Performance evaluation, also known as performance review or performance appraisal, is the means by which employees' job performance is evaluated by their supervisor or manager in terms of time, cost quality and quantity. It becomes part of the employee's portfolio and is used in managing career development. Performance evaluation is a method of obtaining, recording and analyzing information about the employee's value to the company. It appraises the employee's personal strengths and weaknesses and what the possibilities are for a promotion. It gauges and assesses the job performance of the employee based not only on productivity, but on a myriad of factors.
Once the performance evaluation is completed, assessments and recommendations are made. The goals of a performance evaluation are many. It gives the employees feedback on their overall job performance and will identify any areas in which perhaps they need additional training. It is used as a justification for any decisions made about the employees such as promotions, salary increases, bonuses and disciplinary actions to be taken.
There are a number of ways of evaluating performance. The most common one is the scalar system also known as the numerical rating system. In this system supervisors or managers are asked to rate an employee against a number of attributes and objectives. Some companies use a system called the 360 degree appraisal. In that system, employees receive assessments not only from managers and supervisors, but from subordinates, co-workers and even from customers.
Many companies used to use a trait-based system which utilizes factors such as conscientiousness and integrity to evaluate their employees. However it has been replaced by more result oriented and objective methods as studies have shown that trait-based systems are not accurate. There are two main reasons for avoiding using that system. First, a trait-based system by definition relies on personality traits, which may not be related to success on the job. Personalities are likely to be static and do not change, whereas behavior can change. For example, people lacking integrity will stop lying to their supervisor because they have been caught, but as they have low integrity they will very likely lie again when the fear of being caught disappears. Second, trait-based systems are unclear and ambiguous as they can be influenced by office politics and, as such, are not reliable. This can cause managers to evaluate employees based on subjective beliefs rather than objective conclusions and observations about how the employees perform their tasks. This system can also make the company vulnerable to discrimination claims, because the manager's decisions can be construed as bias without backup from any particular behavioral information.
It is imperative that performance evaluations are conducted objectively, consistently and fairly in order to protect the interests of the employee and to protect the company from any legal liability. One way to establish consistency is to use a standard assessment form for each evaluation. The focal point of the form should be related to job performance. Narrowing the focus of the form and limiting the areas of questioning assures that the assessment will be accurate and relevant and gives the employee the opportunity to address the most important matters. In an evaluation, it is very often not necessary to cover every aspect of the employee's job, only those that are specifically related to the job. The areas that should be included in the evaluation form should focus on skills, job knowledge, attitude, quantity of work and quality of work.
It is important that the appraiser has a wide range of descriptors to select from: far exceeds requirements, exceeds requirements, meets requirements, below requirements and far below requirements. Performance evaluation can stimulate and motivate employees to perform to their utmost for themselves and the business by encouraging staff recognition and improving communications. It is also important that there is space provided on the form for the appraiser to write the reasons for the assessments.
A practical performance evaluation system incorporates feedback guidelines and disciplinary procedures. While evaluation systems differ from company to company and some may be more effective than others, the basic process is similar and the goals are the same.