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29th Jun, 2022

Ellie Peck
Ellie Peck
Job Title
Work experience placement

Numerous sources claim Australian businessman W.D. Scott spearheaded appraisal systems in 1914 and, since then, appraisals have changed dramatically over time. It wasn’t until the mid-1950s that processes were formalised, and appraisals became common across the business world.

What is an appraisal system?

Appraisal systems are used to help measure an employee’s performance over time. An appraisal is a two-way process between you and your employee, which benefits both parties.

When conducting your first appraisal with an employee, you will set goals – these goals will allow you to benchmark an employee's performance and achievements in future meetings. This gives you the opportunity to provide guidance and discuss any training required.

An appraisal system is an effective means of helping you to recognise employees’ achievements and can be used to guide your employee's future improvement. These systems promote reflective practice, meaning they are a useful strategy for employers to reflect on their employee’s progress and improve their quality of work.

Types of appraisal systems

There are many distinct types of appraisal systems in the workplace, the best known being the ‘annual review’. During this review, you and your employee will sit down and assess how well they have performed over the duration of the year.

Some systems will rate workers based on various criteria using a scoring system. Others will include a narrative to establish your employee’s strengths and weaknesses, assessing their achievements against objectives set in the previous review. Some employers will combine both the narrative and the ranking methods.

The 360-degree review and self-evaluation methods are another two commonly used appraisal systems. These reviews aim to collect feedback from an employee’s touchpoints, such as colleagues and, in some cases, customers. Due to all the different fields of evaluation, this method will not only give your employee in-depth feedback to reflect on but will also provide them with a true picture of their performance.

A self-evaluation method of appraisal allows your team members to honestly appraise themselves, which may be instructive for both you and your employee.

What are the benefits of having an appraisal system?

One of the most significant benefits of having an appraisal system is that it provides feedback on how to enhance an employee’s performance. It will provide the employee with information and details on ways to develop their work. Appraisal systems have been designed to recognise the training needs of certain individuals, which will give HR a view of training needs for the entire organisation.

Certain companies will use their appraisal systems to govern wage increases and promotions. Based on an employee’s performance, their salary can be increased, with employees who score the highest sale rating receiving the largest salary increases.

Employee appraisal systems also form a reliable foundation for HR decision-making. If an employee is underachieving or performing to the extent of disciplinary action, then performance reviews may indicate whether improvements have been made.

Are annual appraisal systems dead?

Yes and no. Even though annual employee appraisal systems can make a substantial impact to a company’s overall success, many argue that they are starting to die out. In 2016, the same magazine found that only 4% of HR leaders felt their appraisal systems were effective.

An investigation carried out by data analyst Badatunde Jacob Ogunsanya suggested that 75% of workers in the early-to-mid stages of their careers had lost faith in the appraisal system. Of those he spoke to, one employee claimed to have consistently exceeded working expectations in the past four years but was still unable to progress or receive a higher salary within his company.

With workplace culture, technology, and industries rapidly evolving, annual appraisal systems are now thought of as outdated. Businesses that don’t offer more regular feedback risk being left behind. Appraisals should now be more frequent, flexible and personalised.

Managing progress without annual appraisals

An article in People Management magazine by Arne Van Damme, CEO of, states that “a once-yearly confab is no longer a model way to manage people successfully.” He suggests spreading out the procedure, since: “business is faster and more unpredictable than ever” and people’s circumstances can change quickly.

Arne Van Damme suggests businesses need to carry out more manager-to-employee meetings. And that a quarterly one-to-one meeting seems to be a reasonable agreement. Van Damme said having meetings too frequently may appear as though the manager is “breathing down the employees’ necks.”

Another strategy Van Damme suggests is not to shy away from salary-based differentiation for employees that are performing to the best of their ability. Paraphrasing Silicon Valley pioneer Jerry Sanders, he claimed: “There is no shame in differentiating between your best people and the rest of your people.”

Celebrating your employees’ successes is also an important factor in keeping them happy and content. Taking note of, and rewarding, your employee’s effort and success is crucial. This could be through offering benefits such as extra holiday, giving them a pay rise, or even a small gift.

While annual appraisals may be in decline, appraisals themselves are essential and should become more frequent, with more flexibility and emphasis on monitoring progress.

For more advice on employee retention and attraction, contact your nearest Reed office and speak to one of our specialist recruiters who can help.