Employee appraisal systems: pros and cons

4 min read  |   22 March, 2021   By Melissa Jones

Four colleagues are sat together at a wooden desk and are having a meeting. One is wearing a brightly coloured stripey shirt and is writing down notes. Another colleague is wearing a yellow shirt with a grey jacket and has a laptop in front of her.

Most companies run an appraisal system of one sort or another. Appraisals assess staff performance against set objectives and guide employees on their future development. When appraisal systems are managed well, the staff continually progress and achieve more. In this way, employee appraisal systems can make a significant contribution to the overall success of a business.

What are the types of employee appraisal system?

Appraisal systems come in many forms. The best known is the annual review. This is a once a year review where manager and employee sit down and assess how well the employee has performed. Some systems rate staff according to various criteria using a scoring system. Other appraisals will consist of a narrative that describes the employee’s strengths and weaknesses and assesses their achievements (and shortcomings) against the objectives that were set in the previous review. Some systems combine both ranking and narrative methods.

Evaluations also come in other guises. A 360 degree review aims to collect feedback from all an employee’s touchpoints, so their managers, colleagues, subordinates and even customers. This method is not dependant on just one person’s view of the employee and the extra feedback elicited about the worker gives a more balanced view of them in their day-to-day role.

The self-evaluation method of review can be useful as an input in the appraisal process. Asking an employee to honestly appraise themselves can be enlightening for both the employee and the manager.

The best appraisal systems identify objectives and KPIs so that both manager and employee can agree goals and timescales that need to be met. Agreed and well defined aims and goals provide an easy way of measuring success or failure.

More informal appraisal systems seek to provide much more frequent – even ongoing – appraisal of performance. Sometimes called one-to-ones or check-ins, these are regular meetings with a manager where performance can be checked and objectives re-evaluated if necessary. They are less formal than the annual appraisal, and proponents claim that they engender a coaching management style, rather than an authoritative or coercive one. This they argue, along with the frequency and the informality, make them are a more successful appraisal system.

The pros of appraisal systems

The biggest advantage of an appraisal system is that it gives feedback on how to improve a worker’s subsequent performance. It details how an employee can develop and add more value to the organisation. Appraisals give direction to the workforce based on the needs and wants of the customers of the organisation. In this way, staff are encouraged to be more customer-centric. And giving your customers what they want – profitably - is at the heart of business success.

Appraisal systems are also designed to identify the training needs of individuals. When aggregated, this gives HR a view of the training needs within the organisation as a whole, identifying skills gaps and possible training opportunities.

Some companies use appraisal systems to determine pay increases and promotion. Based on performance according to a graded scale, pay increases can be awarded, with those scoring the highest receiving the largest pay increases.

Appraisals systems form a sound basis for HR decision-making. If an employee is under-performing to the extent that disciplinary processes need to be initiated, then performance reviews can measure and identify whether improvements have been made. Where they haven’t, the review can help inform the next stage of the HR disciplinary process.

Employee appraisal systems encourage and facilitate dialogue and communication. When they only happen once a year, then they aren’t so great for this. But where there are regular one-to-ones and check-ins, then employees and manager get a chance to set clear expectations and to talk about issues. Not only does more frequent discussion make for more opportunities to have problems resolved, but increased dialogue also helps to improve morale within a business.

Appraisal software is increasingly accessible for companies. Electronic appraisals are easy to administer and the sophisticated features relieve the admin burden that paper-based or manual processes bring. There is software that can handle the entire appraisal process, from scheduling reviews, generating objectives and identifying deliverables, analysing performance metrics, producing reports and delivering feedback. 

The cons of appraisal systems

Critics of the appraisal system reason that companies should focus more on improving processes and systems than getting the workers to improve. They say it shouldn’t be for the individual staff members to work faster, or more carefully, or more diligently, or whatever; but that the company should seek to adjust its methods of working and to improve where the systems and procedures are failing to bring about success.

That aside, reviews and appraisals can be viewed quite negatively by employees. Some staff feel they are one-sided and judgemental. Traditional appraisal systems do tend to focus on the negative and generate criticisms of the employee from the person that is one step further up the hierarchy.

Managers too are often guilty of reviewing staff based on their personal characteristics, rather than on their achievements. Character traits may not be entirely relevant to the work the employee is doing, so criticisms can feel unjustified, especially if a worker is otherwise feeling that they are succeeding in their job. Self-appraisal goes some way to assisting with this, but it can be difficult for an employee to honestly assess themselves.

Scores-based appraisals can be demotivating, as it can be disappointing to be deemed average. Most employees are hard-working, good people who turn up on time, work diligently, achieve their targets and enjoy good relationships with their colleagues. But scoring employees will necessarily rate these good achievers in with the regular and typical workers. It will therefore make them “average”. It will make them a three out of five. But it can be dispiriting to be average. If you’re doing what is expected of you, why are you not better than a three? Why are you not a five?

Appraisal systems are often seen as being inconsistent. Even with a clearly set out appraisal system, it’s difficult to expect a number of managers to all operate in exactly the same way. Different managers will review people differently, and favouritism and prejudice can lead to inconsistency in how one reviewer appraises each of his subordinates. Where companies are using paper-based appraisal systems, these can be laborious. Manual process are simply not efficient and represent a significant time-pressure for HR, especially in smaller companies. What isn't under scrutiny, however, is the importance of employee appraisals and the return that they can provide both your employees and your business.


Author: Melissa Jones

Mel is the Content Manager at breatheHR. She regularly contributes insights into the current small business climate with a focus on how HR is crucial to the success and growth of UK startups.

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