Performance appraisals are regular meetings between employees and managers to evaluate job performance. More than just a routine meeting, they’re a foundational tool for professional development that gives employers a structured way to assess individual contributions, support growth, and inform decisions such as compensation adjustments or career advancements. Performance appraisals also help align employee efforts with broader organizational goals.
Learning more about performance evaluation methods can support HR leaders as they evaluate and encourage their teams. Here’s a guide to running performance appraisals and different strategies for success.
A performance appraisal is a formal, structured evaluation of an employee's job performance over a specific period. They’re also often referred to as performance reviews, performance evaluations, performance interviews, or employee assessments. Supervisors or managers typically oversee appraisals and assess an employee's strengths and identify areas for improvement. They also typically discuss how an individual’s contributions align within the context of organizational objectives.
While performance appraisals are important for evaluating individual contributions, they represent just one part of a larger framework: performance management. Performance management is an ongoing, holistic process that includes goal setting, continuous feedback, coaching, and development plans. Appraisals are a valuable component in this strategy, but they should be integrated alongside these other practices to support sustained employee growth and organizational success.
Traditionally, annual performance reviews have been the standard, but some businesses have begun to adopt more frequent performance appraisal methods. These include quarterly, bi-annually, or even continuous informal check-ins. More frequent performance conversations give employees greater visibility into expectations and more timely opportunities to grow and improve.
Whether they’re held annually or once a month, these appraisals help align individual and company objectives and support key HR decisions. Here are some additional key benefits:
Support compensation and promotion decisions. Performance appraisals provide documented evidence to support salary adjustments and career advancement. By linking performance to rewards, organizations can incentivize high achievement and
retain top talent.
Encourage continuous improvement. Constructive and forward-looking feedback gives employees a clearer sense of direction to improve their performance and grow professionally. The ongoing cycle of evaluation and goal setting
can help motivate employees to refine their skills and strive for higher levels of achievement.
Identify skills gaps and training needs. After analyzing performance data and feedback, managers can use performance appraisals to pinpoint skills or areas needing development. These insights help leaders create tailored training programs so employees feel better equipped to meet the evolving demands of their roles.
Drive alignment between employee and company goals. Regular performance discussions help employees understand how their contributions support the company’s mission. This alignment fosters clarity around expectations and strengthens a sense of purpose and accountability
Increase recognition and morale. Performance appraisals aren't just about identifying areas for improvement. They’re also a valuable opportunity for managers to highlight achievements and celebrate employee successes.
Each appraisal strategy offers a unique lens into employee contributions. HR leaders should review the pros and cons of different approaches to determine the best option for their team. Here are seven of the most commonly used methods:
1. Management by objectives (MBO)
In this goal-oriented appraisal method, managers and employees work together to set clear, measurable objectives. Then, leaders evaluate performance based on the achievement of these predefined goals.
2. 360-degree feedback
360-degree feedback takes a comprehensive approach, with feedback from multiple sources beyond the direct manager. Typically, this includes input from peers, subordinates, and sometimes customers to provide a holistic view of an employee's performance.
3. Self-assessments
In self-assessments, employees evaluate their own performance by reflecting on their accomplishments, challenges, and growth areas. This method encourages personal accountability and self-awareness while fostering meaningful dialogue during performance discussions.
4. Peer reviews
Peer reviews involve employees at the same level evaluating each other’s performance. This method is especially useful for assessing soft skills like teamwork, communication, and collaboration, which may not always be visible to managers.
5. Graphic rating scales
Arguably the most common and simple appraisal method, graphic rating scales involve ranking employees on a numbered scale (e.g. 1–5) across various performance factors (e.g. quality of work, teamwork, or initiative). While this method may lack depth and context, its simplicity makes it one of the fastest and easiest ways to get a snapshot of employee performance.
6. Behaviorally anchored rating scales
A behaviorally anchored rating scale (BARS) assessment combines elements of traditional rating scales with specific behavioral examples. Instead of rating "communication" on a scale, BARS provides concrete examples of effective or ineffective communication behaviors. The goal of this method is to reduce subjectivity and provide clearer benchmarks for evaluation.
7. Critical incident method
Critical incidents are specific instances of exceptionally good or poor employee behavior throughout the appraisal period. By documenting these incidents, managers have concrete examples for feedback during the appraisal discussion, showing employees exactly where to improve.
Understanding and proactively addressing the common challenges of performance appraisals helps HR leaders conduct more meaningful and effective evaluations. Here are a few key issues to watch for:
Bias or subjectivity in evaluations. Unconscious bias, like subconsciously prioritizing more recent feedback instead of older notes, can significantly influence how managers evaluate employee performance. To reduce subjectivity, organizations should provide training that helps managers recognize and mitigate their biases, and encourage the use of standardized, evidence-based evaluation criteria.
Infrequent or inconsistent feedback. When feedback only occurs during annual reviews, teams can miss growth opportunities. Infrequency makes feedback less impactful because employees may not remember specific instances, and inconsistency could contribute to perceived unfairness and confusion.
Ineffective goal setting. Vague or unrealistic goals leave employees uncertain about how to improve or prioritize their work. Without clear direction, appraisals can feel unproductive. Managers should use structured frameworks like SMART goals (specific, measurable, achievable, relevant, time-bound) to guide performance expectations and give employees a clear path forward.
Employee anxiety or dissatisfaction with the process. If performance appraisals are one-sided or overly formal, employees may feel anxious or disengaged. A successful appraisal should be a two-way conversation — one that gives employees space to reflect, ask questions, and share feedback. Making the process more collaborative helps reduce stress, increases transparency, and enhances the overall value of the evaluation.
Running an effective performance appraisal requires a clear structure. Here are some tips and strategies for success:
1. Set clear expectations
Managers and employees need clear reference points to understand how their performance will be evaluated. Set clear and consistent goals so everyone knows what success looks like.
2. Encourage two-way feedback
Turn performance reviews from one-sided evaluations into collaborative growth conversations. When employees get to share their perspectives, it creates a greater sense of respect and gives managers deeper insight into team dynamics and potential challenges.
3. Train managers to give balanced feedback
Effective feedback highlights both strengths and areas for improvement. Training managers to deliver constructive, respectful, and well-rounded feedback equips them to guide performance growth without diminishing employee confidence.
4. Separate feedback from compensation conversations
When performance reviews are directly tied to salary decisions, employees may focus more on financial outcomes than on personal development. Holding separate conversations for feedback and compensation allows for more open, reflective dialogue.
5. Document thoroughly and consistently
Detailed records on employee performance and progress provide a clear foundation for making more informed decisions. Consistent documentation also helps eliminate bias by allowing managers to rely on objective evidence rather than memory or perceptions.
6. Use performance tools or apps
Digital tools can streamline documentation, feedback collection, and goal tracking, which can reduce administrative burden and enhance accuracy. Many platforms also offer analytics, reminders, and templates to support consistent and data-driven appraisals.
Performance appraisals are a powerful tool for driving
engagement and professional growth. However, supporting employee performance goes beyond annual performance reviews. To truly help employees reach their potential, companies should consider common external factors that may impact day-to-day focus and productivity — especially financial stress.
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Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
This Blog was sponsored by EarnIn. While the author received compensation, the information shared is grounded in independent research and intended to provide helpful and accurate guidance to readers.
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