This document provides information about establishing an effective employee performance review process. It discusses that the goal should be continuous development rather than just an annual obligation. Regular feedback is important to avoid surprises. It also describes different review methods like top-down, peer, and 360-degree reviews. Key steps include determining review criteria, formats, who to review, and providing regular feedback throughout the year. The review meeting should establish rapport, allow questions, and discuss goals. Follow-up is also important. Bias should be avoided and reviews based on job performance rather than personal impressions. Regular reviews can motivate employees and support business goals.

1. Performance appraisal cycle
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I. Contents of getting performance appraisal cycle
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Before you start marching employees into the corner office to conduct time-consuming and
sometimes contentious employee performance reviews, you should conduct another review --
figuring out exactly what your goal is in establishing an employee review process for the
business.
In many ways, performance reviews begin with the employer's mindset. Is your intent to do this
annually or continuously? Do you view performance reviews as an obligation or a chance to spur
employees to greater performance? Are performance reviews scheduled only after you have
problems with an employee or someone asks for a raise, or are they penciled in on your calendar
every month or every year?
"If you view this as merely an annual process, you'll put everything off until the last moment,"
says Will Helmlinger, a former human resources executive for Saber Software EDS, and HP who
now owns a consulting business, Your Hire Authority, based in Portland, Oregon. "However,
when you think of performance reviews as an integral part of your business, you think of reviews
on a more regular basis. Verbal reviews should begin early shortly after the hire date and should
continue frequently until you memorialize your thoughts into your written document."
The following guide details why you should institute an employee review process, how to
develop a successful review process, and how to avoid pitfalls in conducting employee reviews.

2. Not every employer and employee has to think of performance reviews with the same dread as
an appointment with the dentist. It doesn't have to be confrontational. It doesn't have to be
unpleasant. It doesn't have to be viewed as merely a way to avoid any potential litigation from
dissatisfied or dismissed employees.
There are actually business benefits to be gained from instituting a program of evaluating
employees on a regular basis. The performance review process is an opportunity for supervisors
and staff members to take time out from the daily business grind to discuss longer-range issues
and plans. This is beneficial for the business because it allows leaders to spell out their
expectations from employees, establish goals, and hear feedback from the rank and file. This
opens up communication between employees and managers. At the same time, managers can use
performance reviews to help further business goals -- for example, by motivating employees to
try to increase productivity or sales.
Traditionally, many companies have employed employee reviews to reinforce good work
performance while, at the same time, seeking to better the work of under performers. The
underlying basis also provides a foundation for documenting measures on which to base pay
increases, promotions, or punitive actions -- such as documenting grounds for dismissal.
But, in order to realize benefits, it's important for employers to get in the right mindset and
understand their goals for the employee review process. The most common use of the
performance review process is to document past performance. However, an emerging trend is an
employee development review. The employee development review looks to the future. These
reviews typically include information about past performance but have a heavier emphasis on
career development, specific job and personal goals, and areas of personal growth.
"Some HR administrators view the process as a way to make sure we have ourselves covered in
the case of litigation," Helmlinger says. "My objective when I do a review is to state what a
person has accomplished against a set of objectives and then make it a forward-looking process.
What is it that we need to accomplish from a company standpoint? What are your own personal
objectives? And incorporate a career-development component -- what do you want to do next?"
Business leaders also need to determine what type of review process to implement. There are
different types of employee reviews, including the following:
 Top-down review. This performance review is conducted by someone above the
employee in rank at the company -- this could mean a direct supervisor, manager of a
business unit, executive, or all of the above. Putting a direct supervisor in charge is often
the most effective way to assess an employee's performance and provide valuable
feedback as to how they can improve. In larger organizations, these reviews are

3. sometimes filled out by line supervisors and then conducted by human resources
personnel. Either way, the review often culminates in a discussion regarding achievement
of pre-determined goals.
 Peer review. In this case, employees are evaluated by co-workers. The benefit of this type
of review is that peers at the same level as the employee understand the challenges better
than someone judging performance from the top down. The risk is that rivalries can alter
performance reviews, if jealous co-workers review each other more critically, particularly
if they are in competition for promotion or pay raises.
 360-degree review. Literally, in a 360-degree review, employees are evaluated from all
angles -- above, below, and sideways. That means supervisors, peers, subordinates, and
even sometimes customers put in their two cents about the employee. These types of
reviews are often spear-headed by the human resources department and those giving
input are usually allowed to remain anonymous. Critics of 360-degree reviews say that
anonymity can pave the way for excessive -- and sometimes vindictive -- criticism and
ultimately leave the employee who is the subject of the review feeling under attack.
 Self assessment. The employee self-assessment can be used in conjunction with any of
the other review processes listed above. Some companies have found this very useful in
that it can help cue managers as to areas in which an employee can improve and may
benefit from training. It can also allow the employee to undertake some constructive
criticism and be more willing to receive feedback from a manager. Employees, in fact,
can sometimes be harder on themselves than their managers are. But the downside is that
an employee's view of their performance sometimes might diverge greatly from a
manager's view, which presents challenges in the review process.
Once you decide to establish an employee review process there are several decisions you need to
make along the way to make it a successful endeavor. You'll have to decide who will be subject
to reviews. Helmlinger recommends that reviews be conducted at all levels within your
organization. "This sends a clear message that performance reviews are important and favoritism
doesn't exist in your company," he says.
Second, you need to decide whether to use a performance review format from an off-the-shelf
software program, from a Web-based application provider, or a customized format solely for
your organization. This decision may depend on the size of your business and your resources.
Software packages and Web-hosted applications offer templates for various employee reviews
and can help step you through the process. But if you have an office with only a handful of
employees, you may just want to find a sample template and customize it for your business.

4. It's important to establish and communicate to both managers and employees the performance
rating criteria and expectations at the outset of the performance year -- the rules of engagement,
so to speak. "That's the most important thing you can do at the beginning of the performance
cycle so that you are able to objectively measure an employee's performance," says Paul
Rowson, managing director at World at Work, a global human resources association that focuses
on compensation, benefits, work-life, and integrated total rewards. "You can't give people
moving targets to aim for. You can't move the cheese."
Rowson recommends that you develop employee goals and objectives at the beginning of the
performance cycle by using the SMART formula:
 Specific. Spell out specifically what you are expecting from the employee and what the
employee is promising to do, such as, "I will improve customer response rates in the call
center by 15 percent," Rowson says.
 Measurable. Talk about what metrics to use in establishing whether you have
accomplished this goal. In the case of the call center, you could use call volume statistics
every month compared to the previous year.
 Aligned. Make sure that these goals are aligned with the company's goals. "You want to
make sure everyone in the organization is on the same flight plan and that they are
aligned with corporate goals," Rowson says.
 Realistic. "I've seen employees that actually say their goal is to climb Mt. Everest, so to
speak, but they don't have the equipment, don't have the budget," Rowson says. It's
important that the goals represent something that realistically can be accomplished.
Instead of only communicating with your employees once a year during an annual review, you
should provide employees with regular feedback throughout the performance year so that they
know where they stand. "There should be no surprises at the end of the year," Rowson says.
Reviews are commonly conducted approximately 60-90 days after hire, and at regular intervals
thereafter. Companies normally schedule reviews around an employee's anniversary date, or
conduct reviews for all employees during a designated time of the year. They can also be held
more frequently, such as once a month, if it helps the business better achieve goals. Reviews
typically summarize performance of tasks and duties and include areas of improvement or
strength. Sometimes they will encompass goals for a future period.
Here are some tips from Helmlinger on making the review process a success.
1. Be prepared. Pull your notes and thoughts together as you review the actual performance
review form. Set aside enough quiet time to reflect on each area that will be reviewed. "Take in
to account the entire timeframe since the last review; never use just recent events," Helmlinger

5. says. "Avoid including data points that catch an employee off-guard, especially dated instances."
Preparation also means you will decide if you will have employees involved in drafting their
own review or if you'll write the review without employee involvement. This is a critical
decision since the path you take may set the tone on how you conduct the actual meeting.
Employee buy-in is critical; choose your path carefully.
2. Conduct a performance review meeting. Once you have prepared for your meeting, you must
set the tone for the meeting itself. Conducting an effective review with an employee requires you
to do the following:
 Establish rapport. Most employees are going to be nervous and anxious. Remove both
visible and mental barriers. Sit next to each other instead of across the desk from them.
Let them know this is a mutual conversation, not an interrogation. Even consider meeting
them over lunch or breakfast.
 Concentrate on the meeting and employee. Avoid interruptions. Your focus needs to be
on them. Interruptions will be interpreted as a lack of interest on your part and will
weaken your process.
 Take notes. Taking notes is another indication of your interest in the process.
Performance reviews should be a two-way conversation. Notes will help you remember
what changes need to be made to the final performance review form.
 Observe responses as well as behaviors. Both you and the employee may be nervous and
anxious. Even though you may know the employee well, you still want to observe their
responses and behaviors during the meeting. If their responses and body language shift
during your meeting, go back and re-establish rapport. Body language can clearly
demonstrate their level of buy-in.
 Allow time to ask questions. While you could hand them the review, have them read it,
and sign it, it's better if you can allow time for them to ask questions. "Buy-in takes place
when the environment is open and conversational," Helmlinger says. "Let them know that
you welcome questions and want to ensure they understand what is being shared and
why."
3. Follow up. Not all performance reviews are designed for a single session. You may have to re-
draft the document because of the changes you've negotiated with the employee. Perhaps you
have asked the employee to provide you with their evaluation without you sharing yours with
them. Whatever the reason, a follow up is your ally for employee buy-in. Following up might
also encompass future meetings with the employee to discuss any progress reports that may be
required as part of your process. Following up demonstrates that you are committed to the
employee's contributions and development.

6. 4. Get employee feedback. Effective performance reviews involve employee feedback. Your
document should always include a place for employee comments. Employees should be allowed
to provide written feedback about their review. Give them the opportunity to agree or disagree
with their evaluation, and let them do it in writing.
5. Set up a commitment for the next cycle. The results of the review should dictate the timeframe
for the next review. If there are performance issues or specific goals that must be met, pick an
appropriate intermediate time period in which to reconvene. It's a natural part of a follow up.
6. Discuss goals and career development. Employee buy-in to the performance review cycle can
hinge on this step. "Most employees dread the thought of discussing historical information, yet
get excited when you talk about their career development," Helmlinger says. Make this step a
joint venture with your employee. Have them lay out their goals and objectives for the next three
to nine months. Be sure their plans are in alignment with your organizational objectives. Then
follow up with them. Without follow up, the process becomes a meaningless exercise that could
negatively impact employee job satisfaction and turnover.
Dig Deeper: How to Conduct an Annual Employee Review
Instituting an Employee Review Process: Pitfalls to Avoid in Conducting Employee Reviews
Too often, employee reviews get a bad rap because they're used for pettiness or as a vehicle for a
manager's favoritism. Here are some of the tendencies to avoid when rating employees during a
review process:
 The Halo Effect. This occurs when an employee excels in one area and the manager lets
that trait or factor influence their ratings under every category in the review process.
"This problem often occurs with employees who are especially friendly (or unfriendly)
toward the supervisor or especially strong (or weak) in one skill," Rowson says. To avoid
the halo effect, evaluate all your people on one performance factor before going to
another factor. This way the evaluation is based on the factors more than an overall
impression of one individual.
 Leniency or harshness errors. Sometimes the person doing the rating of an employee can
show their own personal bias. "If you think everyone is great, then everyone deserves an
Academy Award," Rowson says. "When raters see everything as 'good,' they are lenient
raters. When they see everything as 'bad,' they are harsh raters." Look over your ratings to
see if you display any of these tendencies and even consider using a "grading"
distribution like they use in school -- with 10 percent of employees exemplary, 20 percent
distinguished, 40 percent competent, 20 percent marginal, and 10 percent unacceptable.

7.  Central tendency. Another pitfall is to rate everyone somewhere near the middle.
"'Central tendency' describes what happens when you tend to put ever yone in the middle
of the road and rate all of your subordinates as 'competent,'" Rowson says. The problem
with this tendency is it fails to discriminate between employees and offers little
information for subsequent decisions. If you have this tendency, you will never
differentiate performance between those who have done exceptional work and those who
have had a poor performance. "It drives top performers nuts," Rowson says. "You'll lose
your best people this way."
 First impression. Whether your first impression is positive or negative, this should not be
the basis for performance evaluation. Some workers end up riding on that first impression
for the rest of the year. To avoid this, go back to the job description and performance
documentation. "This will take the emphasis away from gut level feelings and superficial
impressions and focus your evaluation on facts and behavior," Rowson says.
 Personal bias. People tend to identify with others who are like them; this is true for
managers and their employees who sometimes give a higher rating because the employee
has qualities similar to him or her (or a lower rating because the employee has dissimilar
qualities). Raters have to watch out for exhibiting this bias simply because they like
certain employees better than others, Rowson says.
Any type of favoritism can undermine all the good will you seek to bring to your business when
instituting an employee review process.
==================
III. Performance appraisal methods
1.Ranking Method
The ranking system requires the rater to rank his
subordinates on overall performance. This consists in
simply putting a man in a rank order. Under this method,
the ranking of an employee in a work group is done
against that of another employee. The relative position of
each employee is tested in terms of his numerical rank. It
may also be done by ranking a person on his job
performance against another member of the competitive
group.
Advantages of Ranking Method

8. i. Employees are ranked according to their performance
levels.
ii. It is easier to rank the best and the worst employee.
Limitations of Ranking Method
i. The “whole man” is compared with another “whole man”
in this method. In practice, it is very difficult to compare
individuals possessing various individual traits.
ii. This method speaks only of the position where an
employee stands in his group. It does not test anything
about how much better or how much worse an employee
is when compared to another employee.
iii. When a large number of employees are working, ranking
of individuals become a difficult issue.
iv. There is no systematic procedure for ranking individuals
in the organization. The ranking system does not eliminate
the possibility of snap judgements.
2. Rating Scale
Rating scales consists of several numerical scales
representing job related performance criterions such as
dependability, initiative, output, attendance, attitude etc.
Each scales ranges from excellent to poor. The total
numerical scores are computed and final conclusions are
derived. Advantages – Adaptability, easy to use, low cost,
every type of job can be evaluated, large number of
employees covered, no formal training required.
Disadvantages – Rater’s biases
3. Checklist method

9. Under this method, checklist of statements of traits of
employee in the form of Yes or No based questions is
prepared. Here the rater only does the reporting or
checking and HR department does the actual evaluation.
Advantages – economy, ease of administration, limited
training required, standardization. Disadvantages – Raters
biases, use of improper weighs by HR, does not allow
rater to give relative ratings
4. Critical Incidents Method
The approach is focused on certain critical behaviors of
employee that makes all the difference in the
performance. Supervisors as and when they occur record
such incidents. Advantages – Evaluations are based on
actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces recency biases,
chances of subordinate improvement are high.
Disadvantages – Negative incidents can be prioritized,
forgetting incidents, overly close supervision; feedback
may be too much and may appear to be punishment.
5. Essay Method

10. In this method the rater writes down the employee
description in detail within a number of broad categories
like, overall impression of performance, promoteability
of employee, existing capabilities and qualifications of
performing jobs, strengths and weaknesses and training
needs of the employee. Advantage – It is extremely
useful in filing information gaps about the employees
that often occur in a better-structured checklist.
Disadvantages – It its highly dependent upon the writing
skills of rater and most of them are not good writers.
They may get confused success depends on the memory
power of raters.
6. Behaviorally Anchored Rating Scales
statements of effective and ineffective behaviors
determine the points. They are said to be
behaviorally anchored. The rater is supposed to
say, which behavior describes the employee
performance. Advantages – helps overcome rating
errors. Disadvantages – Suffers from distortions
inherent in most rating techniques.
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