How Do I Develop a Performance Appraisal System?

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  • Written By: Maggie Worth
  • Edited By: Jenn Walker
  • Last Modified Date: 07 June 2019
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A performance appraisal system is a process of comparing an employee's performance to set goals and requirements. To develop such a system, you should first determine who will provide feedback for appraisals, who will conduct the actual review and how often appraisals will be conducted. You should then create a form that encompasses all necessary information. Finally, you'll need to develop a process document that explains how to conduct appraisals.

Begin development of your performance appraisal system by determining who will provide information for the review. In some systems, only the employee's direct supervisor completes the review form. Others require that the employee complete a self-appraisal to go with the supervisor's review. Still others, sometimes called 360-degree reviews, ask the same questions of a number of individuals, including the supervisor; employee; colleagues; and, if applicable, clients. In this type of review, feedback is compiled into a single final document and reviewed with the employee.

You will also need to decide how the results of the appraisal will be used, how they will be delivered to the employee and how often appraisals will occur. Supervisors commonly review the results of a performance appraisal with the employee, then place the appraisal form in the employee's permanent file. In some companies, the human resources department is responsible for reviewing the results of the appraisal with the employee. Results are often used in promotion, pay increase, demotion or termination decisions.


The schedule on which appraisals are conducted varies based on the performance appraisal system. Many businesses conduct reviews yearly on the employee's anniversary. Others conduct reviews on all employees at the same time each year. Companies also commonly conduct an initial review at the end of a probationary period.

The appraisal form is an important part of any performance appraisal system. To create your form, first make a list of general performance requirements that will apply to all or most employees. This can include quality of work, attendance and other similar factors. Decide whether these qualities will be rated using a numerical system or a descriptor system, such as "poor, acceptable, outstanding."

You'll want to add a section that allows supervisors to customize the review to specific job requirements as well. You should also create a section for comments and add signature lines for both the person completing the review and the employee. The same form should be used for all employees.

Once you have completed your form, you will need to write a brief explanation about how the new performance appraisal system works. This should include when and how to complete the process and specific instructions for completing the form. If appraisal results are intended to be confidential, make sure you state this clearly to avoid legal issues in the future.



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