How to Choose the Right Performance Appraisal Method for Your Culture

As an employer, you might be frustrated with how performance appraisals fall short of delivering expected outcomes. They are time-consuming and it’s difficult to know an employee’s true contributions. Moreover, the feedback provided seems to have little impact on employees’ growth. If this is how appraisals are viewed in your company, chances are that your performance appraisal system is doing more bad than good to your organization. 

Such appraisal methods negatively affect workplace relationships and develop a culture of distrust, fear, and unhealthy competition. This can lead to high turnover. In fact, a study shows that 85% of employees consider quitting if they receive inefficient and unfair performance evaluations. So, how do you differentiate between a good and a bad appraisal method?  

Is your appraisal method bad for your culture? 

Not all performance appraisal processes are the same. Companies adopt different appraisal systems, processes, and methods to evaluate employee performance. Unfortunately, some companies follow poor and ineffective systems that create negative experiences for both manager and employees. A few major signs that the appraisal method is bad for your culture is when it is: 

1. Inconsistent in performance evaluations 

Organizations typically review performance once a year, which stirs confusion among employees. They find it hard to understand where to improve and even unable to determine whether they are even improving. As per a study, around 92% of employees want feedback more often, rather than just once a year. 

As the author Daniel Pink said, 

There’s no way to get better at something you only hear about once a year.

2. Based on badly set objectives 

Take a moment to consider if you set growth objectives or just a list of tasks for the month or quarter. Of course, a goal should be SMART. However, it should also move people out of their comfort zone, encourage them to try things they aren’t already doing, and stretch them to make their work more valuable to the company. Any culture that doesn’t promote growth is doomed to foster a culture of unsatisfaction and disengagement. 

4. Not yielding required performance results  

This is a direct sign that your appraisal system needs to be changed completely or redefined. When appraisals do not yield required performance results, check: 

• If you provide adequate training and developmental opportunities 
• If there’s follow-up after evaluations  
• If bias is in control 
• If the review system is causing division among employees 

 5. Not promoting real-time feedback  

Real-time feedback provides insights instantaneously to improve performance. This fosters a culture that focuses on career development. Provide performance review comments on time so that there’s no confusion at the time of appraisals. 

Sadly, not many appraisal methods encourage real-time feedback. Companies should not adopt a traditional appraisal method blindly, as it may not suit the workplace culture and can potentially deteriorate it. Read below to know what you can do about this. 

Traditional appraisal methods: Are they still relevant to today’s workforce? 

Traditional appraisal methods are unpopular. Employees dislike them, managers struggle to conduct them, and it seems as if there are no real benefits from these methods. Yet, most companies use these methods. Only 5% of managers are satisfied with the quality of traditional methods and only 10% found them to be effective, according to a research.  

With time, traditional appraisal methods became more ineffective and now businesses are opting for a modern method that is holistic.  

These are a few reasons why traditional methods are not relevant: 

1. Bad design and implementation 

Traditional appraisals are harmful when they are not tailored to the organization’s needs or its culture.  

For example, consider a company that has a collaborative and team-oriented culture. It adopted a strict individual performance-based appraisal system, meaning each employee was evaluated on the number of sales per day. Due to the mismatch between the company’s culture and the appraisal system it implemented, employees became focused only on their output per day and found opportunities for teamwork and knowledge sharing unproductive. A culture that was once known for its collaboration became a culture of competition and a lack of innovation. 

What system should it have adopted instead? It should have designed a system that considered both individual contributions and teamwork. The company could have implemented peer evaluations, metrics for knowledge sharing, and a reward system for those who actively contributed to each other’s growth.  

2. Do not fix performance issues in time  

Traditional appraisals, by design, have a lower frequency of occurrence. Because companies directly implement the system without tailoring it to its needs, they follow the original design of yearly appraisals. This means, throughout the year, employees are unsure if they are heading in the right direction. They don’t have the opportunity to work on issues on time. As stated above, there’s no way employees can get better at something they only hear about once a year. 

3. Lack of regular feedback 

Yearly evaluations also mean the company doesn’t spend a considerable amount of time providing feedback. When there’s no feedback throughout the year, performance issues are not fixed in time. A survey by Yoh revealed that 24% of employees were ready to quit because of inadequate feedback. Ultimately, employees become confused and overwhelmed during appraisals, leading to disappointment and disengagement. If the company fails to overcome this on time, it can result in unplanned attrition as well. 

4. Plays a very small part in employee development  

Another survey showed that 32% of employees quit because of a lack of developmental opportunities. With irregular feedback, employees have little to no insights into their performance and what they should even improve. This, however, majorly depends on a company’s interest to invest in employee development.  

There are a lot of other reasons – from bias to focusing on a major behavior of employees. It ultimately depends on how a company designs and implements a rating system or any traditional appraisal method. Read here to learn more about this.  

How to choose a performance appraisal method that will boost your culture? 

A good appraisal system is one that is aligned with the company’s goals, promotes culture, fixes performance issues, and recognizes employees timely. However, even the best appraisal system can be harmful and ineffective if the company has an unhealthy culture. A few signs are: 

• Employees are afraid to receive or give feedback 
• Employees are not motivated to improve their performance  
• Company’s goals and objectives are not shared 

To make sure that the appraisal systems are productive and effective, you need to have a culture that supports them.  

1. Understand where your culture stands in terms of performance management 

If your culture doesn’t support performance improvement, it can be difficult to adopt and implement performance management practices. Understanding your culture is the first step to creating a more supportive environment and adopting appropriate systems. 

This model was developed by Howard Dresner, John Wiley & Sons in 2010. It helps you understand where your culture stands in terms of performance management. It is divided into four levels, each determining where your company stands and how far or close it is to become a performance-directed culture. Most companies use it as a benchmarking tool to compare their culture, define improvements, and evaluate progress towards a performance-directed culture. 

2.  Understand the role of performance management in appraisals 

While you can develop improvements to set up a more efficient performance management system, it’s also crucial to understand the role it plays. Ultimately, the more effective a performance management process, the more effective the appraisal season is. A few signs your performance management system is effective: 

• Timely interventions from managers to improve employee performance  
• Constant feedback, performance challenges are addressed  
• Individual development needs are identified 
• Company goals are communicated  
• Good goal setting 
• High level of engagement and confidence  

Top 6 appraisal methods that promote a strong work culture 

Appraisal methods that help achieve the desired performance outcomes of performance management are more effective and better suited to cultures that are performance driven. You can be confident that your appraisal system promotes a stronger work culture by observing the following signs: 

If your appraisal method doesn’t check all the boxes, the below methods will help. Most companies at Level 4 in the Performance Culture Maturity Model adopt a combination of appraisal methods for a holistic evaluation and fair appraisal. Following are the majorly used methods by such companies: 

1. 360-degree appraisal  

A 2019 survey by the HR Society of North America found that around 63% of companies adopted a 360-degree appraisal method. 360-degree appraisals have been gaining popularity because of their holistic evaluation and view of an employee’s performance. Moreover, they also identify developmental needs alongside increasing collaboration and communication.  

When employees give and receive feedback from each other, it improves collaboration. This can, however, be disastrous in a culture where employees are afraid to speak up or there’s a major focus on providing negative feedback. This is why companies should create an environment that’s at least somewhere between Level 2 and 3 in the model provided above. To tackle this, organizations should train their managers, encourage a culture of feedback, and address underlying issues in the workplace. 

2. Performance check-ins 

Performance check-ins can be an appraisal method where employees are evaluated by comparing their actual performance to their expected performance. This helps take decisions and identify developmental needs.  

For example, the company Apple uses a form of performance check system called the Performance Review. It’s a system that incorporates 360-degree feedback, ratings, and continuous feedback. Employees are assessed by more than two executives, direct reports, and peers. They are evaluated in 3 categories: teamwork, results, and innovation. Employers get a clear view of their contributions and help improve. 

3. Management by Objectives (MBO) 

A method that’s primarily based on objectives and goals, MBO is one of the appraisal methods that’s widely used. A study by the American Productivity and Quality Center, MBO leads to a 10% increase in productivity. Another study by Bain & Company revealed that it can improve customer satisfaction by 20%.  

The main focus of this method is to align employee goals with organizational goals. When employees feel more connected to their organization’s goals, they become more dedicated and motivated. It fosters a culture of accountability and communication. By focusing on goals, it becomes easier to identify the areas where employees are falling behind. This also helps in identifying areas where the organization can ultimately improve, leading to a culture of continuous improvement. 

4. Behaviorally Anchored Rating Scales (BARS) 

This is a well-known method where individuals are compared against the performance dimensions. By anchoring performance ratings to specific skills, traits, and behaviors, there is less room for bias and subjectivity. A fair and objective process leads to a positive work environment, ultimately boosting your work culture. To achieve this: 

• Managers and employees should mutually agree on the performance dimensions (behaviors, skills, and traits) for the role. 
• Behaviors should be anchored to the organization’s culture as well. 
• Provide regular feedback 

5. Self-evaluation appraisal method  

Self-evaluation is a process where an employee evaluates his own performance in a specific period. This helps them prepare themselves for the appraisal process where they can communicate to their managers about their development. By adopting this method, you can promote a culture where an individual takes ownership of their own results. Employers should empower employees to complete their self-evaluation and encourage them to be honest and objective. To learn more about how to write a self-evaluation, read here. 

6. Assessment center appraisal method 

Assessment centers are used to evaluate an employee’s competencies and skills in multiple areas through exercises like role-playing, in-basket, etc. This appraisal method is often used to assess an employee’s suitability for a management position but can also help take decisions regarding training and development or promotions. Since they are rated by multiple people, this method is unbiased and fair. Some exercises require employees to work together and communicate, ultimately increasing collaboration and teamwork. In result, this method boosts a stronger work culture. 

Is there a way to fix the current appraisal system? 

You may prefer not to adopt another appraisal system because of lack of resources, resistance from employees, or if the new ones do not meet your culture. In such cases, you can improve your existing system. Firstly, understand that there are many negative consequences associated with annual assessments. You can overcome this by making a few changes in your current system. Alongside your current system, implement timely, regular feedback frequently. Many companies are adopting real-time feedback to fix performance issues in time. Collect feedback from peers and hold regular reviews. If possible, implement technology to capture performance data, set easy goals, hold private meetings, and collect feedback. You can do all of these and much more through Keka’s PMS. 

How Keka can help you boost your culture 

Keka’s Performance Management System is the perfect fit for companies who are looking for appraisal software to accommodate their growth, implement continuous feedback, and provide real-time reviews. You can also use Keka to analyze and track employee performance and make sure the results are achieved. It provides other features like 360-degree software, OKR software, and one-on-one meetings. Get a free trial today here!