What is Performance Appraisal?


Performance appraisals are a valuable performance management tool to evaluate the performance and value employees provide as well as set goals for the next review period. Most companies conduct performance appraisals annually, but they may also be done after a new hire completes the first 90 days of employment or on a monthly basis in situations where performance is an issue.


  • Formal performance appraisal has its origins in Frederick Winslow Taylor's 1911 Time and Motion work, which used the scientific method to assess and improve worker productivity. In 1960, the Theory of X and Y was introduced to categorize employees. With X employees, performance appraisals are income-justification exercises. With Y employees, they are a cooperative exercise in aligning personal and professional goals. Currently, management favors the Y employee model and uses performance appraisals to develop skills and talent.


  • There are a variety of performance appraisal types as well as variances in terminology, but the most common performance appraisal types are: rating scales, essay methods, results oriented (also known as Managing By Objective). Rating scales are the most popular type of performance appraisal followed by the essay and results oriented appraisal formats. Regardless of the performance appraisal type the main purpose of an appraisal is to encourage and develop employees, facilitate corporate goals, identify improvement areas and training needs.

Rating Scale

  • Rating scales are a structured appraisal of employee performance and, as their name suggests, use a scale to grade work quality. Scales may be numeric or rate from poor to excellent. While rating scales are objective in their format, their use is subjective and open to supervisor interpretation. In addition, their inflexibility can be problematic if a problem or achievement area is not included on the scale because both good and poor performance can slip under the radar.


  • The essay method of performance appraisal involves a supervisor writing a paper outlining employee strengths, weaknesses, goals and objectives. A supervisor can introduce any topic at his discretion and there are no limits or objective metrics to ensure the performance appraisal is appropriate or productive. The subjective nature and freedom of essay appraisals could open the door to employee contention and legal liability if a supervisor is not well-informed on employment law. In addition, a study published by the European Journal of Social Sciences found the essay appraisal to be the least effective appraisal method (see References for a link to the study).

Results Oriented

  • Results oriented or Managing by Business Objective (MBO), is a metric based performance appraisal method that focuses on work outcome. Employee performance is judged primarily on goal achievement. Managing by Business Objective is considered to be the most objective and effective appraisal method, but the emphasis on measuring performance can result in inappropriate goals. For example, once an employee reaches 100% on a given metric, it would typically be unproductive to set a new goal of 150%.

Preparing for a Performance Appraisal

  • Employees should track their goals throughout the year, documenting their professional achievements and performance as much as possible. Prior to a performance appraisal, they should informally discuss their work performance with their supervisor to avoid surprises and make suggestions on goals for the next review period. Proactive communication is the best way to positively influence performance review outcome and most supervisors are pleased when their staff partners with them to assist with the review process.

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