It's not enough for HR to recruit, train, develop, and motivate employees. It is also important for employees to be assessed or reviewed to know how they are doing. Read this section to learn about some methods for employee performance review.

The Basic Three-Step Process

Appraisal systems vary both by organization and by the level of the employee being evaluated, but as you can see in Figure 7.8 "How to Do a Performance Appraisal", it's generally a three-step process:

  1. Before managers can measure performance, they must set goals and performance expectations and specify the criteria (such as quality of work, quantity of work, dependability, initiative) that they'll use to measure performance.
  2. At the end of a specified time period, managers complete written evaluations that rate employee performance according to the predetermined criteria.
  3. Managers then meet with each employee to discuss the evaluation. Jointly, they suggest ways in which the employee can improve performance, which might include further training and development.

Figure 7.8 How to Do a Performance Appraisal

It sounds fairly simple, but why do so many managers report that, except for firing people, giving performance appraisals is their least favorite task? To get some perspective on this question, we'll look at performance appraisals from both sides, explaining the benefits and identifying potential problems with some of the most common practices.

Among other benefits, formal appraisals provide the following:

  • An opportunity for managers and employees to discuss an employee's performance and to set future goals and performance expectations
  • A chance to identify and discuss appropriate training and career-development opportunities for an employee
  • Formal documentation of the evaluation that can be used for salary, promotion, demotion, or dismissal purposes
As for disadvantages, most stem from the fact that appraisals are often used to determine salaries for the upcoming year. Consequently, meetings to discuss performance tend to take on an entirely different dimension: the manager appears judgmental (rather than supportive), and the employee gets defensive. It's the adversarial atmosphere that makes many managers not only uncomfortable with the task but also unlikely to give honest feedback. (They tend to give higher marks in order to avoid delving into critical evaluations.) HR professionals disagree about whether performance appraisals should be linked to pay increases. Some experts argue that the connection eliminates the manager's opportunity to use the appraisal to improve an employee's performance. Others maintain that it increases employee satisfaction with the process and distributes raises on the basis of effort and results.