An appraisal (also known as a performance review or performance appraisal) is the formal procedure of assessing the performance and effectiveness of employees in relation to their job description and the organization's business objectives. The line manager (the appraiser) conducts the appraisal with reference to the roles and responsibilities of the employee (the appraisee).

The overall purpose is to facilitate review and reflection in order to help employees improve and develop. As stated by Elon Musk, founder of Tesla and SpaceX, "I think it’s very important to have a feedback loop, where you’re constantly thinking about what you’ve done and how you could be doing it better."

The key reasons for conducting appraisals are to:

• assess and record an employee’s performance in line with their job description and professional targets

• assist employees in reflecting on their own performance and contributions at work

• identify any barriers hindering the performance of an employee

• identify appropriate training and development needs of the employee

• set new goals for continuous professional development and career progression

• aid management in assessing the suitability of individuals for a pay rise or promotion

• provide an opportunity to praise or reward staff for their good work.

Communication is conducted in a two-way manner so that the line manager and employee are able to discuss performance targets and identify any areas for improvement. The appraiser also provides constructive feedback to the appraisee.

To support the employee in his/her professional development, the appraisal process is also used to recognise any training needs. It is common to conduct a performance review at least once a year. Typically, employees will set SMART targets that intend to accomplish as part of the appraisal process:

• Specific

• Measureable

• Achievable

• Realistic, and

• Time bound.

 Watch this video about how to conduct effective performance reviews, which features how to carry out a development plan for employees:

Appraisals are conducted in order to:

• provide feedback to the employer and employee on the latter’s performance

• help the employee improve his/her performance at work

• hold employees accountable

• improve the employee’s motivation and job satisfaction

• identify specific training and development needs to support the employee

• help with decisions about salary increases

• identify potential workers for promotion

• meet workforce planning needs of the organization.

However, appraisals can be time consuming and expensive to executive effectively. They can also cause anxiety and stress for employees, especially if their pay and employment prospects are dependent on a successful outcome of staff appraisals.

(i)  Formative appraisals

“When the cook tastes the soup, that’s formative. When the guests taste the soup, that’s summative.”
- Robert E. Stake (b, 1927), Professor Emeritus of Education at the University of Illinois

Formative appraisals take place on a regular and continual basis in order to allow workers to improve their performance and effectiveness. The line manager provides feedback on the progress being made, based on the SMART targets set by the employee and/or employer, such as the progress made in a particular role or project. Modifications or additions to these targets are made if needed.

The employee is praised for jobs and tasks that have been done well, and feedback is also provided in areas where there are difficulties. The purpose of providing formative feedback is to help the employee to improve. This could be supporting with funding for appropriate training and development needs or opportunities related to the discussions in a formative appraisal.

(ii)  Summative appraisals

Unlike formative appraisals, which are ongoing, summative appraisals are conducted periodically over a period of time or at the end of a major task or project. In practice, these are conducted annually. A summative appraisal includes an element of making a judgement of whether the appraisee has passed the agreed and expected standards, i.e. it sums up how the worker has performed. It is used to is hold employees accountable for all aspects of their work.

Failure to meet the standards does not necessarily lead to termination of contract, but may lead to the employee being on a performance improvement plan, which includes agreed areas for improvement before the next summative appraisal takes place.

(iii)  360-degree feedback

As the term suggests, a 360-degree appraisal provides feedback from a range of people who work with or interact with the appraisee, such as their line manager, co-workers, subordinates and even customers. Self-ratings can also be used as part of the process. As 360-degree feedback involves a larger number of people in the appraisal process, the information is usually gathered from questionnaires, surveys, observations and/or interviews.

However, this can be rather time consuming. The main advantage of this method of appraisal is that it provides multiple perspectives of the employee’s effectiveness and performance at work.

(iv)  Self-appraisal

A self-appraisal involves individual employees reflecting on and evaluating their own performance against the pre-agreed standards and practices in the workplace. Typically, this involves employees rating themself against various key performance indicators. Executing properly, self-appraisals can help to motivate employees to formulate action plans to improve their own performance.

Self-appraisal enables workers to consider their own strengths, weaknesses, accomplishments, and challenges. This allows managers and the individual employee to identify any specific training and professional development needs. It also enables the appraisee to be prepared for further discussions with their line manager.