Performance appraisals. Just the term can send shivers down the spines of both employees and managers. Traditionally seen as a once-a-year, check-the-box exercise, they often fail to capture the nuances of an employee’s contributions or provide meaningful direction for growth. But what if performance appraisals could be different? What if they were a chance to celebrate achievements, identify areas for development, and set clear goals for future success? They can be! Provided you implement the best performance management practices to create an environment where you prioritize continuous feedback, open communication, and employee development.
So, what best practices will help you build an effective performance appraisal process? How can you get the most from your employee reviews?
Join us as we explore 7 of the best performance management practices for enhancing your appraisal interview process so that your reviews are a win-win for everyone!
- What Is a Performance Appraisal?
- How Performance Appraisals Have Evolved
- 7 Best Performance Management Practices for Appraisals
- Benefits of Using Factorial’s Performance Management Software for Your Appraisals
- Set up your next performance appraisal with ease ✅
What Is a Performance Appraisal?
A performance appraisal, also known as a performance review, is a critical component of an organization’s overall employee performance management strategy. Essentially, the aim is to discuss the impact of an employee’s performance on the business, identify if there are any performance gaps that you need to address with training or performance coaching, and define specific performance goals to help them grow and develop. This can be done annually, quarterly, or twice a year. Alternatively, you can use a system of continuous performance management (more on this below).
Specific benefits of conducting regular employee performance reviews:
- Strategic alignment. Performance reviews help you align employee performance with your expectations and the specific strategic objectives of your business.
- Identify performance gaps. Performance reviews help you identify and address potential performance gaps. This prevents them from having a lasting negative impact on the overall productivity of your business.
- Direction. Sharing constructive feedback gives employees a clear sense of direction. Moreover, the right feedback can help them develop professionally and expand their skill set.
- Increased motivation. Conducting regular performance appraisals can be a great tool to motivate your workforce and increase employee accountability. Why? Because when employees understand how their performance impacts the business, they have a structured incentive to continuously improve.
- Increased engagement and satisfaction. Offering two-way feedback helps your workforce feel valued and heard. This boosts employee engagement and satisfaction levels.
- Open lines of communication with all employees. Finally, if you use performance management software, you get access to all the tools you need to manage your performance reviews. This includes remote employees. As a result, you can maintain open lines of communication with all employees, including those who you don’t see regularly. This is crucial for nurturing a culture of open dialogue.
How Performance Appraisals Have Evolved
Performance management is not a new concept. In fact, it could arguably be traced right back to the Egyptians and their use of whips to encourage increased performance. Thankfully things have moved on a bit since then. More traditional performance management systems can be traced back to the early 20th century when the U.S. military developed formal methods for assessing and improving soldier performance. This approach evolved into systematic appraisals that were focused on structured reviews, goal setting, and employee development.
This perspective began to shift in the 1960s when a more holistic approach was adopted. This new method had a greater focus on self-appraisal and was more concerned with what an employee could achieve in the future with the right support and development. From this point on, traditional performance management typically involved self-evaluation, manager evaluation, scoring and annual appraisals. But appraisals were still very much tied in with bonuses and promotions (such as performance-related pay) rather than individual performance in relation to a company’s goals
Issues with Traditional Performance Management
Although traditional performance management systems were a step forward, many companies these days find them to be lacking. For one thing, trying to compress a year’s worth of performance into an annual appraisal is time-consuming for all involved. Especially when you consider that you need to do this for each of your employees. It makes far more sense to focus on continuous evaluation throughout the year and assess goal progress on a regular basis.
Other disadvantages of performance management systems used in the past include stress and pressure. With an annual review, an employee feels they only have one opportunity each year to raise any concerns relating to their job, development and working environment. And if you want your employees to improve their performance then they need regular feedback so that they know what areas they need to work on. A lack of clear goals and expectations can also have a negative impact on employee performance.
7 Best Performance Management Practices for Appraisals
So, what’s the key to success then? How can you implement a system for conducting regular appraisals that helps you avoid the issues often encountered with traditional performance management strategies?
Don’t worry, we’ve got all the answers you need!
We are now going to share a list of the best performance management practices that will help you design a modern, effective and efficient strategy for conducting your performance appraisals.
Let’s get to it!
Set Agile Goals with OKRs
First on the list of our best performance management practices is setting clear, agile performance goals with OKRs.
So, what do we mean by this?
Let’s start with what we mean by agile. Agile refers to a flexible, iterative approach to goal-setting and project management that allows you to rapidly adapt to changes and continuously improve. In the context of performance management, agile practices ensure that goals are not rigid or static but can be adjusted as priorities shift or new information becomes available. This flexibility helps keep employees aligned with the organization’s evolving objectives and fosters a more responsive and dynamic work environment.
Agile performance goals are typically defined using OKRs. OKR stands for Objectives and Key Results, a goal-setting framework used to define and track objectives and their outcomes. With this methodology, you establish two core components: objectives (what you want to achieve) and key results (how you will achieve your objectives).
The OKR approach, similar to SMART goals, can be a great tool for aligning individual, team, and organizational goals. By setting clear objectives and measurable key results, employees can focus on what truly matters and ensure their efforts contribute to the company’s success.
For instance, instead of vague goals like “improve sales“, you might set an objective such as “increase quarterly sales by 20%“. The key results for this objective could include specific metrics like “generate 50 new leads per month“, “convert 25% of leads into customers“, and “increase average sale value by 10%“. This structure not only clarifies what success looks like but also provides a clear path to achieving it.
By embracing agile practices and using the OKR framework, you can create a dynamic and effective performance appraisal system that drives continuous improvement and aligns everyone’s efforts with your organization’s strategic goals.
Establish Channels for 360 Feedback
360-degree reviews, also known as multi-rater reviews, are comprehensive evaluations that gather feedback from an employee’s supervisors, peers, subordinates, and sometimes even customers. This holistic approach provides a well-rounded view of an employee’s performance. The idea is to collect insights from various sources to get a more accurate and complete picture of an employee’s strengths and areas for improvement.
These appraisals usually focus on the following skills:
- Leadership
- Teamwork
- Communication
- Management
- Company Alignment
The best way to gather 360 feedback is through surveys. These surveys often use closed questions, with a specific answer range such as yes and no questions or a rating scale of 1-10. By using closed questions, you can easily gather quantitative results and make clear comparisons. Alternatively, you can use open-ended questions. This gives the employee a deeper understanding of the results they have received from each individual.
Ultimately, 360 reviews help employees understand how their colleagues and managers view them on a professional level. This is not limited to their work quality. They are also used to evaluate how their performance affects others. You can then use this feedback to form a development plan for the employee in question.
Promote Continuous Performance Management
Instead of holding annual performance reviews, why not nurture an environment of continuous performance management? This can be a great strategy for being proactive and keeping your finger on the pulse instead of waiting for the end of the performance management cycle to see whether your employees have met their performance goals.
Essentially, continuous performance management (CPM) is an HR tool for tracking, evaluating, and improving employee performance. It is based on the principles of continuous analysis, agile management and real-time feedback. It involves setting standards and expectations for performance and guiding employees so they can meet their goals. Employees are then monitored regularly and assessed against their performance standards and goals. This helps companies identify and address any issues with poor performance before they become a problem.
The most important aspect of CPM is conducting regular appraisals. This creates a culture of open two-way dialogue (not just top-down evaluation) and encourages employees to take responsibility for their own professional development. This, in turn, builds trust within the company, creates stronger relationships between managers and employees, and helps employees realise their true potential for the good of the business. Companies that implement a CPM strategy find that it increases employee engagement and performance, and improves communication and retention levels.
Hold Regular Check-Ins
Continuing with our list of best performance management practices, we can’t stress enough how much holding regular check-ins with your employees to monitor goal progress between appraisals can benefit your performance management practices. In fact, offering regular constructive feedback is the basis for professional development. Employees want to know if they are on the right track, and checking in with them regularly can provide them with the insights they need to improve before the next performance review phase.
One way that many companies try to foster healthy workplace communication is through weekly one-on-one meetings between employees and managers. Employees generally lead these meetings and express any concerns, strategic visions, and goals that they have. Meanwhile, their managers actively listen to their ideas and offer them feedback and suggestions.
Some companies even choose to do away with traditional performance appraisals altogether. Instead, they use self-appraisals to assess how employees feel in their roles and monitor employee progress through regular check-ins with their manager.
Implement an Employee Recognition Program
Another essential strategy on our list of the best performance management practices is offering rewards and recognition for improved performance. Although there are many different ways to acknowledge and reward the achievements of your employees, most companies choose to implement a structured employee recognition program.
Essentially, structured employee recognition programs are used to recognize the achievements of your employees. The aim is to reward an individual employee or an entire team for hard work, hitting an important milestone, or achieving a specific performance goal. Examples include employee spotlights, bonuses, peer-to-peer kudos, professional development opportunities, and improved benefits packages, to name a few.
A structured employee recognition program is based on four core principles:
- Firstly, company leaders have defined a clear strategy for recognition and rewards.
- Secondly, employees are aware of the strategy that you use to decide who is worthy of recognition and rewards.
- Thirdly, managers recognize employees objectively and on a consistent basis.
- Finally, employees know when they are being recognized or rewarded.
Employee recognition programs have grown in popularity over recent years, This is because organizations are realizing the benefits of acknowledging the accomplishments and hard work of employees, especially in terms of retention, productivity, and staff morale.
Gather Regular Employee Feedback
Constructive feedback goes both ways. To create a level of mutual respect and trust, you must be open to receiving criticism yourself. By allowing employees the opportunity to share what they think about your performance appraisal process, you can stimulate a culture of feedback and find out which areas of your performance management strategy you need to improve.
There are two effective tools for collecting employee feedback on your appraisal process: surveys and suggestion boxes.
One of the best surveys for this is an Employee Net Promoter Score survey, more commonly known as eNPS. This is a metric used to measure employee engagement and satisfaction. It gives you a quick glimpse into how happy, engaged, and motivated your workforce is. If you measure the metric over time, you can also gain valuable insights into the impact of any changes to your performance appraisal process.
An employee suggestion box, or idea box, is a physical or digital repository that you can use to collect anonymous feedback and suggestions from your employees. It provides them with a channel to voice their opinions, share insights, and contribute to improving various aspects of the workplace, including the way you conduct your employee appraisals. Traditionally, suggestion boxes were physical containers placed in common areas, where employees could drop written suggestions into the box. More recently, the popularity of virtual suggestion boxes has grown, especially with the acceleration of remote or hybrid working models.
Use Performance Management Software
Finally, the best performance management practices are those that provide you with tangible tools to enhance your processes. After all, a company can only thrive when it has high-performing employees, so it’s vital to have a performance management system in place to continuously track your team’s strengths and weaknesses.
Performance management software is a tool that helps companies and managers organize, understand and manage employee performance. It can be used as a collaborative tool, allowing line managers, heads of departments and HR professionals to access individuals’ records and set strategic goals.
You can use performance management software to plan, schedule, conduct, and evaluate performance appraisals efficiently and effectively. This ensures a consistent and fair appraisal process, ultimately leading to improved employee performance and organizational success.
Moreover, good performance management software will also allow you to track and evaluate performance against KPIs, giving you insight into where individuals need more training and professional development. Plus, you’ll usually find features like automated reminders for performance reviews, reporting, goal setting, and rewards for good performance.
Benefits of Using Factorial’s Performance Management Software for Your Appraisals
Factorial’s performance management software offers a complete solution for small and medium businesses for efficiently tracking and managing employee performance. You can use the platform to create employee performance appraisals to gain insight into your workforce, support employee development, give and receive feedback, and make more informed decisions.
With Factorial, you’ll gain insight into every level of your workforce by assigning the best reviewers to each employee. You can even automate the process so performance reviews are sent out monthly, yearly, or on your own timescale. Having a centralized place to store your evaluations and responses ensures you can oversee the review process effectively while also protecting your team members’ confidentiality.
Specific benefits of using Factorial’s performance management software for your appraisals include:
- Higher retention. Having all your performance management resources organized and centralized will allow you to give regular feedback to your team. This helps them develop their skills, progress their careers and feel more valued. And the more valued your employees feel, the more likely that they will stay at your company.
- Increased engagement. Your employees are more likely to be engaged with their work if they know that you’re invested in improving their professional development with an established performance management system. This is the key to building a high-performance culture.
- Builds trust. You’ll have better relationships with your team members if you’re having regular appraisals and check-ins with them.
- Goal setting and tracking. Set individual and team goals, track progress, and align them with your company’s objectives. That way, everyone is working towards the same goals.
- 360-degree feedback. Use the platform to collect 360-degree feedback from peers, managers, and employees to gain a well-rounded view of employee performance.
- Continuous performance monitoring. You can implement continuous performance monitoring to provide ongoing feedback rather than waiting for annual reviews.
Free Performance Appraisal Template!
One last perk before we end the post. Factorial offers customizable templates for performance reviews, allowing you to tailor the appraisal process to fit your specific needs and industry standards. For example, with Factorial’s 360-degree performance appraisal template, you can quickly and easily evaluate your team’s skills, performance, abilities and more. Then, easily outline any room for improvement and conclusions. And, best of all, this template is completely free to download! So, why not give it a try to get a taster of how Factorial can enhance your performance appraisal processes?
