Performance Appraisal Systems

There are many different appraisal systems but due to the subjectivity involved there is no such thing as a perfect appraisal system. Subjectivity is the biggest problem with performance appraisals, two separate managers, to varying degrees, will invariably appraise the same employee differently.

Therefore getting the managers all together to agree on uniform measures of performance standards is always useful before you start the process.

If You Work In A Large Organisation

If you work in a large organisation no doubt you will already have a performance appraisal system in place. Sometimes the problem with large organisations performance appraisals is they try to be a 'one size fits all' and are too general.

To improve performance it always best to be as specific as possible. Another problem in large organisation there is simply too much bureaucracy involved in getting such systems changed, everyone has to be consulted and generally someone has a problem with any changes. My advice in these situations would be to augment the present system with your own 'add on' that makes it more specific and relevant to your team members.

The Main Performance Appraisal Systems

Whatever the system used it is important to bear in mind that it is the discussion and communication with the employee about performance and how to improve it that brings the benefit, creating an atmosphere of working together and getting the employee to leave WANTING to do better is what it's really all about, not filling out the forms.

The most common systems are:

  • Ratings

  • Narrative

  • Rankings

  • 360 Degree
  • Ratings

    This is the most common form of recording performance; the manager rates an employee's performance on a pre-determined scale. The scale generally varies from a 3 point scale up to a 5 point scale with different descriptors for each point. Different aspects of the job are rated, common distinctions are:

    Job Performance (What the employee is accountable for doing)

    Skills (What skills the employee has)

    Behaviour (How the employee gets the job done)

    Knowledge (Knowledge about the job)

    Obviously these can be subdivided again. Job performance for example may have several categories; certainly the most important parts of performance should have their own categories.

    Five level scales are the most common, obviously the greater the number of scales the more discriminatory judgement is required from the manager.

    With Ratings I would suggest you add additional notes to each section that explain the rationale for the rating and a brief outline of what will be done to improve, if they are not in the top category. If an employee is in the top category I always find it useful to talk with that employee and try and get them to share their secrets as to how they consistently out-perform their colleagues.

    As mentioned earlier the employee should play an active role in self evaluation and coming up with ways to improve, and the rating should be agreed between the two of you, not just the manager handing it down from above.


    A narrative assessment is simply a written summary of views about the level of performance achieved. It is best to give narratives a structure dealing with certain specifics relating to the employees job, i.e accuracy and reliability, dealing with customers and product knowledge.

    The advantage of narratives is they are extremely flexible and don't have the illusion of objectivity that can occur in ratings. Narratives can also deal with forward performance planning and what is necessary to improve performance.

    The disadvantage is managers can really struggle and suffer from 'writer's block' spending a lot of time getting started and having problems with how to word things. Performance Appraisal Phrases can be helpful in this regard to help get managers started.

    As with all reviews that should be done WITH the employee a good way to use this method is not to write out the narrative before the review meeting but to jot down an outline with some ideas and phrases, get the employee to also make some notes before hand, and then together craft the final copy.


    Rankings are somewhat controversial, in most of the literature I have read they get a lot of criticism. Their saving grace seems to be that Jack Welsh, generally accepted as one of the greatest managers of all time is a proponent of them. When running General Electric he implemented a system where employees were ranked and the bottom 10% fired, the idea being to continually improve the team.

    I have used rankings and found them to be extremely powerful. Where individuals do not have to work as a team, and objective job performance data is available, there is no question they create a healthy competitive atmosphere and can really drive performance. Sales is an obvious example but there are many other jobs that fit this criteria.

    On a personal note: I ran a fleet of delivery drivers and measured the number of drops per hour, ranked all the drivers on a descending graph, and incentivised them according to their ranking. The drivers loved the competition; they couldn't wait each week for the graph to be put up on the wall. Obviously the fellow at the bottom wasn't so keen but more often than not it showed he had been up to no good, running around on his own business when out and about, rather than focusing on the job he was being paid to do, as the guys at the top were.

    Even when there is a need for more team work and the data is not as objective, I have found rankings useful. I was Managing Director of a pizza chain consisting of 23 branches. Each branch had a branch manager and two assistant managers. When I took over we began to rank the managers, just like sports teams at school there was a 1st team, the top 23 managers who (should be) the branch managers. Within the first team the star players at the top of the ranking were the ones that were allocated the biggest busiest branches. The second team was the better assistant managers, the guys at the top of the second team were knocking on the door wanting to get into the first team and run their own branch - and the guys at the bottom of the first team were aware of it. Then I had the 3rd team, here the guys who were at the bottom of the third team were in danger of losing their place to ambitious, hardworking branch staff that wanted to get ahead and get into the third team and climb up to the first team. It was a system that everyone understood and served to motivate people who wanted to get ahead and as well as be a warning to those that were ahead and were resting on their laurels.

    All too often when there is discussion of rankings the focus is on the poor performers and 'oh dear, how must they feel down at the bottom of the ranking?' The question I am asking is without rankings 'how do the top performers feel?', those who are trying harder, working longer, giving their all to the job feel when they are given no recognition for it and treated the same as the guy who really doesn't really give a damn.

    If you don't recognise your top performers and reward them, but rather treat them the same as the bottom performers, you risk demotivating them or worse still, losing them. These are the guys you should be concerned about, not the poor performers who are more than likely poor performers because they simply don't work as hard or care as much.

    Furthermore I don't subscribe to the fact that if you are shown to be at the bottom of the ranking you are immediately demotivated by the fact, in my experience individuals who are at the bottom of the ranking one month are highly motivated not to be at the bottom the next month. The individuals that don't care and are consistently at the bottom need to question if they are in the correct job or organisation.

    360 - Degree Appraisal

    The idea behind the 360 degree appraisal is that information about performance is collected from multiple sources, for example, a managers may be appraised by the staff they manage, superiors, colleagues and even suppliers and customers.

    Most commonly the different sources appraise using a rating system so it has the strengths and weaknesses of that system. Furthermore the rating is usually done anonymously; this is so that the people giving the feedback can do so without fearing any reprisal from someone who may be a superior. This however is one of the problems with it. As discussed in the 'Ratings' section the real power is the discussion and communication that comes from the appraisal process. If the system is totally anonymous then these discussions cannot take place. An employee may give a manager a poor rating on a criteria such as 'Inspires and Motivates team' however without discussion about why the rating was poor and what can be done to address it the usefulness of the process is limited.

    Furthermore if the system is anonymous the source of the feedback can be discredited by the manager receiving it.

    In a well functioning workplace where there is trust and mutual respect between staff 360 degree reviews can be very powerful at helping improve performance. If however there is not, staff may want to score points against managers and give excessively bad ratings, furthermore managers may discount the ratings and get defensive and it may just serve to make a bad situation worse.

    Certainly managers need to have the benefits of getting feedback from their subordinates explained to them. The old fashioned manager who likes to be all powerful is not going to appreciate being told by subordinates that he is actually not doing a very good job, he will no doubt react defensively and try and justify himself, try to discredit whomever gave the feedback, may even act vindictively towards those who criticises him.

    Receiving Feedback From Subordinates

    Even if an entire 360 Degree Appraisal System is not implemented at the very least a system should be in place that lets subordinates appraise their managers, after all this is the main job of the managers and they need a system to let them know how well the are doing.

    On a personnal note: In my management career something that was a real watershed for me and transformed how I thought about managing was when we had an excercise carried out by a Human Resource consultant. It was my first business, a start up and at that stage I had grown it to having 7 branches with 7 managers. The excercise involved the facilitator explaining that I was no longer the boss in the room, he was, and he was running the show, not me. We were all treated as equals and each person in the room had to sit in the chair at the front and be told by all the others, one person at a time:

    3 things they were doing that were good and should carry on doing

    3 Things they were doing that were bad and should stop doing

    3 Things they were not doing and that they should start doing.

    The person receiving the feedback was not allowed to speak, which in the beginning was difficult for me, I wanted to start defending my position but was told by the facilitator I had to keep quiet.

    When you think you have been doing a great job and you have the luxury of being the boss and never hearing any different you can get lulled into a false sense of competency. Hearing negative feedback is never a pleasant experience but it is absolutely invaluable to hear from the people you manage how you are doing. I didn't enjoy hearing 7 people telling me what I was doing wrong but when I thought about what they said I realised they were right and it forever totally changed, and improved, the way in which I managed.

    Since that day, I always built into every business I have run, a system for managers to receive feedback from the people they manage, on how they are doing and it forms an integral part of the managers appraisal system.

    With regards to the system being anonymous what I have found most useful is to make it optional whether or not individuals want it to put their name to it or not. If you have a good relationship with the people you manage more often than not they want to put their name to it because they want to discuss the matter with you and know you will respect their opinion and not get defensive.