Before you can create an effective and usable performance appraisal instrument, you need to clarify your organization's performance management system and philosophy. Employee performance usually encompasses performance standards, corrective and disciplinary review and annual performance appraisals. And many employers still subscribe to the philosophy that suggests punitive action for poor performance and behavior and monetary rewards -- such as raises or on-the-spot cash awards -- for job performance that exceeds the company's expectations. Your performance management system and philosophy affect how supervisors conduct appraisals and the performance appraisals they use.

Performance Appraisal Types

Of the many different types of performance appraisals, understanding employees' job duties is an important factor in determining the best-suited appraisal. For example, production workers' jobs may be best evaluated using graphic ratings scales that permit numeric or letter grades for specific job functions. Behaviorally anchored rating scales, or BARS, are another form of appraisals that require supervisors to assign numerical rankings to employees' performance. On the other hand, managers whose goals are supposed to be aligned with those of the organization, will probably do well with an appraisal that identifies their annual and quarterly goals, usually referred to as a management-by-objectives performance appraisal.

Performance Standards

Employee performance standards set the bar for employer expectations. They're necessary for supervisors to accurately grade employee performance because they outline what an employee needs to do to achieve the organization's goals. For example, sales managers connect their employees' goals to the company's revenue goals. Sales managers set revenue goals for their employees and the employees' performance standards assess whether they meet those goals. A sample performance standard for sales personnel is to achieve 20 percent repeat customer business. Employees who achieve 30 percent repeat business exceed the company's expectations, while employees whose repeat business is just 10 percent have performance ratings that fall below the company's expectations.

Performance Appraisal Process

How supervisors actually conduct their employees' evaluations is an essential part in developing an appraisal instrument. Many performance appraisals begin with the supervisor's rating, but some require the employee's self-assessment. If you're going to require a self-assessment, you'll likely need two separate performance instruments. But the majority of performance appraisal instruments rely solely on supervisors' input. Set the parameters for what the supervisor is expected to rank and how supervisors rank employees against their peers. Determine how supervisors should conduct one-on-one discussions with their employees and whether appraisals should include supervisor-employee goal setting for the upcoming review period.

Training and Modifications

The measurements that performance appraisal instruments provide are useless if they aren't calculated properly or if your supervisors aren't skilled at producing unbiased, fair analyses about employees' job duties and performance expectations. That's why it's critical that you provide leadership training to supervisors and managers on what performance management systems are suitable for your work environment and the benefits of evaluating employees honestly and routinely. When you finalize your instrument, review its components with department supervisors and managers. Engage them in experiential learning activities so they gain firsthand expertise in how to conduct performance appraisal meetings, set goals with their employees and assess whether their performance warrants salary adjustments, bonuses or incentives.