A Small Business Guide to Performance Appraisals

A vital tool to keep employees motivated and focused, regular performance appraisals are essential in any business

A Small Business Guide to Performance Appraisals

Keeping employees motivated and focused is a key skill if you are to keep moving forward as a business; without giving people regular feedback on how they are doing, there is a danger standards will slip and you could stagnate or even go backwards.

Performance appraisals are a widely-used tool for employee feedback and are crucial in helping your staff understand what you expect of them. Presenting staff with concrete goals and objectives and reviewing the results on a regular basis will give people a clear sense of direction and responsibility, improving your business as a result.

This article will cover all you need to know about conducting your own performance appraisal; outlining the benefits, how to prepare a self-assessment form, how to conduct and follow up an appraisal meeting, and more.

What kinds of performance appraisal are there?

Although all performance appraisals will have you assessing how your employees are doing in some way, there are numerous ways of conducting them, each with their own benefits and drawbacks.

Some popular options include:

  • Line manager appraisals: This is the most commonly-used method in which employees are simply reviewed by their immediate superiors. However, it is vulnerable to bias, and a poorly trained line manager can cause inconsistency and unfairness within the process.
  • Ratings scale appraisals: This may remove some of the bias inherent in the line manager approach. This method will see you develop an in-depth ratings system which line managers (or anyone else) can use to record an employee’s performance in a more objective way.
  • Bottom-up appraisals: A more thorough approach, a bottom-up appraisal will have a person’s colleagues rating them alongside input from a line manager. You may find it strikes a good balance between appraisals conducted by line managers and 360-degree appraisals in terms of labour intensity.
  • 360-degree appraisals: This is the most comprehensive approach, taking in feedback from sources such as customers, colleagues, superiors and suppliers. However, it is extremely labour- and time- intensive.


What are the benefits of performance appraisals?

Performance appraisals, used well, can be an enormously powerful tool in improving your business. They’re not just for the employee’s benefit – by focusing on how your staff are working towards the goals of your business, you are forced to look at how those goals in themselves are being achieved and whether they are realistic.

In particular, performance appraisals can help with:

  • Clarifying objectives: You can use performance appraisals to set achievable goals for each employee and push them on to greater things. You can also increase a member of staff’s desire to improve through a ‘personal development plan’ – read more on this here.
  • Motivation: This doesn’t just entail words of encouragement for a high-achieving employee, although this obviously does help with motivation. An underperforming member of staff being told exactly how they are going wrong and how to fix it can arrest stagnation and give them much-needed direction in your organisation.
  • Correcting issues: Performance appraisals provide an insight into what work is being done, and whether there are any problems with it – allowing you to identify trouble and deal with it effectively.
  • Improving your business: You can canvass feedback on your own performance through an appraisal, providing you with ideas on how to improve your performance as a manager and the business in general.
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