Annual Performance Evaluation is the process of finding how well an employee has performed over the previous year. If you are working in a company, then you must have an annual evaluation each year. Depending on the timing the company follows, it can be over the financial year-end or the exact one-year after an employee is recruited. As an HR specialist for nearly a decade, I will now tell you how to monitor & conduct Annual Performance Evaluation effectively and efficiently. This is one of the basics of running a good human force within the organization.

According to C. Heyel (1973), “performance appraisal is the process of evaluating the performance and qualifications of the employees in terms of the requirements of the job for which he is employed, for administration including placement, selection for promotions, providing financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally”.

Figure 1 Performance Appraisal or Performance Evaluation is a very important part of employee motivation

Why Do You Need Annual Performance Evaluation?

You need annual performance evaluation for many many reasons. But first we will elaborate a little bit.

Annual performance evaluation is also called employee performance review, and performance appraisal.

You can also review an employee’s performance after the probationary period ends. Right now, many organizations conduct performance appraisal quarterly and even half-yearly.

So, what is the benefit of an Annual Performance Evaluation –

• If it is done correctly, then an employee can find out if he/she is facing any problem subconsciously within the organization.
• An employee can have the opportunity to correct his/her mistakes made in the past.
• An appraisal can perfectly motivate an employee to do a better job.
• Performance Evaluation gives an employee recognition within the organization, which leads to self-respect and self-awareness.
• If an employee is promoted due to Annual Performance Evaluation, then he/she can take it as a valuable opportunity to enhance his/her career.
• It also motivates all the other employees to follow the right path for asset maximization in the company.
• A well-evaluation of performance leads to positive influence on the overall performance of the organization.
• Employers recognize the Strengths, Weaknesses, Opportunities and Threats of an employee while the employee also recognises them.
• Annual Performance Evaluation can reduce the risk of employee turnover rate becoming high.
• It also helps to keep the human assets of the organization in check and find out future leaders for the organization.
• It promotes communication between the management and the employees.
• Last but not the least, you can find out who needs training and development and who needs promotion with Annual Performance Evaluation.

Monappa and M.S. Saiyadain Douglas Mc Gregor (1957) says – Formal performance appraisal plans are designed to meet three needs, one of the organization and other two of the individual, namely-

(i) They provide systematic judgments to back up salary increases, transfers, demotions or terminations.

(ii) They are means of telling a subordinate how he is doing, and suggesting needed changes in his

behavior, attitudes, skills or job knowledge. They let him know ‘where he stands’ with the boss

(iii) They are used as a base for coaching and counseling the individual by the superior.

Figure 2 There Are Six Steps for the Annual Performance Evaluation of the employees

Process Of How To Monitor & Conduct Annual Performance Evaluation

Now, I am going to describe in detail the process of monitoring and conducting annual performance evaluation. The process of performance appraisal or performance evaluation has six simple steps:

1. Establishing Performance Standards for the Employees
2. Communicate AKA deliver the standards of Performance Evaluation to the Employees
3. Measure the Performance by the Employees in actual manner
4. Conducting comparison between the standards and the actual performance
5. Provide feedback to the employees
6. Take necessary action, positive or correction according to the need

Now, we will discuss in detail about the processes –

Figure 3 The First Step for Annual Performance Evaluation is to set standards

1. Establishing Performance Standards for the Employees

Each department has their own set of works. So, each one of them needs performance standards separately. You cannot use one department’s standards to another department. Besides, those who are in the leading positions for an organization, must have different standards from their subordinates, even if they are in the same department.

You need to establish the standards according to-

1. The position of the employee
2. The KPIs or Key Performance Indicators, like a salesperson may have KPI in terms of bringing the number of new clients for an organization
3. The time the employee served the organization
4. Possible areas of expansion of duties for an employee

Etc.

After setting the standards, you should move to the next step.

Figure 4 Deliver the Standards to The Employee

2. Communicate AKA deliver the standards of Performance Evaluation to the Employees

The second step is to let the employee know about the standards. The standards should be clarified totally to the employees. You cannot express vague standards to them.

Specific and clear instructions can motivate and set goals for an employee whereas a set of vague orders and standards can cloud the judgment and demotivate them.

So, you should conduct this step very carefully.

Deliver the standards and ask for feedback from all the concerned persons. You may need to adjust a few terms and conditions in your standards if necessary.

Figure 5 The Third Step of performance evaluation is to measure the real performance

3. Measure the Performance by the Employees in actual manner

At this stage, you should be directly and indirectly monitoring the actual performance done by the employees under evaluation.

For this, you need to focus on these points –

Direct Monitoring

You can ask about different KPIs and performance issues from time to time. You can also take data about attendance, absence and regular duties’ execution.

Oral Reports

You can ask the colleagues of an employee to provide you with feedback about the behaviors, positivity and performance of the employee. You can also ask people from different units or departments about the works performed by the employee.

Written Reports

Written reports are the reports mostly made by line-managers or supervisors who are conducting direct business with the employee. You can take the feedback from them and measure the actual performance of the employee.

Figure 6 Fourth Step is to make a comparison

4. Conducting a comparison between the standards and the actual performance

At this stage, when you have already collected all the data from all the sources, you should conduct the comparison without further delay.

Take your standards as well as the actual performance from duties executed by the employee. If you compare them thoroughly, you will get the picture of evaluation easily.

Figure 7 At the fifth stage of annual performance evaluation you should provide feedback to the employees

5. Provide feedback to the employees

The evaluator will deliver his/her feedback to the employee under evaluation at this point. It will consist of all the necessary details regarding the performance.

If the feedback is good, it can motivate an employee easily.

If there are negative feedbacks, then the evaluator can take feedback from the employee about his/her perception on the point.

Figure 8 Provide training & development or promote the employee after evaluation

6. Take necessary action, positive or correction according to the need

At the last stage of the annual performance evaluation, the evaluator can take positive or corrective actions against the employee. Possible outcomes can be;

• Recommendation of promotion of the employee
• Recommendation of salary increment
• Recommendation of Training & Development
• Recommendation of Demotion
• Recommendation of Correction

Etc.

These 6 steps complete the process of performance evaluation for an employee. You can repeat the cycle next year to monitor and conduct annual performance evaluation.

Frequently Asked Questions

1. How do you monitor and evaluate performance?

You can monitor and evaluate your employees through various methods. The original process is to follow these six steps-

• Establishing Performance Standards for the Employees
• Communicate AKA deliver the standards of Performance Evaluation to the Employees
• Measure the Performance by the Employees in actual manner
• Conducting comparison between the standards and the actual performance
• Provide feedback to the employees
• Take necessary action, positive or correction according to the need

2. How do you evaluate an annual performance review?

You can evaluate an employee’s annual performance review by –

• Setting Standards
• Conveying the Standards
• Maintaining close monitoring through oral, written and direct reports for finding actual performance
• Create a comparison
• Being honest and providing feedbacks to discuss
• Take necessary action like providing training and development, promotion or correction

3. How does organization conduct the performance evaluation?

An organization conducts performance evaluation through following stages – Establishing performance indicators and standards, Delivering the standards to the employee, Conduct survey to gather information of actual performance of the employee, Compare the performance and standards, Provide feedbacks to the employee, Take necessary actions like promoting or correcting.

4. What are the tools for monitoring and evaluation?

Following are some tools for employee monitoring and evaluation –

• Written Reports by Supervisor or Line managers
• Surveys
• Oral reports from colleagues or department heads
• Recommendation by Department Heads
• Attendance Report
• Leave of Absence Reports
• Direct Feedback

Etc.

4. What do you say in a performance evaluation?

If you are an appraiser, then you can convey the following points in a performance evaluation:

• Achievements of the employee
• Points to be corrected
• Strengths, Weaknesses, Opportunities & Threats of the employee
• Communication of the employee within the organization
• Organizational goals and objectives
• Necessary training & development

Conclusion

Annual Performance Evaluation is one of the most important parts of employee motivation. If done correctly, it will not only motivate all the employees but also will show organizational flaws that need to be corrected.