Performance appraisals, sometimes called performance reviews, are one of a number of performance management tools that aim to ensure employees’ performance contributes to business objectives, and should be used as part of a holistic approach to managing performance. The value of annual performance appraisals has increasingly been challenged in recent years in favour of more regular ‘performance conversations’. However, performance feedback or appraisal remains a crucial aspect of the performance management cycle.

This factsheet outlines the elements of performance appraisals, unpacking the role of line managers and the skills they require to carry out performance reviews. It looks at ways of measuring performance and the changing methods of gathering and giving feedback - a critical part of the performance discussion.

CIPD viewpoint

There has been much debate over and criticism of performance appraisal recently. Much of the criticism is justified, but the core function of appraisal – to present feedback to employees on how they are performing – is as important as ever.

In many organisations, ‘the appraisal’ is still seen as an annual event, but in this case its impact will be limited. Conversations on performance should be an integral part of regular meetings with line managers, and if performance is measured quantitatively, employees should be regularly informed of their progress towards targets. What’s vital is that meaningful and open performance conversations happen regularly; whether or not there is also an annual review is secondary.

Broadly, the ideal conditions for effective conversations include: 

  • a culture of trust and openness
  • people managers who are appropriately skilled, for example in asking good questions and active listening
  • employees who are receptive, prepared to align with business objectives, learn and take responsibility for their performance.

More specific factors that make for a constructive appraisal are:

  • a clear purpose – to inform management decisions or employee development
  • recognition of achievements
  • genuine two-way conversation and reflection
  • the whole period is reviewed, not just recent or isolated events
  • agreed action plans.

Performance appraisal (or performance review) is one important element in the broader set of processes that make up performance management.

Essentially, performance appraisal is a means for managers and their employees to review and discuss the latter’s performance. Its purpose can be to identify areas for growth and improvement and inform suitable development plans. Alternatively, it can inform administrative decisions on contractual aspects of employment, such as pay, bonuses, promotions or termination. Both are valid uses of appraisal, but it can help to keep them separate.

How is performance appraisal changing?

There’s been much debate in recent years around deficiencies in traditional appraisal approaches and whether they are ‘past their sell-by date’. Some have suggested performance appraisal should be abandoned wholesale, but the more persuasive criticisms are more specific. In particular, they include that:

  • Appraisals are traditionally not frequent enough
  • They focus on past performance with little attention paid to future performance improvement, learning and development
  • Feedback often comes from a single source (the line manager) which many not account for the experiences of peers, customers, and the individuals themselves
  • The amount of effort associated with paperwork and overseeing process of appraisals is excessive.

Our recent research Could do better? What works in performance management reviews this debate in more detail and summarises the best evidence on what works in performance appraisal.

Some evidence affirms current thinking. For example, there’s strong evidence that performance benefits when employees regularly monitoring their progress towards goals, so more immediate feedback and an ongoing focus on improvement is indeed important.

However, the research also uncovered aspects of performance appraisal that often get overlooked and arguably need more attention. For example, the two uses of appraisal – for learning and development purposes and for administrative purposes of informing decisions on pay and promotion – involve different cognitive processes, so it seems best to separate these as far as possible by focusing on them in different meetings.

Further, there’s strong evidence that employees’ reactions to feedback, more than how feedback is given per se, are a critical influence on whether future performance is likely to improve. As such, it’s very important that employees perceive appraisals as fair as well as useful, which means they need to feel they have a voice in the process.

Performance can be assessed in different ways, including objective metrics and more subjective views of managers and colleagues.

The focus of performance measurements

Some jobs lend themselves much more readily to performance metrics than others. In some contexts, accurate and even real-time performance data are available on teams or individual employees – an example is a customer contact centre, where data on call length and outcomes can be recorded as the calls take place. In other contexts, what constitutes good performance may be defined more broadly and there may be longer timeframes attached. Examples include: client development roles, in which targets on sales can be set for a longer timeframe and procedures are less fixed; and project work, in which very broad objectives are agreed for a period of months or longer, and there may not be clarity at the outset how they are to be achieved.

However, not all measures focus on performance outcomes. Performance objectives can also relate to employees’ behaviours and attitudes against espoused values, or to their learning and development. Both these areas can be covered by performance assessments.

Methods of assessing performance

In some jobs, performance metrics can be calculated on an ongoing basis through management information systems. If the data is relevant to how individuals perform their jobs, it offers an extremely valuable basis for performance appraisal.

Some employers go further, making this data available through real-time dashboards. An additional benefit of a live dashboard is that people or teams can adjust their effort or the focus of their work in response to changing demands. This can hugely valuable in in time critical environments such as the UK’s National Health Service.

Another approach involves the use of 360 degree assessment, where feedback is gathered from a wide range of commentators, typically including the individual’s direct reports, customers and colleagues as well as their line manager. These assessments can include both qualitative comments and compiled scores from colleague ratings.

A lighter touch and more subjective approach to assessment is for managers or their employees to complete a form or a questionnaire that prompts in collecting information on their performance. This can cover different aspects of their work – such as their contribution to the team, role development and effectiveness – and can prompt the collection of evidence or examples.

Many organisations struggle to measure how employees contribute to the organisational performance. Where this is the case, improving human capital metrics should be a priority. The CIPD is leading a programme of work, Valuing Your Talent, to develop and promote this area.

The right measures for the job

A common criticism of performance management is that recording and collating the necessary information can be very time consuming and not always relevant. We advise that assessments and measurements are kept to the minimum that is relevant for short- or long-term performance and useful for employees. It should also help to underline the purpose of the different assessments.

Another key to getting assessment right is to match types of measures to jobs. Specific and stretching objectives increase performance in relatively straightforward jobs, so in this case, prioritising specific metrics is appropriate. But there is good evidence to show that, in complex jobs, less specific outcome goals, behaviour standards and learning objectives are better drivers of performance. See more on objective setting in our performance management factsheet.

Bias in performance ratings

Performance measures need to be trustworthy as well as relevant if they are to be relied upon. Unfortunately, as our Could do better? report points out, there’s a lot of potential for bias in performance ratings.

Firstly, managers or raters may be biased for various reasons. For example, managers tend to give more favourable ratings if they personally like an employee, hired or recommended them, or if they are particularly caring or considerate. Managers tend to give less favourable ratings if they feel powerful in the organisation, receive negative feedback themselves, or are particularly conscientious.

Secondly, employees can unduly affect their performance ratings by self-promotion and ingratiation, and by showing citizenship behaviour (for example, helping colleagues) in other areas of their work. However, they tend to damage their ratings if they make suggestions or challenge the status quo.

Thirdly, how ratings are set up also affects judgements. Managers tend to rate workers more generously and less accurately if it is to inform administrative decisions such as pay and promotion, and stricter and more accurately if it is to inform learning and development.

Ratings accuracy can be increased in various ways, including:

  • training raters (for example, in techniques for comparing employees with set standards)
  • using composite scores instead of a single score (for subjective measures)
  • averaging scores from different raters
  • using an expert to check scores.

Once performance assessments have been made, managers should inform employees on their performance and progress and on what’s required to perform well in the future. This can focus on behaviour or how things are done.

Regular feedback

Feedback is a critical element in performance management, not only because it directs the focus on learning and improvement, but also because it allows individuals to monitor their progress towards goals and stay motivated. So it’s important that feedback is given regularly. Many organisations are moving towards more continuous feedback, rather than relying on annual or six-monthly reviews, which is very positive change.

Topics to cover

Examples of areas that managers and their employees may cover in performance conversations include:

  • How well the employee has performed and what they have achieved since the last meeting.
  • Factors that have helped or hindered performance and how employees can become more effective now and in the future.
  • What practical support and learning or development will help the employee.
  • How the employees’ current role and longer term career may be developed.
  • Objectives for the next review period and a plan for how they can be met.

Open exchange of views

Giving effective feedback and taking it on board is much easier when there is a trusting relationship. Performance conversations should not be one-way information, but rather open exchanges in which the employee is fully involved, and both people share their hopes and concerns. A high level of involvement is important to make sure employees actively engage with the feedback and reflect on how they can develop and improve. It also ensures they feel supported and fairly treated, which helps them respond well to the appraisal and perform better as a result.

Strengths-based approach

A common tendency when considering how we can improve is to focus on our weaknesses or what is not going well and try to ‘fix’ these areas. However, there is growing research to show that appraisals are more likely to improve performance if they focus on building strengths and replicating successful techniques in other areas of one’s work. Approaches to performance appraisal that are strengths-based in this way also tend to adopt a coaching style and be more future focused, which may be part of the reason for their effectiveness.

Performance appraisal is usually carried out by line managers rather than HR professionals, so it‘s important that they understand their role and develop appropriate skills. Particular skills sets to develop include:

  • Asking good questions – when to use open or closed questions, and how to probe in a way that encourages people to expand on their experiences, views or feelings
  • Active listening – to take in what is being said, notice body language, help people clarify and respond in a way that helps the conversation
  • Giving constructive feedback – focusing on evidence and actual examples, not subjective opinion, reinforcing positives and strengths (see above), and knowing when to be directive and when to take a coaching approach.

Appraisals will be more effective when managers have a healthy relationship with their staff in general. Read more in our factsheet on the role of line managers in HR and L&D.

Books and reports

ARMSTRONG, M. (2017) Armstrong's handbook of performance management: an evidence-based guide to delivering high performance. 6th ed. London: Kogan Page.

ASHDOWN, L. (2018) Performance management: a practical introduction. 2nd ed. HR Fundamentals. London: CIPD and Kogan Page.

Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print.

Journal articles

CAPPELLI, P. and TAVIS, A. (2016) The performance management revolution. Harvard Business Review. October. pp58–67.

DENISI, A.S. and PRITCHARD, R.D. (2006) Performance appraisal, performance management and improving individual performance: a motivational framework. Management and Organization Review. Vol 2, No 2. pp253-77.

HARARI, M.B. and RUDOLPH, C.W. (2017) The effect of rater accountability on performance ratings: a meta-analytic review. Human Resource Management Review. Vol 27, No 1, March. pp121-133.

IQBAL, M.Z., AKBAR, S. and BUDHWAR, P. (2015) Effectiveness of performance appraisal: an integrated framework. International Journal of Management Reviews. Vol 17, No 4, October. pp510-533.

KLUGER, A.N. and DENISI, A. (1996) The effects of feedback interventions on performance: a historical review, a meta-analysis, and a preliminary feedback intervention theory. Psychological Bulletin. Vol 119, No 2. pp254-284.

CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.

Members and People Management subscribers can see articles on the People Management website.

This factsheet was last updated by Jonny Gifford.

Jonny Gifford

Jonny Gifford: Senior Adviser for Organisational Behaviour

Jonny is the CIPD’s Senior Adviser for Organisational Behaviour. He has had a varied career in researching employment and people management issues, working at the Institute for Employment Studies and Roffey Park Institute before joining the CIPD in 2012. A central focus in his work is applying behavioural science insights to core aspects of people management. Recently he has led programmes of work doing this in the areas of recruitment, reward and performance management. 

Jonny is also committed to helping HR practitioners make better use of evidence to make better decisions. He runs the CIPD Applied Research Conference, which exists to strengthen links between academic research and HR practice. 

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