Key Factors to Effective Performance Appraisals


Performance appraisals are an important tool in managing employees. They are a communications tool that allows managers to set goals and expectations with employees and then evaluate their performance. Based on how they do, the employee can be rewarded or if need be, a corrective plan of action can be implemented. Either way, performance appraisals set clear expectations for what is expected from an employee.

Identifying What to Evaluate

When deciding what aspects to evaluate an employee on, a manager must first determine what activities contribute to the overall success of the department or company. These are the activities that need to be evaluated if the performance appraisal is to be relevant to the employee and to the company. For example, when developing a performance appraisal for a sales agent, their ultimate job is to bring in new business. Does it make sense to evaluate them on the number of cold calls they make or the number of sales they actually close? The key is to evaluate each position individually and determine the key factors for success.

Quantifiable Metrics

Once a manager has determined the key activities to evaluate, she must figure out a way to make them quantifiable. Quantifiable metrics are the best way to ensure that performance appraisals are as fair as possible. Quantifiable metrics allow each employee to track his own performance at all times and know exactly how he is doing. If the goal of a sales agent is to bring in one million dollars in new business for the year, she will be able to easily determine how much more business she needs to bring in to meet the goal. The difficult part of performance appraisals is identifying a quantifiable way to measure each key activity and making sure it is within the employee’s power to control the outcome.

Examples of Quantifiable Metrics

Quantifiable metrics can take many forms. Some examples: • Number of new accounts opened • Number of widgets made • Number of hours billed • Percent of on-time deliveries • Percent of projects completed on time • Average waiting time of a customer

Soft Metrics and How to Use Them

Not everything can be reduced to a quantifiable metric. While the bulk of a performance appraisal should rely on quantifiable metrics as much as possible, there are some jobs or some aspects of a job that cannot meaningfully be reduced to a number. In these cases, a soft metric can be employed. These include things like customer satisfaction and teamwork. The most important thing when using soft metrics is to clearly articulate what the soft metric is and how it will be evaluated. It is also important to encourage the employee to keep an anecdotal list of incidences in which they met the soft metric’s requirements.

Setting the Stage

Performance appraisals don’t start at the end of the appraisal period; they begin before the period gets started. It is incredibly important for managers to sit down with employees and share with them exactly what they will be evaluated on and the best ways to meet the performance goals. This way employees won’t feel blindsided at the end of the period if they get a poor review because they didn’t know the importance of one of the factors they were being evaluated on.

Making Performance Appraisals Matter

For performance appraisals to be effective there must be incentives attached to them. If one employee gets an outstanding performance appraisal and another employee gets a mediocre one, but they each get the same bonus and raise, then there will be less incentive for the outstanding employee. By tying compensation and their continued employment with their performance appraisal, employees are more likely to take the key factors identified seriously and will work to achieve the goals of the company or department.

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  • The Performance Appraisal Question and Answer Book: A Survival Guide for Managers; Dick Grote; 2002
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