Performance Management or Appraisal, Decide!

Performance Management or Appraisal, Decide!

Performance management and performance appraisal are two important concepts in the world of work. But what exactly is the difference between the two?

Performance management is a continuous process that helps employees achieve their goals and objectives. It involves setting goals, providing feedback, and tracking progress. Performance appraisal, on the other hand, is a more formal process that typically occurs once a year. It involves assessing an employee’s performance against predetermined standards.

So, which one is right for you? It depends on your specific needs and goals.

In this blog post, we’ll take a closer look at both performance management and performance appraisal. We’ll discuss the benefits of each, as well as the challenges. We’ll also provide some tips on how to choose the right approach for your organisation.

So, whether you’re new to performance management or you’re looking for a refresher, this blog post is for you. Read on to learn more about these two important concepts.

What is Performance Management?

Performance management is a continuous and ongoing process of planning, monitoring, and evaluating employee performance to achieve organisational goals. It involves setting clear goals and expectations, providing feedback and coaching, identifying training and development needs, and rewarding employees for their achievements.

“Performance management is not just about employee evaluations, it’s about aligning your workforce to achieve organisational goals.” – Michael Armstrong

Objectives of Performance Management:

• Aligning employee goals with organisational objectives: Performance management helps to align employee goals and objectives with the organisation’s overall objectives.
• Improving employee performance: Performance management aims to improve employee performance and productivity by setting clear expectations, providing regular feedback, and identifying opportunities for growth and development.
• Facilitating communication: Performance management provides a structured framework for communication between managers and employees, which can help to improve understanding and collaboration.
• Identifying training and development needs: Performance management can help to identify employee training and development needs, which can improve their skills and knowledge.

Benefits of Performance Management:

Improved performance: Performance management can help employees to improve their performance by setting clear expectations, providing regular feedback, and identifying opportunities for growth and development.

• Goal alignment: Performance management helps to align employee goals with organisational objectives, which can improve overall performance and productivity.
• Employee engagement: Performance management can help to improve employee engagement by providing a structured framework for feedback and communication.
• Talent development: Performance management can help to identify high-potential employees and provide opportunities for growth and development.

Uses of Performance Management:

• Strategic planning: Performance management can help to align employee performance with the strategic objectives of the organisation.
• Talent management: Performance management can help to identify and develop talent within the organisation.
• Employee development: Performance management can be used to identify employee training and development needs and provide opportunities for growth and development.
• Succession planning: Performance management can be used to identify potential candidates for promotion and develop a talent pipeline for the organisation.

Types of Performance Management:

• Continuous performance management: This approach involves ongoing feedback and coaching to improve employee performance and productivity.
• Goal-based performance management: This approach involves setting specific goals and objectives for employees and evaluating their performance against those goals.
• Strength-based performance management: This approach focuses on identifying and developing specific competencies for success in a particular role or function.
• 360-degree feedback: This approach involves obtaining feedback on an employee’s performance from multiple sources, including supervisors, peers, and subordinates.

What is Performance Appraisal?

Annual performance reviews are the norm. The employee receives self-reflection on their work and feedback on their performance from their employer as part of the evaluation method.

“Performance appraisal should be a two-way conversation between managers and employees, focused on improving performance and achieving success.” – John Mattone

Objectives of Performance Appraisal:

• Evaluating employee performance: Performance appraisal helps managers to evaluate an employee’s performance against predetermined goals and standards, and to identify areas where they excel or need improvement.
• Identifying training and development needs: Performance appraisal can help identify an employee’s training and development needs and help them improve their skills and knowledge.
• Facilitating communication: Performance appraisal provides a structured framework for managers and employees to communicate performance expectations and feedback.
• Making decisions about promotions and pay raises: Performance appraisal can provide a basis for making decisions about promotions, pay raises, and other rewards and incentives.

Benefits of Performance Appraisal:

• Improved performance: Performance appraisal can help employees identify areas where they need to improve and receive feedback on their performance, which can help them to perform better.
• Goal alignment: Performance appraisal can help to align employee goals with organisational objectives, which can improve overall performance and productivity.
• Employee development: Performance appraisal can help employees identify their training and development needs and provide opportunities for growth and development.
• Employee engagement: Performance appraisal can help to improve employee engagement by providing a structured framework for feedback and communication.

Uses of Performance Appraisal:

• Performance improvement: Performance appraisal can be used to identify areas where employees need to improve their performance and to provide feedback and coaching.
• Succession planning: Performance appraisal can be used to identify potential candidates for promotion and to develop a talent pipeline for the organization.
• Employee development: Performance appraisal can be used to identify employee training and development needs and to provide opportunities for growth and development.
• Compensation decisions: Performance appraisal can be used to make decisions about pay raises, bonuses, and other forms of compensation.

Traditional Methods of Performance Appraisal

Traditional methods of performance appraisal systems refer to the conventional methods that have been used for a long time to evaluate employee performance. Some of the traditional methods of the performance appraisal process include

• Graphic Rating Scale: This method involves using a scale to rate employee performance on various criteria such as job knowledge, quality of work, communication skills, and teamwork.
• Ranking Method: This method involves ranking employees based on their overall performance, either from the best to the worst or vice versa.
• Critical Incident Method: This method involves keeping a record of significant incidents that demonstrate employee performance, both good and bad, throughout the year.
• Forced Choice Method: This method involves giving the rater a set of statements, where they have to choose between two statements that best describe an employee’s behaviour or performance.
• Essay Method: This method involves a written evaluation of an employee’s performance, which includes strengths, weaknesses, and recommendations for improvement.
• Checklists: This method uses a checklist to evaluate employee performance against a predetermined set of criteria, such as job knowledge, punctuality, communication skills, and teamwork.
• Field Review Method: This method involves an outside consultant or an expert in a specific field reviewing an employee’s performance and providing feedback to the manager.

Modern methods of Performance Appraisal:

• Continuous Feedback: This method involves providing regular feedback to employees throughout the year rather than only during an annual or bi-annual review. This approach allows for ongoing communication and helps employees to stay on track with their goals.
• 360-Degree Feedback: This method collects feedback from multiple sources, including supervisors, peers, subordinates, and customers. This approach provides a more comprehensive view of an employee’s performance and helps identify improvement areas.
• Objective-Based Performance Appraisal: This method involves setting specific, measurable, achievable, relevant, and time-bound (SMART) goals for employees and evaluating their performance based on how well they achieve them.
• Behavioural-Based Performance Appraisal: This method involves evaluating an employee’s behaviour and actions rather than just their results. This approach focuses on specific behaviours that lead to success in a particular role or function.
• Competency-Based Performance Appraisal: This method identifies and develops specific competencies for success in a particular role or function. It involves evaluating an employee’s competency levels and providing opportunities for improvement.
• Results-Based Performance Appraisal: This method involves evaluating an employee’s performance based on the results they achieve in their role or function. This approach focuses on outcomes rather than inputs.

In summary, performance appraisal has several objectives, benefits, and uses, and organisations can use various types of performance appraisal methods to evaluate employee performance.

Performance appraisal and performance management are related but distinct concepts.

Key Differences Between the Performance Appraisal & Performance Management

• Focus: Performance appraisal assesses an employee’s past performance against predetermined criteria. In contrast, performance management focuses on improving employee performance to achieve organisational goals.
• Frequency: Performance appraisal is usually conducted annually or biannually, while performance management is ongoing throughout the year.
• Scope: Performance appraisal is a specific component of performance management that involves assessing an employee’s performance against predetermined criteria, while performance management is a broader process that includes setting goals, providing feedback, and coaching employees to improve their performance.
• Purpose: Performance appraisal is primarily used for evaluating an employee’s performance, determining their strengths and weaknesses, and making decisions about promotions, pay raises, or disciplinary actions. On the other hand, performance management is used to improve employee performance, increase productivity, and enhance organisational effectiveness.
• Methods: Performance appraisal usually involves a formal review process, where an employee’s performance is evaluated against predetermined criteria and documented in a Written report. On the other hand, performance management can involve various methods, such as goal setting, feedback, coaching, training, and development.

Performance Management vs Performance Appraisal – Comparison

Aspect	Performance Management	Performance Appraisal
Focus	Improve employee performance to achieve organisational goals	Evaluating individual employee’s performance against predetermined criteria
Frequency	ongoing process throughout the year	Conducted annually or biannually
Scope	Broader process that includes setting goals, providing feedback, coaching, training, and development	A specific aspect of performance management that involves formal review of an employee’s performance
Purpose	Improve employee performance, increase productivity, and enhance organisational effectiveness	Evaluate employee performance, determine strengths and weaknesses, and make decisions about promotions, pay raises, or disciplinary actions
Methods	Goal setting, feedback, coaching, training, and development	Formal review process with predetermined criteria and written report
Time Horizon	Long-term focus	Short-term focus
Feedback	Ongoing and continuous	Feedback given after appraisal
Result	Aims at continuous improvement of employee performance	Aims to judge the employee’s current performance
Importance	Essential for organizational success	A part of performance management
Implementation Timeline	Throughout the year	Annual or bi-annual

In summary

Performance management is a broader process that aims at improving employee performance throughout the year, while performance appraisal is a specific aspect of performance management that involves a formal evaluation of an employee’s performance against predetermined criteria on an annual or bi-annual basis.

FAQs

What are the three types of performance reviews?

The three different forms are behavioural evaluation, 360-degree evaluation, and objective evaluation.

What are the five ways to evaluate performance?

The five performance evaluation techniques are the rating scales, the critical incident strategy, management by objectives, social observation scales, and narrative assessments.