What is a Performance Appraisal System?

Evaluating employee performance is not a new concept. But, modern performance appraisal methods are far more employee-centric than they used to be. Performance management has changed rapidly since the COVID-19 pandemic upended the traditional workplace. Blakeley Hartfelder, Director at Gartner, said that performance management will “move beyond just measuring employees’ outcomes and consider the context in which employees’ outcomes are achieved.”

Performance appraisal systems have not only shifted from rigid performance scoring to more empathetic and contextual. They’ve also made the move from being a manual to a digital process with the rise of performance management software.

The traditional review process is declining in popularity, and the performance management software market is projected to be worth nearly $6 billion by 2026. That means there’s no better time to optimize performance appraisals at your organization.

Definition Of A Performance Appraisal System

Performance appraisal system refers to the method you use to evaluate employee performance and analyze performance trends. It sets a standard for the performance appraisal process while allowing some flexibility depending on the role. Performance appraisal systems also include performance data analysis and any actions taken as a result of those findings.

Traditional performance appraisals are once-a-year conversations where employees are bombarded with feedback. The downsides are clear: feedback is less timely, or worse, focuses only on performance in the most recent months. After all, it’s difficult to look back on one year of work in just an hour.

However, annual appraisals were already on the way out when the pandemic hastened changes to performance management. After teams went remote in early 2020, some companies paused their traditional reviews or did away with them altogether. Typically, they also increased one-on-one check-ins. About 30% of companies made adjustments to performance appraisals to account for the challenges brought about by the pandemic.

Increasing feedback and performance conversations made them less stressful and more useful. As Robert Sutton, a professor of management science and engineering at Stanford University, said, "The way human beings make progress is through small steps, not through a bizarre conversation once a year."

Benefits Of Performance Appraisal Systems

Establishing a system for evaluating how employees perform has a multitude of benefits to employees and your company:

• Constantly improve performance across the organization
• Help employees grow professionally
• Increase productivity 
• Keep employees engaged with their work
• Pinpoint performance trends

Top Performance Appraisal Tools

Performance conversations have changed rapidly in the past couple of years. Recent research shows that employees aren’t responding to traditional performance appraisal systems. 55% say annual reviews don’t improve their performance. As a result, companies are modernizing their approach to improve performance appraisals.

Companies will also need to modernize how they manage their new strategies. That’s because it’s next to impossible to conduct a variety of strategic performance appraisals when you’re relying on paperwork. That’s likely the reason why performance management software use is also on the rise.

If you want to upgrade your appraisal process with software, you’re in the right place. The best performance appraisal systems are equipped with several features that make evaluations more useful and efficient. Let’s take a look at some of the tools to look for in an appraisal system.

Peer & 360-Degree Reviews

360-degree reviews are an excellent way to evaluate employee performance from all angles. The employee receives feedback from colleagues, managers, and direct reports. That adds valuable perspective and depth to evaluations. A variety of viewpoints also mean there’s less chance of any potential bias on the reviewing manager’s part.

360-degree feedback can also result in employees being more receptive to the feedback they receive. Since several employees at various levels have given input, the feedback feels less like a direct criticism and more like helpful guidance.

Employee Self-Assessments

Another perspective that’s important to gather is that of the employee themselves. Self-evaluation encourages employees to honestly consider where they’re doing well and where they need more guidance. Self-evaluations also help managers start appraisals off in a more collaborative manner, making employees part of the conversation instead of piling on the feedback.

With an employee self-assessment, you can answer questions like:

• Does the employee feel they receive enough support and training to meet their goals at work?
• Does the employee feel that performance conversations are useful?
• Does the employee’s perception of their performance align with that of their peers, reports, and manager?

New Hire Performance Reviews

New hire reviews, or 30-, 60-, 90-day reviews, help you evaluate how well new employees are performing. These performance appraisals are useful because they establish a cadence of frequent check-ins. They also help new hires become comfortable discussing performance.

New hire reviews are also a chance for you to make sure onboarding programs are working as intended. For example, a new employee is falling a little behind because they didn’t receive training materials until their second week. It’s clear that this is an issue with your onboarding program, and not the employee’s performance. You can adjust the onboarding program to ensure employees receive training materials on day one going forward.

Standard Performance Review Types

Formal performance appraisals are still a standard part of many effective systems — just not the only part. Regular reviews are important to gauge progress, set new goals, and ensure dedicated performance conversations take place. No matter your appraisal schedule, great performance appraisal tools can accommodate quarterly, annual, and biannual reviews.

Review Cycle Management & Completion Tracking

Another reason software is such an important part of a successful performance appraisal system is that it automates many tedious tasks. HR teams will no longer need to remember when it’s time to send reviews or remind managers to complete them. Effective software sends out reviews and reminders right on schedule so those important conversations aren’t delayed.

Employee Engagement Surveys

SHRM research is pretty convincing when it comes to the relationship between frequent feedback and engagement:

• Only 2% of workers who had weekly check-ins with their managers said they were disengaged. 
• Checking in at least once a week led to workers that were five times less likely to be disengaged. 
• Across industries, executives indicated that more frequent, constructive feedback provided employees with more opportunities to learn and improve.

It’s no surprise that so many companies have made continuous feedback part of their performance management strategy. Gathering employee feedback (that you respond to or take action on) with regular surveys is a valuable way to let them know you care about their opinions. That’s important because employees are almost five times more likely to feel empowered to do their best when they feel they’re being heard at work.

Today’s software solutions make it easier than ever to bring modern performance management strategies into the mix. Do you want to explore new solutions, but aren’t sure where to start?

Finding the right performance appraisal system is easier than you think. Download our Performance Management System Buyer’s Guide and find the right system for your business needs.