1. Develop a Solid Understanding of Performance Appraisal

2. Executive Summary
Most organizations have a performance appraisal (PA) program that has evolved over time and is likely not meeting the needs of employees and managers.
Many competing PA theories and practices exist making development of an effective program difficult. However, done well, a strong PA program reinforces organizational culture and helps employees achieve high levels of performance.
An effective PA program can improve key business measures such as Return on Assets, Return on Equity, profit margins and earnings.
Every strong PA program has three elements: performance tracking, informal feedback, and formal appraisal.
Build on these three elements to customize your program to your organization’s goals and values:
Informal coaching is the single most significant factor in easing retention and developing talent.
Forced ranking and forced distribution are techniques that work well in competitive environments. Avoid them in team-based departments.
360-degree evaluations help to improve people management abilities. Stay away from using them for manager compensation or disciplinary  purposes.

3. When done well, performance appraisals also provide significant benefits to executives, managers, employees, and HR
Benefits
Impact on Organization
Better organizational performance and increased revenue.
Apparent opportunities for training and improvement.
Identification of future leaders.
Improve employee performance.
Measure departmental performance.
Highlight top performers.
Executives
Improve employee morale and work quality.
Catch performance issues early.
Make well-informed decisions.
Enable the achievement of departmental objectives.
Reduced turnover and absenteeism within a department.
Manager awareness of progress.
Develop a department through training, promotion, bonuses and terminations.
Managers
Satisfy employee’s desire to know how they are performing.
Connect employees to organizational objectives.
Clarify performance expectations.
Increase engagement.
Opportunities to improve performance are identified.
There is a desire to achieve goals.
Established sense of fairness and clarity when performance is appraised.
Increased productivity.
Employees
Reduce turnover and absenteeism.
Provide a written record of performance.
Identify training needs at a departmental level.
Prepare for the future.
Focus on internal employee development as opposed to constant recruitment.
Defend promotion and termination decisions.
Deliver training.
Succession planning.
Human
Resources
Info-Tech Research Group

4. Solid Performance Appraisals
Effective PA programs identify goals that drive the need to evaluate employees and make decisions about their employment
Solid Performance Appraisals
Organizational Goals
Employment Decisions
Drive the need to do PAs
Decisions are
based on goals
decisions
PAs inform
Clarify expectations
Maintain/improve performance
Increase effectiveness, productivity and engagement
Help employee develop as a professional
Promotion
Reward
Salary increases
Layoffs
Cutbacks
Professional development (identify skills to build)
Choose components of several PA methods that achieve organizational goals
Not about the components themselves, but about the outcomes they will enable
A solid performance appraisal program will look different for every organization because they should be designed to enable unique goals and outcomes.
Info-Tech Insight:
Info-Tech Research Group

5. Develop an awareness of four types of bias that can infiltrate even the most well-intentioned performance appraisal
Halo Effect
Occurs when an employee performs particularly well (or poorly) in one area and is then rated correspondingly high or low in all other areas.
Lack of Differentiation
Occurs when a manager tends to score all employees similarly by, for example, giving everyone high scores, low scores, or average scores.
Personal Bias
The more characteristics a manager shares with an employee, such as age, race, gender, work values, work experience, and personality, the more favorably the manager will tend to rate that employee’s performance.
Occurs when a manager weighs an employee’s recent performance too heavily, as opposed to assessing the employee’s average performance over the entire evaluation period.
Recency Effect
Tip to Overcome
Tip to Overcome
Tip to Overcome
Ranking employees from best to worst (even as a private exercise) can help managers differentiate between employees.
Engaging in ongoing coaching and having employees send regular updates can serve to remind managers what employees are up to.
Having an awareness of this type of bias is the most effective step toward overcoming it.
Tip to Overcome
Awareness of this bias is an important step towards overcoming it.
Info-Tech Research Group

6. Understand common PA methods to determine which combination is best for your organization’s needs
Formal Methods*
Numeric
Example Driven
Measures Traits
Measures Goals
Measures Behaviors
Can be Combined
Graphic
Rating
Scale
BARS
Critical
Incident
Mixed
Standard
Rating Scale
Management
by Objectives
Fully meets objectives
Partly meets objectives
Info-Tech Research Group
*Detailed descriptions of methods on subsequent slides.

7. Management by objectives (MBO): links organizational goals to employee performance targets
Arranged in order of importance.
Expressed quantitatively where possible.
Realistic.
Consistent with policy.
Compatible with one another.
Definition (MBO)
The objectives must meet five criteria. They must be:
Sets organization-wide goals, and links these to employee specific goals.
Managers periodically discuss employee progress towards departmental goals, as well as how the employee is contributing to organization-wide goals.
This process aims to serve as a basis for:
Greater efficiency through systematic procedures.
Greater employee motivation and commitment through participation in the planning process.
Planning for results instead of planning just for work.
Specific objectives being determined jointly by managers and employees and end results attributed to rewards.
Use the Info-Tech, “Annual Performance Review: Management by Objectives” template
Info-Tech Research Group

8. No organization’s performance appraisal program should look identical to another because each organization has unique goals
My PA Program
Individual templates and processes are organic in nature and combine components of several formal methods. Putting a formal name to the program is like putting a square peg in a round hole.
Select components of formal methods
Graphic Rating
Organizational policies and objectives
Desired outcomes of performance appraisal program
MBO
Your performance appraisal program
Info-Tech Research Group

9. Behaviorally Anchored Rating Scale
To rectify this dilemma, you should combine multiple approaches to develop a program that fits your needs
Use the Info-Tech templates for “Annual Performance Review” [Staff], [Management])
63% of organizations surveyed by Info-Tech draw from several methods to create an approach that best fits their environment and goals.
For example: a graphic rating scale can be combined with behavioral examples of each of the traits being measured and include a section for comments.
Link to: 1.2.2_Annual Performance Review – Staff
Link to: 1.2.3_Annual Performance Review - Management
Graphic Rating Scale +
Behaviorally Anchored Rating Scale
+ Critical Incident
Info-Tech Research Group

10. Greater use of informal coaching translates into less effort required to retain and develop talent
The effort required to retain and develop staff drops as more informal feedback is used.
Responsibility for training completion needs to be reflected in the employee, trainer/mentor, and supervisor performance evaluations. Apply the following training techniques:
Mentoring and coaching.
On-the-job training (cross-training, etc.)
Pairing experts and novices on projects.
Stretch assignments.
Knowledge capture and transfer.
Relationship transfer protocols.
External training and certification.
Skills-building incentives.
Ongoing, timely feedback.
Level of Effort “
Ensure that all employees receive constant feedback and appreciation so that they know at any given time what they do well and what to improve.
- Director, Small manufacturing firm
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Extent of Informal Feedback Usage ”
Source: Info-Tech Research Group N = 112
Info-Tech Research Group

11. Get data from “all around” an employee to identify skill gaps
360-degree feedback is best used to assess training and development needs and to provide competence-related information for succession planning. It is also sometimes inappropriately used to inform promotion or pay decisions.
360-degree Feedback is also known as Multi-Source, Multi-Rater (MSMR) Feedback
Watch Info-Tech’s Video: “360-Degree Feedback”.
Internal Customers
Supervisors
Peers
Subordinates
External Clients
Self
360 Feedback
Link to: 1.2.4_Video_360-degree Feedback
Info-Tech Research Group

12. Appropriate for use when:
The formal methods of performance appraisal should be dissected and used in a way that fits an organization’s goals
Formal Methods
Appropriate for use when:
In summary:
Graphic
Rating
Scale
The organization requires a quick and easy solution that results in a numerical rating.
BARS
The organization places importance on behavioral examples, and clear job descriptions allow for a description of detailed behavioral objectives.
Critical
Incident
Numerical scores are not necessary and managers are diligent with recording both positive and negative events.
Mixed
Standard
Rating Scale
Detailed descriptions of excellent, average, and poor behavior would be easy to develop, and the organization places importance on avoiding bias.
Management
by Objectives
The organization has clear goals that are appropriately delegated to departments, and actionable objectives that are clearly described.
Info-Tech Research Group

13. Summary
Performance appraisals are a fact of life for most managers and HR departments. Instead of thinking of them as an administrative burden, understand the benefits of an effective performance appraisal program and how to get the most out of them with the least amount of effort:
Schedule formal appraisals where a score is delivered no more than quarterly.
Provide informal feedback and coaching on an ongoing and regular basis to reduce the amount of work needed to prepare for the formal appraisal session, and the level of effort required to retain and develop talent.
Design the performance appraisal program to fit the goals of the organization. Customize at will, but build on the foundation of a method of tracking performance, informal feedback and formal appraisals.
Use force ranking when appropriate and do so intelligently. Failure in this area can cause your top talent to leave and retain your bottom performers.
Generate insight into employee performance with 360-degree feedback.
Info-Tech Research Group

14. Appendix III: Demographic Information
Appendix III: Demographic Information
The following graphs describes the details of the responding firms that answered Info-Tech’s survey that was used to create this research report.
Industry of Survey Respondents
Business Services
21%
Trans/Utilities/Comms
17%
Government
15%
Manufacturing
15%
Financial Services
13%
Healthcare
12%
Education 4%
Primary Industry 3%
Wholesale/Retail 1%
Source: Info-Tech Research Group N=78
Info-Tech Research Group