A guidebook for effective appraisals

Appraisals header image by Christina Morillo

Each year, Glassdoor – one of the world’s largest and fastest growing job sites – lists the best places to work. And oftentimes, the companies at the top of the list share the same qualities: a strong mission, commitment to challenging employees, listening to employee needs, and leaders seen as coaches.

They’re dedicated to keeping their employees engaged and driven, which is great for productivity and profitability alike. In fact, companies with a highly engaged workforce are 22% more profitable than those without a motivated team.

Appraisals offer a unique opportunity to gain insight into your strengths and weaknesses as a company and evaluate overall leadership. By forcing yourself to evaluate how an employee is doing, you are effectively evaluating how you have been performing as a manager.

Additionally, appraisals give you a chance to listen to your employee’s feedback, analyse if they are motivated and challenged, take stock in their pain points, and adjust goals accordingly.

Use these meetings to not only provide key feedback to team members but as a tool to boost motivation and increase loyalty. 

In this guide, we’ll explain what appraisals are, show you how to prepare for and run effective appraisals meetings, and cover the dos and don’ts for these valuable conversations.

Table of contents

What are appraisals?

A performance appraisal, sometimes known as an annual review or performance review, is a meeting between an employer and employee to discuss, evaluate and document job performance. It’s a chance to talk one-on-one, formally, with an employee to review what’s going well, what can be improved and reset expectations going forward.

And they work at every level of the company. Members of staff are appraised by their line manager, who is appraised by their superior, who is appraised by the owner of the company.

There’s no legal requirement to hold appraisals, but they’re a great tool for keeping your business moving in the right direction.

They help in fostering the relationship between you and your staff. They let you see how employees are performing against set objectives and put new responsibilities in place. And allow you to identify any need for training, spot new potential and discuss pay.

In order to keep appraisals objective and fair, we recommend using a performance rating system. These vary by nature and there is no gold standard for rating systems. At the very least, your performance rating system should be: 

  • Fair: Focus on the individual you are reviewing and never compare their performance to the team at large.
  • Honest: Be truthful and respectful. This is not the time to reprimand an employee, but rather a time for a neutral, open discussion about performance and goals. 
  • Professional yet relaxed: Keep the meeting business casual. This is an opportunity to reflect as coworkers and as humans, and should not be perceived as intense.
  • Flexible: Be flexible in your feedback and remember to voice both the positives and negatives, within reason, to create a comfortable balance.
  • Consistent: Keep your feedback consistent throughout your team. Make sure you’re ranking each member on the same scale to ensure everybody is working towards a common goal.

At the end of an appraisal, both of you should leave the room feeling confident and looking forward to continuing to work together. For this to happen, though, you must prepare in the right way.

How to prepare for an appraisal

While it’s based on performance and not personal opinion, an appraisal should promote open and honest discussion. And it should always focus on the positive – personal development and growth.

Here are eight things to do before the meeting to ensure everything runs smoothly.

1. Give the employee plenty of notice

Employees need time to prepare for these meetings just like you do. They may want to formulate ideas for how to address you in an open feedback discussion, as well as time to fill out the paperwork you’ll send their way.

Give at least two weeks’ notice to your employee, along with a specific date and time.

2. Ask the employee to fill out a self-assessment form before the meeting

Asking the employee to assess their performance gives them a chance to think about their future at the company.

Self-reflection is an incredibly important tool that forces an employee to devote time to evaluate their own performance at your company. They may realise, for example, that they’ve been wasting several hours of valuable time a week on data entry and are hoping to find a solution to automate it. Perhaps they can even think of one before the meeting and present it then.

Or, they may feel they are overperforming in one area, and ask you to be challenged in new ways—something you should be eager about as this is a positive sign of a loyal and motivated employee.

A self-assessment form or personal development plan (PDP) should be broken down into three parts:

  • Personal analysis: The employee’s strengths and weaknesses.
  • Setting goals: What they want to achieve in future months and years and their plan for accomplishing it.
  • Personal objectives: Where they see themselves in the short-term (6-12 months), medium-term (2-3 years) and long-term (3+ years).

This information can be used to shape the action plan you put in place for the coming months.

3. Take notes

Take comprehensive notes throughout the year to make it easier to evaluate employees when the time comes.

For example, if your employee hits a personal goal in February, but your meeting isn’t until August, you may have forgotten about that achievement by the time the meeting rolls around.

In contrast, if your employee had a down month, but picked up the pace thereafter, it may be worth reviewing what happened to ensure this behavior doesn’t repeat in the future.

Of course, best practice is to meet with your employees via one-to-ones throughout the year on a less formal basis than the appraisal meetings. But if that’s not possible, having notes on these occurrences will help you conduct the most comprehensive appraisal meeting as possible.

4. Revisit the employee’s job description

The original job description should include the responsibilities and expectations for the role and how that role benefits the company.

Use this document as the criteria from which to measure performance. Make sure the employee has a copy before the meeting, too, so that they are able to self-assess whether or not they believe they’ve achieved what is expected of their role.

In the meeting, go through the application line by line and ask your employees to assess their own performance before you chime in. Hearing what your team members have to say about themselves before you provide feedback gives you an opportunity to listen to honest responses that are not skewed by your own input.

This can be valuable for assessing if an employee’s feedback matches your own, and if not, opens the door to discuss any deviations.

5. Find a comfortable environment

Plan to host the meeting somewhere private that has comfortable seating and is quiet so that there are no distractions.

The environment sets the tone, and it should be professional and relaxed — think business casual.

The more relaxed environment, the more likely you are to elicit an honest conversation and decrease nerves.

6. Put goals in place for the coming year

Yearly goals might change depending on what the employee has in mind for their personal development. Regardless, it’s good to go in with some objectives you feel the employee can achieve. That way you can work together to come up with a plan that you’re both happy with.

Base your goals on the SMART principle:

  • Specific: What can be achieved, when, how and why?
  • Measurable: What will you see when the goal is reached?
  • Attainable: Is the goal realistic and acceptable to you and the employee?
  • Relevant: Does the goal match the employee’s job description, skills and available resources?
  • Timely: When is the deadline? Is it realistic and flexible?

Strategic business goals are invaluable because they set concrete objectives for employees to hit. They can be used to incentivise, motivate, and increase focus for your team members. Most teams perform at peak-levels when they have individual and group-aligned goals that benefit both themselves and your business. Setting goals is key to success.

SMART goals diagram for performance reviews

7. Block out enough time

You don’t want someone interrupting the meeting half-way through. Give it the time it deserves, and your employee will feel respected and heard.

Not every employee will require the same amount of time, but you should block out the same time window for each meeting to stay consistent. If your top performer only takes up 30 minutes of the allotted hour, that’s ok. However, you may want to use that extra 30 minutes to gain feedback from your top employee that could perhaps benefit your leadership and business strategies.

Make the most of the time you have with your employees and listen to what they have to say. You never know what you could learn.

8. Have a clear structure

Every appraisal is different. Set a clear structure that covers the agreed objectives and performance notes to keep things on track.

As part of your preparation, you’ll also need to decide on an appraisal system to use. As mentioned above, there is no gold standard, so take the time to review the options and decide what’s best for you and your business.

Let’s dive into the appraisal system options.

Types of employee appraisal
systems

Appraisal systems give you the framework to identify achievements and performance shortfalls. They also help you guide improvements by using a set scoring system (typically A, B, C, a percentage or a mark out of ten).

Here’s a run-down of the most popular systems:

  • Management by objective: This measures what’s been achieved against the agreed objectives to rate how much the employee has contributed. 
  • Ranking system: This is used where specific targets need to be met. This system compares employees with each other, ranking them from first to last and is often used in sales to show which employees have achieved the highest volume.
  • Self-evaluation: This is the self-assessment method we covered in preparing for a meeting. As there’s a chance employees might not accurately rate their performance, this system should only be used as part of a wider appraisal.
  • 360-degree view: This gives a more objective view of employee performance by gathering feedback from other sources, including line managers, colleagues, customers and subordinates. According to Forbes, more than 85% of Fortune 500 companies use this method as part of their appraisal process.
  • Trait-based: This measures certain traits such as punctuality, personality, confidence and creativity. The problem with this system is that some character traits can be overlooked. It’s also hard to set goals based on an employee’s character. If you want to measure traits, do it as part of a wider appraisal that also includes management by objective or 360-degree view. 
  • Grading: This measures employees based on a score from A-F or 1 to 10 or ‘Exceptional’ to ‘Needs improvement’ for certain skills (e.g. communication, teamwork, attention to detail, etc.). As it’s subjective, it’s best used in combination with another system.

How to run an effective appraisal meeting

No matter how much notice you give or how relaxed you make the environment, any time you ask an employee to step into a room with you, there are going to be nerves. It’s your job to dispel any tension and make sure the employee is satisfied with everything discussed.

Here’s how to conduct a meeting so that everything goes to plan:

1. Start with a warm introduction

A warm, friendly greeting, complete with a nice big smile is a great way to set the stage and ease nerves.

Start by spending a few minutes having a casual catch-up. Talk about your family, pets, or favourite TV shows, anything to develop a natural rapport. Don’t chat for too long, but also don’t skip this step. It will set a more relaxed tone for the rest of the meeting. Then, you can dive into business.

Explain that this meeting is about them and not you. It’s about their future in the company and how you can help get them to where they want to be.

Run through what you plan to discuss and let them know when the meeting will finish.

2. Run through the review

This is where your structure comes into play.

One at a time, work through each of the activities, achievements and objectives.

When doing this, make sure you stick to the facts. Talking about how you’d specifically approach a task or what you’d do in a certain situation isn’t the priority here. The focus is on employee performance. If you want to offer advice and feedback on how to do things better, save that until the open conversation at the end.

For each of the items to review, give a rating or measure (based on the scoring used by your appraisal system).

3. Put an action plan in place

Taking into account job responsibilities, objectives, the employee’s self-assessment and your drafted goals, put a plan in place that maps out short, medium and long-term goals.

Remember, the plan – and all of the actions and targets that go into making the plan a success – must be attainable and relevant. And you both need to agree before you put it into action.

If your employee isn’t motivated about hitting their goals, the chances of them hitting their goals are slim. Make sure your employee is excited about the plan, and realise the goals may vastly shift from one employee to another based on individual strengths and weaknesses.

4. Put support in place

If the employee needs support or training to accomplish their action plan, agree on what’s needed and make arrangements to provide it.

Training might include:

  • Attending a course or workshop
  • Attending a webinar
  • Shadowing a colleague
  • Watching video tutorials
  • Reading books

And it shouldn’t be purely work-based. If developing a hobby in their spare time is going to benefit the employee in their role, be open to it.

5. Any other business

Ask the employee if they have any questions or want to go back over anything covered during the meeting. If a point is raised that you can’t answer during the meeting, write it down and make a note to look into it later.

However, don’t make any empty promises. If you don’t have time to circle back, be honest about that. Best practice is to make the time, but each business structure varies from the next and you must work within your comfort zone.

6. End on a positive note

Naturally, not every comment throughout the meeting will have been positive. It’s important to be open and honest with your feedback, and that includes communicating any missteps or areas of improvement that you’ve noticed in your employee’s work or attitude. Addressing these behaviours constructively early on in the relationship will give them a fair chance to improve down the line.

Regardless of how the appraisal went, make sure to finish it in the same way that you started – in a warm and friendly manner. Thank them for their time, praise them for their contribution to the company and commit to helping them achieve their objectives.

What to do after an appraisal meeting

Once the meeting is over, create a written report for the employee that includes:

  • Name, job title and job description
  • Performance review
  • Performance rating
  • Your comments on each area of work covered in the appraisal
  • The employee’s comments about their performance
  • The personal development action plan

The report should be filed and all relevant departments should be copied in (i.e. line managers and HR).

How often should you hold appraisals?

Typically, businesses hold appraisals once a year. We recommended holding them more often than that.

How many times depends on how often your employees want feedback and whether you have the resources to deliver it. But you should aim for at least twice a year.

Why?

Because they’re great for business. 

Research from HR software provider Breathe found that 75% of employees consider personal development important and 72% of employers feel the appraisal process is valuable.

Take advantage of the opportunities to discuss personal growth with your employees as often as possible throughout the year. More often than not, it will be a mutually beneficial discussion.

6 common appraisal mistakes to watch out for

Only 20% of employees surveyed by Breathe consider their current appraisal process to be motivating.

That could be due to a lack of regular appraisals, but it could also be due to the way management conducts meetings.

We already covered how to run a meeting the right way, but it’s worth knowing what can cause an employee to leave the room feeling unmotivated and lacking direction.

1. Waiting for an appraisal to sit down with employees

Being called into a room for a meeting with the boss is something most employees would rather avoid. In their mind, it means something bad is about to happen.

If the only time you sit down for a chat with your employees is during an appraisal, you risk turning it into something they dread.

The easiest way to make the situation less stressful is to have one-to-one chats throughout the year. Talk as often as you can to employees about work, development, life, music, fashion – anything.

Regular discussions help create a bond that makes the appraisal process more relaxed and productive.

And there’s an additional benefit: employee engagement. According to Gallup, employees whose managers regularly communicate with them are almost three-times more engaged at work.

Recruitment specialist, Sellick Partnership, make appraisals easier for both parties by holding monthly review meetings.

“Our monthly reviews give employees the opportunity to review their performance with their line manager on a monthly basis, giving them time to address and voice any issues or make any suggestions they have for the business. This is also an opportunity for the Senior Management Team (SMT) to communicate their thoughts on the individual’s progress and share any training opportunities and provide guidance where needed,” founder Jo Sellick told Small Business.

It’s an approach worth considering.

2. Talking too much

For an employee to improve you need to agree on an action plan based on a shared conversation.

When delivering your appraisal of the employee’s performance, take the time to listen to their point of view.

Let them talk through their self-assessment form.

If they’ve underperformed in a certain area, let them tell you why. There’s probably a good reason.

3. Evaluating attitude

An appraisal should be based on performance, not attitude. An employee that’s a bit quieter, more reserved and less openly enthusiastic than their team does not make them a bad employee. If they’re struggling, however, get to the root of the problem and work on an action plan that addresses it.

4. Being critical without being constructive

Criticism only works if it’s constructive.

Follow up on every piece of negative feedback with an explanation of how the employee can improve. Otherwise, you’ll leave them feeling dejected, victimised and without any idea of how to change their situation.

5. Measuring all employees by the same criteria

Every employee should be appraised individually on their performance. For example, evaluating a new employee by the same criteria as your top performer can leave the former in an unrealistic position whilst the latter receives top marks.

6. Ignoring the bigger picture

As natural as it is to focus on recent performance, judging an employee on their work over the last few weeks or in a specific situation is dismissing the bulk of achievements in the lengthy period between appraisals.

There are numerous reasons why performance might have dipped – illness, stress, troubles at home, etc. Refer back to your notes you’ve been taking throughout the year to properly and fairly evaluate performance.

Wrapping up

Appraisals are the best way to measure and reward performance. They help you identify skill gaps and training needs, unearth rising stars and challenge your staff to improve. They also give employees the chance to speak up about their worries, ideas and objectives.

The tips we’ve given here will help you plan and deliver positive appraisals for the benefit of employees and your business.

But don’t let these meetings be the only time you sit down with your team. Be a friendly face. Interact with staff regularly, monitor performance, discuss concerns and provide guidance. This makes appraisals easier for both parties. More importantly, it makes for happy employees.

And as the old saying goes: a happy workforce is a productive workforce.

Photo by Christina Morillo, published on Pexels

Darren Bates-Hirst

VP People & Culture

Tide Team

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