Actions to take: Don't treat annual appraisals as an especially important task that needs perfect accuracy. Do them competently, but quickly. Instead, spend your time and energy on work that has real impact on your efficacy.
(Note: the following post applies to organizations of a certain size. If your organization is big enough to have a separate HR department, you can safely trust that this advice applies to you. If your organization is very small, there are fewer political factors at play.)
How many times have you been totally satisfied with your year-end appraisal? How often do you read it and say, "Yes, this is an excellent, accurate reflection of my work and abilities?" I haven't met anyone yet who agrees with that statement. It seems that no one is satisfied with their appraisals, no matter how much time the boss spent on them.
I am going to offer you some practical and controversial advice. Most HR departments would take issue with me if the blog were big enough for anyone to notice. The advice is this: Don't put much effort into annual employee evaluations. As a good boss, you will want to write thorough appraisals that accurately reflect your employees' skills and accomplishments. You will want to show how great your top performers are and show the problems with your bottom performers. Your organization, on the other hand, will push you to write watered down, middle-of-the-road appraisals. They'll do it gently, and they would never describe it that way, but they'll do it.
Don't fight the organization's will. Just get them done and off your plate as quickly as possible.
Performance appraisals, as an organizational process, are built to fail. The performance appraisal process means too many things to too many parts of the organization. For the employee, it is: 1) a review of their work, 2) the manager's opinion about their work, 3) a factor in future salary earnings. Those are three huge, distinct things.
For the manager writing the appraisal, it is: 1) all the things mentioned above, 2) a comparison with the manager's other employees, 3) a reflection of the managers work, both in that they wrote the review and that they are responsible for their employees' performance. These reasons, and especially the third, incentivize the manager to write largely generic, generally positive appraisals. To do otherwise invites scrutiny on their work.
For the HR department, the appraisal is again, everything mentioned above. Plus, it is an evidentiary document for disciplinary decisions. The first thing HR will ask about a poor performer is, "Are the problems reflected in their performance appraisals?" At the same time, HR will demand ironclad documentation of the problem before they allow it to be put into an appraisal. A real chicken-egg situation. Yet another incentive pushing managers in the direction of generic appraisals.
We could go on. We could talk about how the manager's manager has their own opinions about the employee's appraisal, how managers of other departments have some influence, how the culture of the organization pushes us to give certain ratings and speak about employees in certain ways. The list of influences doesn't end.
How can one document succeed in all of these different goals? Frankly, it cannot. It is not possible to write a set of truly exceptional, accurate performance appraisals for your team. You can’t have a single document that functions as conversation from manager to employee about their work over the past year, and is also the key document in determining salary increases, and also sidesteps scrutiny of the your own work, and is also formatted as documentation of problematic behavior, and so on, and so on. There are too many pressures from too many directions.
Use that energy elsewhere. Take the advice from our previous post about performance appraisals, and just get it done with. The appraisal does not have much impact on your employees' success and productivity, truly. Humans are not motivated once per year—we are motivated by the everyday feedback we receive. The faster you finish this largely bureaucratic task, the faster you can return to the valuable task of everyday communication about the work.
You can ignore this advice. You can try to write excellent, accurate appraisals with top ratings for your high performers and low ratings for your poor performers. I certainly attempted it early in my managerial career. The appraisals don't last the onslaught of upper-level review. Your decisions and opinions will be softly poked and prodded by HR and by your manager until you relent. Your ratings will be pushed to be whatever the average score is. It will be strongly implied or outright stated that you don't have quite enough evidence to justify the highest or lowest ratings. Your comments will be watered down.
Save yourself the grief of fighting that lost cause.