Many employees approach performance appraisals with a mix of dread and anticipation. Traditionally used to determine raises, promotions or even terminations, the potential of performance appraisals extends far beyond these narrow confines. 

When used effectively, performance appraisals can highlight growth and learning opportunities for employees and their leaders. They can reveal areas for improvement and provide a roadmap for career advancement.

We’ll cover different types of performance appraisals and tips to conduct them effectively in this article. 

Performance appraisals, also known as employee reviews,  evaluate an employee's work and skills against the requirements of their job.

Usually, the employee's manager does the evaluation and then shares the feedback in a one-on-one meeting with the employee.

Conducting regular performance appraisals regularly unlocks a slew of benefits, including:

Different types of performance appraisals can be conducted to meet specific objectives. 

For instance, the 360-degree method gathers feedback from an employee’s colleagues, direct reports, leadership, and the employees themselves, offering comprehensive insights into their work. This approach can be particularly useful for identifying growth opportunities related to soft skills and competencies.

Self-assessments allow employees to reflect on their growth opportunities and align their personal skill goals with the organization's needs.

Peer reviews allow colleagues at the same job level to assess each other’s performance. Peer reviews demonstrate an individual’s ability to collaborate and help employees develop skills in providing feedback to others.

To make the most of your performance appraisals, here are three key steps to include in your process: 

Determining next steps after an employee performance appraisal is crucial for translating feedback into tangible improvements and growth. It’s not enough to simply have the appraisal conversation; concrete actions need to be taken based on the findings.

Clear next steps give employees a roadmap for their development, ensuring they understand what is expected of them and how they can achieve their goals. This approach fosters accountability, boosts motivation and aligns individual efforts with organizational objectives.

No matter what kind of performance appraisal method your organization uses, make sure to build next steps into the framework and train people managers on how to set them.

Performance appraisals should not be viewed as a one-and-done exercise. They hold valuable information that can be used to identify workforce trends, skills gaps and opportunities for improvement within your greater talent management strategy.

For example, if you notice that one department is consistently underperforming, you should allocate more resources to training and development for this particular group.

You can enhance the accuracy of your appraisals by using technology to analyze performance data. Tools such as Human Resource Information Systems (HRIS) and performance management software are particularly effective for this.

Manual methods of data collection, like conducting and comparing individual employee interviews, are also valuable. This approach can help identify common skills, competencies and knowledge gaps, as well as qualitative insights, such as areas where employees express a desire for further development.

An individual performance appraisal identifies development opportunities for an employee, allowing them and their manager to create a clear and comprehensive development plan to achieve their career goals.

Similarly, L&D teams can use employee performance data to design targeted learning and development programs that address organizational skills gaps.

For example, let’s say you find out through appraisal data that your newer sales representatives are struggling to hit their quotas because many of them are new to cold calling. In response, you might develop a targeted training program that focuses on cold calling techniques that includes in-person workshops, online courses and one-on-one coaching sessions.

Additionally, performance appraisals can help you track the progress of your L&D initiatives. Using this same example, you would review performance appraisal data 6 months after the training program was launched. If you saw an improvement in quota attainment and specifically, cold calling metrics, you might attribute this back to the training program and decide to make this program a mandatory part of onboarding. 

Performance appraisals go well beyond their standard uses for promotions and terminations. Used effectively, they can be a powerful tool to transform your learning and development initiatives so that employees at every level of your organization can advance their growth and careers. 

Looking for more talent development resources? Download this ultimate skill-building guide for quick tips on how to fast-track upskilling and reskilling for your workforce.