their attention to carrying out company goals.

By using this method, managers can compare employee’s accomplishments with these determined objectives. So, when employees show excellent results, they get to be rewarded with promotion or a raise. On the contrary, if employees have unproductive results, they will receive further training. The review period can be quarterly, half-yearly, and annual.

When it comes to the MBO method, companies need to have fixed goals that are aligned with the SMART method. So, their aims have to be:

  • S – specific,
  • M- measurable,
  • A- achievable,
  • R- realistic, and
  • T – time-sensitive.

But, since there are many positions and roles within the company, these goals would not be the same for everyone. For every position in the organization, there are general areas of outcomes. Thus, workers doing the same job in the company are responsible for the same general areas of outcomes. These areas are called Key Results Areas (KRA).

Let’s take a look at the example for a project manager, with the KRAs and his/her results. As we can see from the table below, this employee has two positive outcomes, and one area that needs improvement. Therefore, this project manager will undergo a training program in this particular area.

KRA Employee’s result
To finish the project at (or under) budget Managed to complete the project under budget
To meet the deadline of the project Managed to complete the project on time
To predict the cost of the project accurately Failed to predict the cost of the project

The major advantages of the MBO method are:

  • Employees have a clear understanding of their job duties.
  • Promoting transparency and hierarchy in the workplace.
  • By performing their tasks, employees make their contribution to the company’s success. Furthermore, workers will feel more loyal to the company.

However, there are some downsides of this method:

  • Working conditions and other circumstances may sometimes cause employee failure.
  • The lack of individuality: no matter what, employees are expected to work their way towards the set goals, which may make them feel like a machine, not individuals.
  • The lack of creativity and proactivity since workers are bound to follow only the fixed objectives.

Forced distribution method of performance appraisal

This method is also known as the Bell Curve method or the Stacked ranking. One of the first companies that embraced the Forced distribution method was General Electric in the 1980s.

Here’s how this method works: a manager, a supervisor, or a director evaluates each employee. Regarding how they perform, employees can be classified in three groups. This type of distribution is called the 20-70-10 formula:

  • 20% of employees are A performers, those who are the company’s top performers.
  • 70% of employees are B performers – those with an average performance.
  • 10% of employees are C performers – those with extremely low levels of performance.

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The employees are evaluated in categories such as Quality of work, Knowledge, Attitude, Dependability, and Cooperation.

Here are several positive aspects of this method:

  • Equal process of measuring employee performance, regardless of the number of workers in the company.
  • Revealing new leaders of the company. Once the A performers are discovered, the company management can start training these employees for their future roles.
  • Easy to conduct because the process is the same for all employees.

Nevertheless, this method has several disadvantages as well:

  • This method can cause unhealthy competition and conflicts between employees.
  • Employees might feel that their performance is underrated, especially if they end up in the C category. Therefore, this negatively affects trust between employers and employees.

Aside from these negative aspects, there are many HR specialists who consider the Forced distribution method controversial, because many worldwide organizations use it when they need to reduce the number of employees.

Behaviorally Anchored Rating Scale (BARS)

The Behaviorally Anchored Rating Scale (BARS) method incorporates both qualitative and quantitative analyses of the employee performance. The purpose of this method is to make the comparison between the employee’s performance and the specific, predetermined examples of behavior (how that employee should behave). Each job has its own set of specific behaviors. Therefore, employee appraisals can be more accurate.

But, before you start using the BARS method of evaluation, there are some necessary steps you need to take:

  1. Write down the examples of appropriate and effective behavior for a particular job. You can consult with the HR team or your supervisors. These examples are called critical incidents.
  2. Then, create several categories for these examples – these will be performance dimensions. You can have from 5 to 10 dimensions.
  3. Once you have examples of behavior with their assigned performance dimensions, rethink your decision, to make sure that they make sense. This is the step when you’ll need help from other experienced managers or the HR team.
  4. Make the rating system for all examples of behavior.

Here’s an example. Let’s say that you’re a manager of the “Sam’s Coffee Shop” and you need to evaluate your employees working at the counter. Their main duties are greeting the customers, taking orders, and handling payments. Therefore, you can evaluate your workers in these categories: Customer service, Attendance, Effectiveness, Responsibility, and others.

When it comes to Customer service, at the top of your scale should be examples of exceptional employee behavior. For instance, smiling while greeting new customers and using phrases such as:

  • Welcome to “Sam’s Coffee Shop.”
  • Can I take your order?
  • Enjoy your coffee.
  • Goodbye and have a wonderful day!

In other words, being polite and friendly to customers, as well as creating a positive atmosphere. On the other hand, at the bottom of your scale should be examples of unprofessional, unacceptable employee behavior. For instance, being rude and impolite to customers, talking on the phone while taking orders, and not making eye contact with them.

The same rule goes for the Attendance category. The predetermined behavior at the top of the scale should be arriving to work on time and leaving after the shift is over. As their manager, you can also establish an employee time tracking system, so that your workers can log in their working hours. Naturally, an improper pattern of behavior here would be an employee who does not log in enough working hours, and who usually comes late to work.

So, these are specific examples of how one should and should not behave when working at the counter of a coffee shop. When evaluating your employees, you’ll compare their behavior with these standards.

There are the advantages of the BARS method:

  • Having transparent and concrete evaluation norms with specific examples of employee behavior.
  • Employees have a clear framework on how to be successful in the workplace.
  • Promotes employee equality – the performance of each worker is measured the same way, using the same structure.

Then again, there are some drawbacks, too:

  • Managers need longer time to create suitable forms for appraisals.
  • Managers need to be trained in order to conduct this method.
  • This method might not be practical for companies with a larger number of diverse types of job.

Assessment center method

The Assessment center method was developed by the German army in 1930. The purpose of this method is to create a set of diverse exercises which simulate various components of the work environment.

But, what do these exercises have to do with employee performance? Here’s the explanation. The idea behind this technique is to see how employees behave in particular situations and how these situations affect their performance. So, in the case of German army, there was a psychologist, Dr. Simoneit. His job was to observe how officers execute various assignments and exercises. The officers who demonstrated excellent performance were later promoted. Therefore, this method is handy when the company’s management needs to make decisions about employee promotions.

Aside from this, the Assessment center method can be used during the recruitment process, in industries such as government, educational institutions, etc. In most cases, Assessment centers are conducted after initial interviews with candidates.

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When it comes to exercises, there are several types:

  1. In-tray exercise: the intention here is to measure job skills of candidates, in order to find out how suitable they are for the desired role.
  2. Presentation exercise: the candidates will receive a topic in advance, then they have to prepare and give a presentation.
  3. Group discussion exercise: a group of four to eight candidates work together to solve a physical or theoretical problem.
  4. Competency-based interview: candidates are given several targeted questions. They need to describe a situation in which they have shown qualities such as leadership, teamwork, etc.
  5. Role-play exercise: candidates are asked to imagine themselves in a hypothetical position, for instance, as the CEO of a company. Then, they should explain how they would manage working as a CEO.

There are many professionals involved in the assessment process, mainly employers, supervisors, and HR personnel. Also, trained individuals, consultants, or professional actors may be included, especially when conducting role-play exercises.

Here are the positive aspects of the Assessment center method:

  • The data gathered from these exercises makes the selection process much easier and more accurate.
  • The skills that employees show during the evaluation process are the true indicator of their current and future performance.

And, here are the negative aspects of this method:

  • Time-consuming: Since it requires planning and resources, the entire process can last for several months.
  • It’s usually expensive because it gathers professionals from numerous industries.

So, this method can be quite useful for companies that need to recruit a large number of employees. However, the Assessment center method won’t be a perfect choice for small companies.

Psychological appraisals

The purpose of this method is to analyze an employee’s future performance. To do so,

qualified psychologists need to evaluate the main elements of an employee’s work, which are:

  1. Interpersonal skills,
  2. cognitive abilities,
  3. intellectual traits,
  4. leadership skills,
  5. personality traits, and
  6. emotional factors.

During the employee appraisal process, the psychologists perform diverse tests, namely in-depth interviews, psychological tests, and private discussions. By looking at how the employee performs currently and by reviewing the results of these tests, psychologists can predict an employee’s future performance.

The benefits of using this method are:

  • Having comprehensive data about employees, all their current skills, emotions, and personality type.
  • Revealing new potentials: While carrying out the test, psychologists can find out some undiscovered employee qualities. Furthermore, this discovery may bring new possibilities for an employee.

The limitations of this method are:

  • It’s time-taking and can be a quite complex process. After all, evaluating one’s personality, emotions, and skills, is surely a complicated task to do.
  • Unpredictable factors may affect the results of the tests. For example, if an employee was nervous during the assessment, the results might be irregular.

If you still can’t decide which review method would suit your needs, we summed up these six techniques, along with their advantages and disadvantages.

Method type How does it work? Advantages Disadvantages
360-Degree feedback method Gathers feedback about an employee from sources like peers, supervisors, customers, and suppliers An unbiased employee feedback; improved teamwork; and discovering issues that may be the cause of an employee’s struggle Usually ineffective for small organizations, because there are fewer sources; requires more time to process data; managers can’t get further information from the sources
Management by objectives Compares employee’s accomplishments with the company’s determined objectives Employees have a clear understanding of their job duties; transparency and hierarchy in the workplace; employees feel loyal to the company Working conditions may sometimes cause employee failure; the lack of individuality, creativity, and proactivity
Forced distribution method Distributes the company workforce into three categories: A, B, and C performers Equal process of measuring employee performance; revealing new leaders of the company; easy to conduct Can cause unhealthy competition; employees might feel that their performance is underrated, especially if they end up in the C category, which affects trust between employers and employees
BARS method Compares employee’s performance with the specific, predetermined example of behavior Transparent and concrete evaluation standards with specific examples of employee behavior; employees have a clear pattern on how to be successful at work; promotes employee equality Managers need a longer time to create suitable forms for appraisals, and they have to be trained for this method; this method might not be practical for companies with a larger number of diverse types of jobs.
Assessment center method To evaluate the employees/candidates, this method conducts a set of diverse exercises which simulate various components of the work environment The data gathered from these exercises makes the selection process much easier and more accurate; the skills that employees show are the indicator of their current and future performance Time-consuming since it requires planning and resources; can be expensive because it gathers professionals from numerous industries
Psychological appraisals Analyzes an employee’s future performance, by evaluating the main components of employee current work performance Having comprehensive data about employees, their skills, emotions, and personality types; revealing new potentials Time-taking and complex; unpredictable factors may affect the results of the tests

No matter which method you use, you might realize that the performance results for some employees are below proper levels. As their manager, you need to find a way to solve that problem. You can reach out to the HR team and, together, you can create several goal-related tasks for these employees. The idea behind these tasks is to improve employee performance. In fact, these steps are a part of the Performance Improvement Plan – a document that an employee signs if he/she agrees to engage in this process. If so, the employees will have a fixed period for completing these tasks.

Aside from managers, supervisors, psychologists, and others, employees can also take part in the performance review process. We’ll discuss this topic more precisely in the following section.

How do you evaluate yourself?

The self-appraisal is the employee’s contribution to the performance review. In other words, the self-appraisal is the overview that employees write about themselves. These appraisals are beneficial for managers because they can compare their own opinions about the performance of a worker with what the employee points out in the appraisal.

If you’re an employee who has never written a self-performance review, here are some tips for you.

Think about your past performance

Workers need to reflect on their past period, for example, past year. Then, they need to find the answers to these questions:

  • What tasks, actions, or activities went well over the past period?
  • What tasks were marked as unsuccessful?
  • What should be done differently in the future?

Try to be as realistic as possible. Avoid sugar-coating your activities or underestimating your past efforts.

Keep track of your accomplishments and struggles

We’ve already mentioned the importance of the “me file.” The idea here is to collect all your achievements.

This file should contain all the positive feedback that you received, emails of appraisal, your successful tasks, etc. So, if you don’t have such a document, start working on it today.

Your achievements should be aligned with your team’s goals. Think about your role within the team and how your contributions play a significant part in the team’s success.

Besides, you can ask your manager or supervisor whether this self-performance review should hold any analytics. If so, then try to be as specific as you can when writing about your accomplishments. For example, note that you’ve managed to sign contracts with 10 new clients, which is a 20% increase compared to the previous period.

Nevertheless, including all the challenges you’ve had over the last few months is also important. Be sure to explain why particular tasks were more demanding for you, so that your manager can help you resolve these issues in the future.

Include your future goals and plans

To show your proactivity, incorporate your future goals in your review. But, try to be rational and include only goals that are possible to achieve, depending on your position within the company, your skills, and experience.

In addition, if there’s any way your manager can help you enhance your skills and gain new knowledge, don’t be afraid to ask. It can be a training session, a conference, or an online workshop dedicated to the topic you’re interested in.

Proofread before sending your review

Once you’ve finished writing your self-appraisal report, be sure to carefully review it before sending it to your manager. Remember to spell check it and make edits if needed. Having typos and grammatical errors is not acceptable.

Furthermore, you should have your colleague, a friend, or a family member proofread the review. It’s likely that they’ll notice an error that you’ve missed, or they’ll point out if your tone wasn’t appropriate.

Conclusion

As a manager conducting a performance appraisal, you should have a separate file for each employee. That way, you can track his/her performance all year long. Plus, every performance review should contain detailed and specific data about your workers.

There are diverse methods of creating performance reviews. You can choose between some of the most common techniques that we’ve covered in this article. Keep in mind that the method you’re using should suit the type of your business, the number of employees, and other factors.

Aside from these methods, your employees can create self-performance evaluations, too. When writing such a review, workers should think about their past performance. This appraisal should present all their accomplishments and struggles. Furthermore, employees should reflect on future goals and plans.

After all, these documents provide managers with valuable data from their employees. Therefore, employee self-performance appraisals are significant for managers as well.