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Personnel evaluation a comprehensive guide to improving business performance
Reading time: 9 minutes
Updated 17 June 2024

Personnel appraisal: comprehensive guide to improving business performance

Selecting top-notch employees for your startup is not enough to ensure success; in fact, the standard must be maintained over time and, if possible, raised further. Staff evaluation is what enables you to improve the performance of the individual and the company as a whole.

In this guide you will find several practical examples of staff evaluation templates and some performance indicators to keep an eye on, as well as the best strategies to follow to create an error-free evaluation form.

 

What is staff evaluation and why it is important

Personnel appraisal is defined as any system that, through the use of a variety of techniques and scales, makes it possible to examine the behavior and performance of employees, with an emphasis on analyzing their competencies and the likelihood that they will achieve set goals.

This just quoted is a purely technical definition of personnel evaluation. Far more suggestive is the definition given by Peter Drucker, that is, by the man who is considered “the man who invented management.” For Drucker, personnel evaluation is

“like a mirror: reflecting past performance and illuminating the path to the future.”

But how does personnel evaluation, in the words of the economist, “illuminate the future” of a company? To answer this question and, therefore, to understand why personnel appraisal is so important, we must first analyze the benefits it offers, both company-side and employee-side.

 

Benefits of staff evaluation

Benefits of staff evaluation

 

Benefits for the company

We already mentioned it at the beginning of this guide, but it is important to reiterate it now: staff evaluation allows you to raise the level of business performance. In fact, analyzing the performance of each and every employee in your startup gives you the opportunity to identify critical issues and potential of each worker and to take action to prevent any mistakes by the individual from affecting the company’s business more severely.

Remember that each employee is different, but also that each role has different priorities. Through staff assessment you understand earlier and better how you can leverage a certain worker’s skills for a particular position.

Having a clear idea of each worker’s strengths and weaknesses allows you, in essence, to make more effective decisions.

 

Employee benefits

Knowing an employee’s strengths and weaknesses well also gives you other possibilities, which benefit the worker himself: for example, based on this, you can better define goals and set achievable but ambitious targets that can motivate staff without discouraging anyone or creating unnecessary (or, worse, harmful) competition.

Keep in mind that an employee may not appreciate being under close and continuous evaluation by his superiors. It is important, therefore, to explain well the reasons and purposes of the evaluation, which should always aim to improve the quality of the employee’s work.

Knowing your employees well also allows you to know earlier when something is wrong: this, surely, benefits the company but also the individual worker, who will see any problems resolved sooner and better.

 

How to carry out effective personnel evaluation

To enjoy the benefits just mentioned, of course, you must be able to make an assessment correctly and effectively.

You should first know that personnel analysis is done through evaluation forms, aimed at measuring (through predefined techniques and scales) various factors, from goals achieved to accuracy in the execution of tasks through behavior in the workplace.

If you want to evaluate your employees accurately, then, you must first determine what to analyze (skills? performance? behaviors?) and define a set of elements that can objectively represent the quality of employees’ work, so that you can best structure the evaluation form.

Not only that, you also need to establish the frequency with which you will be evaluating your employees. In fact, the forms should be filled out on a regular basis so that you have a clear and comprehensive overview of your workers’ progress over time. Indicatively, this period can be between 3 and 4 months, but it clearly depends on the precise needs of your startup (another alternative, for example, is to conduct an evaluation annually).

 

Choose the most suitable evaluation model

Before you learn in detail about the KPIs to be monitored and the techniques and scales to be used to properly and effectively evaluate workers, you should know that several performance evaluation models can be identified.

 

Performance evaluation models

Performance evaluation models

 

A common distinction is based on who evaluates staff performance. In this context, the most common model of staff appraisal is certainly the so-called “leader/assessor” model, in which it is the manager or department head who evaluates employees. On an ideal opposite side is the model of professional self-assessment, in which, instead, it is the workers themselves who analyze their own strengths and weaknesses. In the “middle,” there are other models, such as, for example, peer evaluation or client evaluation.

Staff appraisal models also differ according to the object of the appraisal itself. Your choice should revolve around the goals you have: for example, you may need to investigate the average level of your employees or you may want to find out, in detail, who are the ones who need the most help to reach an appropriate standard. Another option available to you is to analyze whether and to what extent the work team is aligned with your startup’s values.

In a later section we will look at all the available models.

 

Define Performance Indicators (KPIs)

Personnel evaluation is based on the analysis of some performance indicators and you will not be surprised to learn that these also differ depending on what you intend to examine.

Below you can find a list of sample KPIs that you can use to evaluate different dimensions of your employees’ performance.

 

The main KPIs of performance evaluation

The main KPIs of performance evaluation

 

KPIs for productivity

One of the main indicators for assessing worker productivity is the one that measures, precisely, productivity on a daily or weekly basis: the KPI “Production per day/week“, specifically, gives a measure of the amount of work an employee is able to complete in the given time period.

Another very useful indicator is “resource savings“-this particular KPI measures a worker’s ability to efficiently use the resources made available (in terms of time, money and materials) to complete the tasks assigned.

If you want to improve overall efficiency, you need to look at “error reduction” and measure the number of errors made by the employee while performing the task for which he or she is responsible.

 

KPIs for quality of work

You can analyze the quality of your employees’ work based on different metrics. One of these is the “return or complaint rate“-this is a particular KPI that measures the number of returns or complaints related specifically to the work done by a particular employee.

However, it is not only customer opinion that matters: another important KPI examines “feedback from colleagues or supervisors” related to a worker’s activity.

Quality also means “regulatory compliance“-the KPI you need to consider, in this case, is the one that measures a worker’s ability to comply with regulations, whether they are industry laws or internal rules within your startup.

 

KPIs for behavior

A particularly important indicator for evaluating an employee’s behavior is that which measures “absences“-the frequency and duration of absences (especially unscheduled ones), in fact, can reflect the commitment to and interest in work.

An employee’s ability to be proactive and take the “initiative” is something that is generally held in high regard by business managers. Evaluating an employee’s behavior, therefore, also comes down to measuring the propensity to come up with new solutions to solve problems or move processes forward more efficiently.

Good relationships and “collaboration” among colleagues are crucial to achieving business goals all together. Therefore, you should measure the employee’s ability to work effectively and smoothly with other members of the work team.

 

Create an Evaluation Form

Let us now get to the heart of the matter: how do you write an employee evaluation form? First and foremost, such a document must be simple and clear, both for those who fill it out and for those who must understand the questions within it.

Do not include too much information (which might confuse workers) and use a rating system that clearly describes the level achieved. You can use a numerical scale (typically, 1 to 5 or 1 to 10) or a nominal scale (e.g., “insufficient,” “sufficient,” “good,” “excellent,” “excellent”).

The structure of an evaluation form changes according to the objectives and characteristics of the company. That said, you must keep in mind that a staff evaluation form, while varying according to the aspects to be investigated, generally includes 3 key elements:

  • the object of the evaluation (i.e., the performance to be evaluated);
  • judgment levels and their explanation (to describe the worker’s performance);
  • evaluation (to identify the grade achieved by the employee, associated with the performance).

If you are looking for a template to track employee performance on Excel, we have just the thing for you. We have developed a simple performance appraisal tool designed to meet the needs of new businesses (and beyond!).

Using our employee performance appraisal template, you will be able to easily monitor your employees’ performance, assess their performance trends, and appropriately anticipate training and development needs. It will also assist you in identifying and addressing any areas for improvement in a timely manner.

You can download it here!

 

Fill out the form to DOWNLOAD the document for free!

 

Provide constructive feedback

Providing constructive feedback to the employee (who, we remind you, may also get annoyed about being evaluated) is very important.

The moment you have analyzed his performance and find yourself talking to the worker about his shortcomings, immediately shift the conversation to his potential and room for improvement and professional growth.

Another useful expedient is to offer, along with the training programs needed to fill the gaps, benefits that are activated when performance reaches the desired level.

 

Practical examples of personnel evaluation

Now that you have all the theoretical tools to evaluate your employees effectively, it is time to move on to practice with an example of staff evaluation. Or, better said, with several practical examples: in fact, we remind you that there are several staff evaluation models. Let’s examine a few of them.

As mentioned above, the most classic of the staff evaluation models (as well as the one that best fits different types of companies) is the leader/assessor model, in which the manager or department heads evaluate employees. The evaluation can focus on different aspects: from goals (achieved or to be achieved) to skills to be improved, through personality traits and behavior. Whatever the area of interest, remember that the evaluator must provide a final judgment on the level achieved by the employee.

The model called continuous feedback involves the manager submitting the evaluation form to workers on a regular and very frequent basis. The form, in this case, presents very simple and straightforward questions (with answers based on a score from 1 to 10), aimed at monitoring the evolution of job quality. Obviously, given the simplicity of the questions, this is not a particularly in-depth type of assessment.

Far more articulate and intrusive is the 360-degree employee evaluation model, used when there is a need to analyze an employee’s work from every angle. In this case, it is not only the manager or department heads who are evaluating, since the evaluation also includes feedback from colleagues, customers and suppliers.

The Management by Objectives (MBO) model is a recent personnel evaluation technique, all focused on the individual worker. For this reason it is particularly effective, but it is also very complex. In this model, the manager clarifies personal goals for the employee to achieve and then regularly evaluates the performance against the set goals, providing ongoing feedback.

As you can easily guess from the name, the BARS (Behaviorally Anchored Rating Scales) model is used to evaluate staff based on behavior. This example of staff evaluation involves making a list of critical incidents (both positive and negative), sorted and grouped according to the different duties and positions held by the worker, to which a score is associated according to the scale adopted.

Finally, among the staff evaluation models, the aforementioned staff self-assessment deserves further mention: this model, in which the worker himself evaluates his performance, is mainly used to analyze the degree of staff awareness of the work performed.

 

Personnel evaluation as a tool for business growth

The overview of staff evaluation examples just concluded should not mislead you: of course, each company (including your startup) should adopt only the model(s) best suited to it.

Keep in mind that subjecting employees to appraisal on a regular and not too time-delayed cadence can result in an enormous amount of work, which is usually assigned to the human resources department.

Expensive as it may be, however, this is work that you just cannot give up if you want to grow your startup and, in particular, its efficiency. For this reason, you might consider outsourcing staff evaluation to management software.

Nicola Zanetti

Founder B-PlanNow® | Startup mentor | Startup consulting & marketing strategist | Leading startup to scaleup | Private angel investor | Ecommerce Manager | Professional trainer | Book writer

info@b-plannow.com

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