How to set up an employee appraisal system

28 April 2005 by
How to set up an employee appraisal system

In a competitive world, managers and staff alike are expected to perform to the best of their abilities. But how can this performance be best judged? Quite often high expectations are not matched by an effective method of evaluation. Yet without it, can you really rely on intuition alone?

There are three main reasons for having an appraisal system:

1. To monitor the overall progress of the business
A staff appraisal scheme provides a framework for measuring the performance of the business through assessing individual staff against jointly agreed targets that fit into the company's overall aspirations. A good appraisal system should be like having an "internal barometer" measuring the state of the company.

2. To develop the business to meet changing circumstances It is widely acknowledged that a static organisation will not survive and that a healthy organisation is one that can adapt to market forces. This will often involve introducing new methods of working, developing new products and even changing the direction of the business. In reality this can only be achieved by ensuring that staff are similarly able to adapt, perhaps even being retrained in new skills. Therefore, appraisal should not be a static process either. It should be developed to respond to new circumstances such as revised business aims and to encourage the organisation to change to meet new requirements.

3. To encourage and motivate employees
Staff are usually the largest and most expensive asset and their motivation and success will result in a successful performance for the business. Regular meetings and informal chats praising, or indeed chiding individuals, are all part of a good management technique, but they are no substitute for being able to set reasonable targets that can then be measured. A job that is either well-done or botched should not be allowed to go unnoticed. The former may not be repeated, while the latter may become the norm. A longer-term method of measurement and will provide a better and more consistent picture of employee abilities.

Appraisal should not be seen as a process remote from the day-to-day work, but rather as a part of the overall management and development of individual members of staff. After all, each employee in some way influences the overall performance of the business - something that they and their managers sometimes overlook.

The employee perspective
The value of performance appraisal to the organisation is fairly obvious, but what are the benefits for individual employees?

Employees are recognised for the value and worth they bring to the organisation.
They are able to contribute to the development of the business through participation.
They are allowed, and in fact encouraged, to develop their own personal skills.

The best time to introduce an appraisal system is obviously now, but to be successful other groundwork must be completed first.

As the system needs to relate to the main aspirations of the business, these must be defined, although they should already be in your business plan.

The difficult part is then converting these aims into clear targets that can be built into the day-to-day work of staff. After all, it is no use stating that your organisation is "committed to a policy of equal opportunities" or "considers customer care a priority", unless these can be seen in context, together with an indication of how such policies are to be carried through in practice.

The process at this initial stage starts from the top down: senior managers need to consider how targets are to be effectively handled by the next tier of management. This cascade principal is logical and helps everyone identify with the targets that are eventually set. However, once passed down from that upper level of management, a two-way process is needed.

It is useful to look at the job descriptions of each employee and ensure that each manager has the job descriptions of the staff they are responsible for. This will also help to identify areas of responsibility and activities that can be appraised. If the company is particularly small, it may by that no job descriptions exist, but a list of key tasks can still be drawn up and agreed jointly by the manager and each member of staff to help focus on the areas to be appraised.

Having established the company's aims, and how individuals contribute towards achievement of those aims, you need to discuss and agree on a one-to-one basis the specific areas of performance that need to be appraised.

The interview
Often an appraisal system of sorts already exists through regular formal interviews, but these are often undertaken without focus and can easily lead to a feeling of dissatisfaction for both parties. When it is over neither should be thinking "What was it all for?" or "What has been agreed?" This problem can be overcome by having a structure for the interview that will help both parties, and ultimately the organisation, to benefit.

The appraisal interview must therefore be a two-way process and negotiated and discussed rather than just imposed. Another way of ensuring success is to encourage the individual being appraised to become responsible for their own development - a process which may take time and patience, but one that is necessary for two reasons. First, appraisal is more likely to succeed if it is personally owned, and second the appraisee is after all in the best position to know their own capabilities and aspirations within the business.

It is easy to fudge the interview stage by not treating it seriously, and accepting that if the individual has generally done their job without any problems, then everything is OK. But such an attitude will not help anyone. Most people value being appreciated, yet such praise equally needs to be earned.

The interview process should therefore be honest, but fair, and it should seek to accentuate the positive strengths of the appraisee and establish how these can best be used for the benefit of the organisation. This is not to say that weaknesses should be ignored - wherever these are identified, a method of improvement should also be explored through training for instance. On the other hand, if the interview focuses on weaknesses alone this will make the whole process very negative. Once completed, the interview should have provided motivation.

Setting targets
As mentioned earlier, the interview must establish targets that are not only relevant to the aims of the organisation, but focus on how the employee fits into these aims. The initial interview can sometimes be difficult if it becomes too focused, so it should ideally try to open up areas of performance for discussion, as in the following three examples. These are leading questions that centre on the company's aims, the employee's job description and their developmental aspirations.

Example questions

  • "The company is dedicated to reducing customer complaints. How have you contributed to this aim within your own work?"
  • "From your job description, you are responsible for dealing with the public. How do you feel you could improve your relationship with them and therefore increase the amount they spend?"
  • "How would you like to develop your work experience?"

Over time these initial questions will become more refined and relate back to the previous interview - thus providing effective monitoring and feedback on progress. Eventually targets will be set by the employee that are not only clear, but achievable and measurable.


  • Target: "I would like to study x, y and z to allow me to progress to new areas of work"
  • Measurement: Enrolment at college, completing course and achieving qualification.

Within any environment, targets should not be linked to quantity alone, but instead, they should have a qualitative element. Suggestions of targets on the lines of "selling 10 more cameras per week" should therefore to be avoided. A better example is to consider "ensuring that there is no more than an X% return rate due to poor customer satisfaction."

by Glyn Thomas


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