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Appraisal of employee is the periodical process of reviewing his/her performance in specific areas versus predefined standards. This appraisal is initiated, supervised and collected by HR, but essentially is conducted by supervisor with his subordinate.

There are several steps in the annual cycle of appraisal. In January the appraisal process starts with setting of goals for employees that are covered with appraisal process. The Appraisal is split in two main areas:

- Objective setting - target, specified and measures, for different areas. These targets depends on position and business priorities, and can be, for example, Revenue, Sales Volume, Cost Control, Customer Satisfaction, Distribution Efficiency, ...

- Competence Development ( activities for development of specific skills, identified through Gap Analysis ). For every skill that development need has been identified the development plan is created with main elements: Competence to be developed, Skill to be Developed, Activities to be conducted, and Example of activities.

Competency model can be different, so it is up to each company to decide which model to adopt. But the common thing for all models is that they should have Core Competency Model ( Leadership, Judgment, Teamwork, ... ) as well as Functional ( e.g. for Sales those are Negotiation Skills, Communication Skills, Planning Skills, ... ).

After setting objectives it is recommended to have periodical reviews, e.g. quarterly, in order the follow up the process, to be able to correct development in case that is not satisfactory. At the end of year, all scores and activities are assembled in the official form, and mutually reviewed both, by subordinate and his supervisor. First, employee review himself, grading his own success, the way he see it. After that, his superior is putting grades on results and activities, and giving feedback to his subordinate. Basically the outcome of the whole process is a good basis for next year Appraisal process. This is logical, because objectives of companies do not change that drastically. On the other hand, the competence development is not something that requires a few days or months or even a few trainings. It is rather tough task for somebody to develop his weak spots, and it usually takes several years for ambition person to obtain a visible progress in his areas identified as gaps, or to put it in more polite way - "areas for improvement".

Appraisal should be created on annual level, both Objectives and Competence Development. Generally Appraisal process should be incentivized through annual bonus system. ( More under Rewarding Article, within HR section. )

Appraisal process should be cascaded down top-down, until certain level, normally first supervision level. To go below it is management decision, and can have sense in some organizations, but not in all. To go to the bottom would not create real effect, but bureaucratic confusion.

The most important thing in this process is commitment of all leaders of the process, and that goes top down. If is not conducted in a valid way, it turns to be happy sheet filled formally to satisfy the procedure or to justify a giveaway bonus at the end of period.

Appraisal process is a powerful managerial tool and it should be treated as such.