HR Handbook: Performance Appraisals

By Peter J. Ennis, Esq., Buchanan Ingersoll & Rooney, PC

[email protected]

This article is not about the best form of performance appraisal or job evaluation.  There are many different thoughts on what is the best system, and the ultimate answer depends to a large degree on the nature of your business, the type(s) of job(s) involved and the capability of management overseeing the appraisal function.

Rather, this article will focus on why some type of performance appraisal system is important, and provide guidelines to help you decide what type of system and document is best for you.

The Benefits Of Having A Performance Appraisal System

As I have said in earlier postings, employees cannot perform well unless they know what is expected of them.  An effective performance appraisal system is one way to help insure that employees receive regular feedback on how they are doing and what they need to do to improve.

Another benefit of an effective appraisal system is that it will recognize excellent employee performance and help provide motivation for those employees to remain with the employer and continue to excel.

Performance appraisals also provide an opportunity to identify performance problems.  As I have also said in an earlier posting, one reason employees sue their employer is that they are surprised about a decision.  An effective performance appraisal system, which identifies poor performance, helps to reduce the employee’s ability to successfully claim that he or she was surprised by a later adverse employment decision.

Information That May Be Included in a Performance Appraisal

In essence, performance appraisals require the employer to make three main decisions: (1) what is being reviewed, (2) how is performance being judged, and (3) what is done with the results.

1. What is being judged?

In terms of “what” is being reviewed, that requires the employer to consider whether it is going to look at the specific job duties of the employee’s position, a broader set of qualifications that will apply to a group of employees over a range of positions, and/or objectives established for an employee for the particular time period which may go beyond his or her specific job description.

For example, a computer programmer’s primary responsibility is to write code so that the employer’s computers operate efficiently or the employer is able to sell a product to customers.  The performance appraisal system could measure whether the employee was able to write the code, how long it took, whether it accomplished exactly what the employer or customer desired, etc.

Rather than just looking at one position, a performance system can examine traits that apply across many positions.  For example, assume you are reviewing programmers, analysts and customer support personnel.  There might be one category which asks the reviewer to rate whether the employee competently performed his or her job.  Other categories might then ask the reviewer to rate such things as initiative, team work, written and oral communication skills, attendance, etc.

Finally, for employees who have been tasked with accomplishing specific tasks or achieving specific goals, the performance appraisal should address the extent to which those tasks or goals have been achieved.

1. How is performance judged?

This question actually has several subsets.  First, is the employee required to perform a self-evaluation?  While, some employers think self-evaluations create conflict because the employee will overstate his or her performance, a self-evaluation helps to provide an overview of the projects worked on by the employee and a good manager can use even an overblown self-evaluation as a starting point for discussing why it does or does not accurately reflect the employee’s actual performance.  Self-evaluations can also provide an opportunity for the employee to express what training and opportunities the employee needs to progress.

The second part of this question is who is going to be asked for input.  This might be the direct supervisor, but could also involve other supervisors, more senior management, co-workers and even subordinates.  For some employers, the key to an evaluation is whether the employee is meeting the employer’s (i.e., management’s) expectations.   Other employers feel that a wider range of feedback is more valuable.  In either instance, the critical point is that any feedback should be based on the reviewer’s personal knowledge of the employee.

Next, consideration has to be given to who has to sign off on an appraisal before it is shared with the employee and/or finalized.  For example, does a senior manager and/or a human resource professional have to approve it before it is given to the employee or becomes final?  A review system should provide an objective analysis to the process and allow the employer to compare how different mangers are reviewing similarly situated people.

In addition to the people who will be providing input, the employer has to decide how performance is going to be judged.  Some employers use a numeric system, while others describe performance in broad terms (e.g., “exceeds expectations,” “meets expectations,” “below expectations”).  Some employers eschew a ranking-type system altogether and only provide written feedback to the employee.  Finally, some employers use a combination of the foregoing.  A numeric system obviously makes it easier to rank employees.  Some employers feel that employees pay too much attention to the numbers, and not what the employee is being told in order to improve.  Therefore, they opt for broader forms of evaluation.

Finally, employers have to consider how they give the employee the evaluation.  Is the evaluation given to the employee in advance?  This allows the employee to gather his/her thoughts in advance, but can also lead to unnecessary complaints or discussions with other employees before the actual meeting.  Who attends the meeting?  Is it just the direct supervisor, the next level of supervisor and/or an HR representative?  Generally, at least two management representatives should be present.  Finally, does the employee get an opportunity to provide written feedback?  I believe this is important and that the employee should be given time to provide written feedback.  It allows the employers to know if the employee has “issues” with his or her job, before they become problems.

1. What is done with the performance appraisal?

The question here is whether a performance appraisal is tied to a pay increase.  In most cases, it is.  If an employer gives across-the-board raises, rather than merit raises, then the appraisal is not tied to any raise.  In addition, some employers separate appraisals from pay increases because they feel employees focus exclusively on the pay increase when they are connected.

Are There Downsides to Having a Performance Appraisal System?

Yes.  First, conducting effective performance appraisals can be time consuming.  Second, most supervisors do not like giving bad reviews, so there is a tendency to rate everyone higher than they have actually performed.  These types of evaluations can then be used against the employer if it takes adverse action against the employee because the employee will argue that he or she always met or exceeded the employer’s expectation and/or was never told about the problem that led to the discipline or termination.

Best Practices in Conducting Performance Appraisals.

The most important factor in deciding what type of performance appraisal system to have is to honestly assess how much time your company is willing to devote to it and the ability of management to make objective decisions, even if that means a negative evaluation.  If you do not think management will devote sufficient time to the process and/or may have a difficult time sending a hard message, then keep the performance system as simple as possible.

Second, make sure there is at least one level of review by someone who is in a position to judge whether certain managers are rating their subordinates harder or easier than other managers and/or whether certain employees are being rated higher than they deserve.

Third, identify what the employee needs to do to improve his/her performance.  Also consider setting goals or objectives for the next review period.

Fourth, give the employee time to review his or her evaluation and provide written feedback.  Then, either explain to the employee why you do not agree with the feedback, or address that feedback through the next performance period.

Fifth, managers should keep accurate records throughout the year (or evaluation period) to make sure they can accurate evaluate the employee, and not just rely on recent performance.

Finally, remember that evaluating performance should be an ongoing process.  Employees should receive regular feedback when they have done something well or performed poorly.

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