How to Develop a Performance Appraisal System

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Employee appraisals are more complex than incremental measurements.
Employee appraisals are more complex than incremental measurements. (Image: 3 centimètres image by Indigo from <a href='http://www.fotolia.com'>Fotolia.com</a>)

Small and large businesses alike rely upon a performance appraisal system in order to set expectations, develop benchmarking scores and track employees over time, and provide a system for structured goal-setting and feedback. Although out-of-box solutions exist to create a performance appraisal system, companies often choose to customize their own application or methodology specific to the needs of their unique workforce. Developing a performance appraisal system requires careful thought, planning and implementation, but the rigors of setup are offset by valuable results over time.

Designing Performance Appraisal Metrics

Determine company expectations for performance. The most valuable performance feedback evaluates employees based on overall company expectations as well as individualized job-specific goals and measures. Meet with both senior and frontline leaders to develop the scope of areas for appraisal.

Establish guidelines for how performance objectives are set both by the company and the individual employee, when they are set and updated, and at what frequency they are reviewed by the individual employee and their manager.

Include some or all of these performance appraisal metrics in company-set objectives: attendance, communication, safety, customer service, decision-making, initiative, self-development and teamwork. The measure of the same metrics over time allows for employee performance benchmarks to be established, against themselves, among particular work groups and throughout the entire company.

Enable employees, in conjunction with their managers, to set yearly performance appraisal metrics, based upon their specific job function. Begin with the position’s job description to set specific metrics, and then include measures specific to the employee’s self-development as well as participation in identified projects or company goals.

Designing a Performance Appraisal System

Determine whether company's needs will necessitate a less formal or non-technology-based performance appraisal system, or if a more formal database system will be necessary. If the latter is determined, choose a platform to host the performance appraisal system. Evaluate out-of-box solutions, as well as in-house database solutions. Consider cost, development requirements and timing, and ongoing maintenance before making the final decision.

Design a performance appraisal system based upon accrued expectations and guidelines and with either in-house developers or the chosen external solution. If a non-technology-based solution is selected, design parameters for how self-appraisals and manager-led appraisals will be completed, collected and correlated.

Select alpha (leaders) and beta (employees) testers to evaluate the designed system. Carefully measure how the system addresses expectations and guidelines as well as the ease of use for employees and managers. Amend any identified areas of concern in the performance appraisal system.

Create policy and procedure documentation in support of the performance appraisal system to disseminate to all end users. When utilizing an out-of-box solution, ensure that any tweaks to the system have been addressed in the documentation provided. Include guidelines for when objectives are set, when performance is evaluated, and how the information will be discussed between managers and their employees.

Implement the performance appraisal system through careful introduction, explanation of the full scope, expression of expectations, and training on procedures and usage.

Tips & Warnings

  • Even out-of-box solutions can typically be modified before implementation. Ensure that the chosen solution meets individual business needs.
  • One size does not fit all when evaluating employee performance; ensure that both company and job-specific goals are utilized to evaluate individuals.

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