How Do You Appraise Employee Performance? It’s All in the Numbers

My company has been providing performance management for many years now, and has supported thousands of customers during this time. An issue that frequently comes up is the method for rating performance appraisal items. For example, most performance appraisals are comprised of a series of items such as attendance, appearance, teamwork, etc. It is the job of the appraiser to apply some type of rating criteria to each item to complete the appraisal. One would think that there would be some type of “best practice” for this, but there appears to be a wide variety of methods, some of which make a lot of sense to me and some of which do not. In absence of a pervasive, industry-wide best practice, I will give you mine. But first, let’s see what others are doing.

The “Verbal” Method

Perhaps the most intriguing method I have seen is the verbal method. In this method, performance is not rated by any type of criteria, but rather the appraiser simply makes verbal notes about each item. Now, I am all for explanations, but if there is no standardized criteria, there is no method by which employee performance can be compared. For example, if I write a 50-word description of one employee’s attendance, how can I compare that to the 75-word description I use for another? Are more words better or worse than fewer words? If the appraisal item is “professional appearance” and I go on and on about how attractive (err, I mean professional) a particular employee looks, am I not simply looking for trouble? In general, this method tends to create appraisals that are much ado about nothing.

The Black and White Method… Mostly

A number of clients prefer a simple two-level criteria. The two levels are typically “satisfactory” and “unsatisfactory.” This is typical, but not standard because some progressive companies are too keen on the concept of employee engagement. They hesitate to actually be honest with their employees, so they use “good” and “better.” The problem with a two-level criteria is that the criteria is black and white (or in the second case: white and whiter) and performance is not black and white at all. Some performance really is terrible and some performance is exceptional. Rating terrible performance as merely “unsatisfactory” is almost as offensive as rating exceptional performance as “satisfactory.” While this method is more effective for comparative purposes, it does not provide adequate feedback to the employee. Your performance is either “fine… no room for improvement,” or your performance “sucks and so does your future here.”

Three and Easy

Some companies recognize the inherent limitations of the previous two methods and make the quantum leap to a three-level criteria. These levels typically take the form of “low, medium, high,” or “poor, satisfactory, excellent,” or in the case of the critically challenged, “good, better, best.” While three levels are much better than two, this still limits the criteria range an appraiser can apply, particularly in sensitive areas. Going back to “professional appearance,” there are many who appear at work somewhat more than “satisfactory,” but not exactly “excellent.” Sometimes an appraiser needs a bit more finesse to appraise effectively.

The Outrageous

I am going to skip the five-level criteria (my best practice) for the moment to document an extreme method I have seen. In our product, we allow for up to 10 levels. While I do not agree that this many are required, we figured we were covering our client needs quite well. Not so, not so. A prospect actually asked us if we supported decimal places within those levels. In the new math or the old math, that would allow for up to 100 appraisal levels. Given that most appraisers appreciate, but struggle with the finesse decisions between levels in a five level method, one can only imagine the dilemma choosing between 54.3 and 54.4 in a 100-level method.

The Best Practice- Solid Since Grammar School

I propose the best practice is a five-level method in one of two forms. The first form has limited use, but is very popular around Christmas. The five levels are: “naughty, not so nice, nice, pretty nice, very nice.” Note the finesse that can be applied between just being nice and being very nice. This finesse, which is the whole point, is likewise quite evident in a typical five-level criteria that has worked since grammar school: “unsatisfactory, below average, average, above average, excellent.” There are many variations of the five-level scheme and all of them work well because they provide a balance between succinctness and finesse.

Finally, and because words really can matter, each appraisal item should include space for the appraiser to provide a comment. If nothing else, this allows the appraiser to explain why the employee’s professional appearance is not just satisfactory, but very nice.