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Performance Appraisal: Benefits of Employee Evaluation [+ Free Templates]

4 min read

Employees are the cornerstone of every company. Managing and directing employees is a key factor in determining the success or failure of the business. For that reason, every manager understands the importance of measuring their employees’ performance and making sure that they are performing in accordance with the pre-set standards. With this in mind, managers apply performance appraisal techniques in order to examine their employees’ capabilities.

Performance appraisal is the systematic evaluation and review of employees’ performance. It uses objective methods to measure their total contributions to achieving the organisation’s goals. The results are then compared to pre-set expectations and goals. In this article, we will be examining the following:

Employee Performance Review Resources

1. Performance Appraisal Techniques

Coming up with a 100% reliable and objective performance appraisal method is no easy task. On that account, psychologists and HR experts have been trying to design different techniques to measure and evaluate employees’ performance.

Standard appraisal

The most popular and commonly used method of employee evaluation. Standard evaluation or standard appraisal is based on using a “standard rating scale” where every employee is compared to a set of standards or expectations and then graded based on their performance to a rating usually from 1 to 5. The appraisal is conducted by holding interviews or directly observing employees while performing their tasks.

Self-assessment appraisal

Contrary to the popular opinion that employees overrate themselves, most modern research suggests that employees are very aware of what they can and cannot do. They are more likely to be harsh on themselves in these evaluations so as to not be perceived as arrogant etc.

Moreover, self-assessments give you better insights into how employees perceive their work and their daily tasks. Plus, employees are less likely to dispute the appraisal results with their managers. Self-assessments also play an important role in motivation as they provide employees with a sense of significance and trust.

360-degree appraisals

Many managers prefer conducting 360-degree appraisals, which involve self-assessment, supervisor, and subordinate evaluations. Also known as a 360-degree performance review, this employee assessment is one of the most valid and reliable measures of employee performance. In addition, it does not just measure employees’ perceived performance in the organisation, but also their relationships with other people.

Additionally, peer evaluations are another example of 360-degree appraisals. Peer evaluation can be defined as the process in which colleagues within the same discipline analyse their peers’ work and provide them with constructive criticism. Peer evaluations are deemed necessary in ensuring the work produced is of academic quality.

2. Benefits of a Performance Appraisal

Personal and career development

Performance appraisal measures employees’ performance, allowing them to identify their points of strengths and weaknesses. This helps in employees’ personal growth, as they will try to overcome their weaknesses and enhance their strengths. This will result in improving their performance and gaining new skills and experience.

Organisational planning

Another way to utilise performance appraisals is by examining previous results to understand how the company is currently performing. This can help managers determine future organisational goals and objectives. It can also help in assigning and reallocating employees to the most suitable positions based on their abilities and skills.

Motivational tools

Performance appraisals leave a positive impact on motivation by identifying hard-working and high-performing employees and rewarding them for their efforts. This job recognition gives a sense of appreciation and significance to employees. Similarly, identifying high performers would also allow the company to efficiently allocate promotions, bonuses, awards, and raises to those who truly deserve them.

In addition, performance appraisal is a key feedback and communication tool. Upon collecting performance results, companies would be able to provide a sense of direction to those who need guidance. It will also allow employees to communicate their issues and difficulties in their daily tasks, which would help to improve their motivation.


Companies can use data obtained from appraisals and performance reviews to design training programs that are well-suited for each employee’s needs. This will result in improving employees’ skills and increasing their chances to get promoted in the company. Performance appraisals can also be used to determine the effectiveness of the training by measuring employees’ performance and comparing results before and after implementing the program.

3. How to Implement the Performance Appraisal?

    1. First: determine the organisational objectives and performance expectations of your employees.
    2. Second: these objectives and expectations must be communicated throughout the organisation and agreed upon by the employees.
    3. Third: design a valid and reliable appraisal program that objectively measures and evaluates employees’ performance.
    4. Fourth: implement the appraisal program.
    5. Fifth: analyse the results and communicate them to your employees. You should also listen to their feedback and make any necessary changes to future appraisals.

How to use the 360-degree performance appraisal template

We intentionally created the new 360-degree employee assessment template in Google Sheets so that we can keep it up to date for you! The downloadable file consists of instructions, an example sheet, a template sheet, and a results sheet. The step-by-step instructions and the example sheet will guide you through the process of the employee performance review. The template sheet can be distributed amongst however many people you’d like including the employee’s managers, colleagues, subordinates, clients, and/or partners. Finally, the results sheet provides you with a place to compile your results and extract your findings.

By using 360-degree employee performance reviews, you’ll be able to have a better understanding of each employee in your organisation. It will highlight both their strengths, as well as areas of improvement. The latter can be addressed by organising training, courses, webinars, coaching, and more. By doing so, you’ll help your employees reach their potential which will increase their happiness at your organisation!

4. Challenges When Implementing a Performance Appraisal

Validity and reliability

Validity is defined as whether the evaluation tool is measuring what it is supposed to and meant to measure accurately. Reliability is defined as whether the evaluation tool provides consistent results every time. It is impossible to find an evaluation tool that is 100% valid and reliable. So, there is always a percentage of uncertainty and errors in the appraisal results.

Potential biases

Because it is difficult to come up with a 100% valid and reliable tool, potential biases when conducting the appraisal are likely to exist. For instance, although 360-degree assessment is very reliable and useful for the business, supervisors might be either too lenient or too harsh while evaluating their subordinates. Similarly, employees might over or underrate their supervisors depending on their relationship with them.

Unattainable goals

Setting goals that are impossible to accomplish can lead to general dissatisfaction when they are not met. Consider a manager setting a 100-unit of sales every day even though the current market capacity only allows for 50 units. No matter how hard employees try to meet this goal, they will not succeed. Though it is not their fault, employees will be considered underperforming due to their inability to attain the goal.

salary review by factorial performance appraisal

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