A Guide To Effective Performance Appraisals

A guide to help HRs, directors, and everyone who works with people build an effective appraisal process that inspires growth of your team.

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Performance review process has evolved tremendously in the past decade.Instead of serving as a tool to segregate high and low performers, companies use appraisals to help their employees grow by providing valuable feedback.

About performance management

The Performance Management System (PMS) is the process of planning and monitoring of the performance to increase the company’s efficiency in line with its strategy, mission, and vision.

The system involves 2 major processes:

  1. Activity / performance planning defines goals and other performance criteria based on the vision, mission, and strategy
  2. Performance appraisal actual benchmarking of the achieved result against the target one

The main idea behind performance management: the company’s efficiency is the ‘sum total’ of all company employees’ performance results; every individual employee contributes to the overall company performance, to the achievement of its strategic objectives.


One of the researchers in corporate behavior noticed that every company has employees who achieve more in the same conditions with others. The reason for better performance is ‘more efficient’ behavior that helps these people perform better. This led to "HOW + WHAT" performance concept, showing that you can improve the performance through an adjustments of appraisal habits - like training and motivation.

In this case is behavior is everything that has to do with skills, interpersonal communication and patterns of interaction. Behaviors refer to:

Competencies - behavioral models. An employee forms them over a lifetime. They relate to experience, knowledge, skills, abilities, motives, and personal characteristics. An employee demonstrates them when performing functional duties and interactions.

Values are ethical beliefs and principles of interaction between employees. Most employees follow them unconditionally at the organizational level. Values tend to guide their behaviors.

Goal - A business goal is a specific, measurable aim or end result that a company sets out to achieve over a set period of time within the context of advancing their core strategy and purpose. For a goal to be effective at directing business activities, it should have clear targets and timelines along with outlining the broader objective behind the goal. Well-constructed business goals also provide a framework for assessing progress using concrete metrics and data points.

Key Performance Indicator (KPI) — A key performance indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate the success of specific business activities, programs, projects, products, and teams against expected results. KPIs provide the critical data and insights a business needs to determine progress, identify issues and opportunities, and guide strategic decisions.

Objectives and Key Results (OKR) — Objectives and Key Results (OKR) is a goal-setting methodology used by organizations to establish challenging yet achievable goals that align to a company's central strategic priorities and mission. OKRs consist of an overarching, qualitative objective statement supported by a set of 2-5 specific, measurable, time-bound key results that define the metrics for success. The OKR framework aims to provide transparency around organizational goals while allowing for flexibility in the strategies to achieve the outcome.

Performance review trends are changing

Today, employees expect daily feedback to help them grow and improve professionally. Shorter review cycles allow employees to evaluate their performance, correct mistakes, and move forward faster. There are two major shifts happening:

1. Shorter review cycles with faster feedback

Holding performance reviews once or twice per year is a thing of the past.The lengthy gap between appraisals does not help resolve issues on time.For example, an employee might consider up skilling opportunities but must wait months before the issue is discussed in detail.

Short cycles of performance appraisals are influenced by the transformation in modern software development practices. The developer's community has adopted Agile approaches, where they build software applications in multiple, progressive steps to be more responsive and flexible to changes.

Likewise, employees are pursuing rapid growth in their respective careers.They become proactive in seeking spontaneous and regular feedback. For them, continuous feedback is a powerful tool that helps them scale the career ladder at a greater pace.

Therefore, the responsibility of holding regular performance appraisals like on the shoulders of management and HR. Employees are smart enough to consider other options if they don't feel valued.

2. Increased expectations amongst employees

You can’t hold the same type of performance appraisals as you did in the past 10 or 15 years. Back then, managers were obliged to rank employees into the top and bottom performers. Regretfully, those that are at the bottom ranking often face termination.

The conventional ways of evaluating employees cause undue stress to the entire organization. No hardworking employee would want to end up seeking another job after the long-dreaded appraisal. Thankfully, performance reviews have since evolved into a mutually-beneficial platform that helps both the employee and organization grow.

Employees now anticipate constructive feedback then they are put through the online appraisal process. They want to know if they have made a meaningful contribution that aligns with the company’s goals. More importantly, employees want to be valued according to what they are worth.And this means rewarding them with the remuneration that they deserve.


Instead of inducing fear and anxiety, appraisals are now motivational boosters that elevate employee performance. Companies are leaning towards removing the punishment from this process and focusing more on helping employees to grow.

Types of Performance Reviews

When designing the employee performance review process in your team, it's valuable to know the typical approaches organizations take to conduct their reviews. We have identified the 3 most common review types that you can use to design your review process that fits your team

360 Feedback Reviews

A 360 review is a performance evaluation tool that gathers confidential feedback on an employee from multiple people they interact with including managers, peers, direct reports, and sometimes external stakeholders. The feedback touches on employee strengths, areas for improvement, and alignment to competencies that provide a comprehensive perspective of the employee's contributions. 360 reviews give employees visibility into how different groups perceive their effectiveness to support professional development.

Primary goal: collect a holistic view of the individual strengths and weaknesses and help each participant to improve and grow

Reviewers: self-evaluation, manager, peer, direct reports

Frequency: once or twice a year

Benefits of 360 Feedback Reviews

  • Structured holistic feedback
  • Personal professional growth
  • Faster team growth and better collaboration

Common Pitfalls of 360 Feedback Reviews

  • Need to follow up (don't "collect and forget")
  • Encourage critical feedback (don't avoid tough conversation)
  • Don't focus only on weaknesses

Preferred Visibility of 360 Feedback Reviews

  • Anonymous for the recipient, non-anonymous for HRs (to encourage honest, holistic feedback from peers/managers, but allow HRs to calibrate as needed.

Sample Questions for 360 Feedback Reviews

  • What did this person do really well?
  • What could this person improve on?
  • This person is open-minded and accepts feedback
  • This person often shares ideas and suggestions
  • What actions/behaviors should this person start [stop/continue] doing?

Leadership Reviews

During the Leadership reviews, managers receive feedback from their direct reports and become better. 70% of employees leave managers, not companies. That's why your managers need to be empowering leaders.

Primary goal: give managers honest feedback from their direct reports and help managers understand how their manager style affects their team

Reviewers: direct reports

Frequency: once a year

Benefits of Leadership Reviews

  • Valuable feedback for new, inexperienced managers
  • Aligns manager expectations with their teams
  • Better manager-employee collaboration
  • Managers that receive upward feedback perform better (Applied Psychology Study).

Common Pitfalls of Leadership Reviews

  • Employees can be afraid or uncomfortable sharing critical feedback
  • Ensure you communicate the results of the review and actions taken, show that you listen to the feedback
  • Never punish (directly or indirectly) employees for the critical feedback

Preferred Visibility of Leadership Reviews

  • Anonymous for all (to create safe space for employees to share feedback)

Sample Leadership Review Questions

  • My manager empowers me without micromanaging
  • My manager is productive and results-oriented
  • My manager is an excellent communicator
  • My manager and I regularly have meaningful discussions about my career development
  • My manager has the knowledge needed to advise the team
  • My manager and I have consistent and productive 1:1's

Performance Reviews

During the Performance reviews, participants evaluate on the goals achievements and expectations, as well as align on individual performance.

Primary goal: align on the objectives, identify and fix the gap in skills and competencies, evaluate the individual performance

Reviewers: self-evaluation, manager (+ sometimes peers)

Frequency: two or more times a year

Benefits of Performance Reviews

  • Helps teams stay aligned on goals
  • Timely feedback and actions to maintain alignment and correct performance quickly, when needed
  • Increased team productivity and accountability

Common Pitfalls of Performance Reviews

  • Ensure reviews extend beyond just compensation and promotions
  • Most employees feel like they are not reaching their full potential at work. Address these concerns during the performance reviews
  • Ensure all employees participate in the process and are recognized

Preferred Visibility of Performance Reviews

  • Non-anonymous for all

Sample Questions for Performance Reviews

  • The person delivered on his/her commitments.
  • How would you rate the quality of this person's work?
  • I understand how my work makes an impact on my team goals.

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