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Performance Appraisal Policy and Procedures Manual

The performance appraisal policy ensures that the weight to performance should be appropriately given and need to perform should be developed among the employees. The performance review policy is a way to convey to the employees that the company appreciates their hard work and dedication towards work. Performance management policy is also considered as a motivational tool used by the company to make sure that employees use their full potential to perform. The performance management policy example illustrates the process and components of employee performance review policy. It includes the performance management policy template which consists of all the rules and regulations that should be followed by the employees while participating in the performance review. The policy provides that review of the performance is a fundamental right of employees and managers should be fairly executing the performance review process.

Need of Performance Appraisal  policy

The performance appraisal policy is a major part of performance management system and promotes talent management in the organization. The successor planning is another outcome of performance management policy.

Overall it is rightly defined that performance appraisal policy is the way to ensure the performance-oriented work environment in the organization, it helps employees to achieve the set objects and act as a reward for their contribution in the progress of the organization.

Disclaimer: The performance appraisal policy mentioned in this article is created to provide a brief idea about the real-time performance appraisal process carried out in the organization. The policy is designed for enhancement of understanding and to clear the concepts regarding performance appraisal system. The site is not responsible for the resemblance or accuracy of the policy. It is important to professionally verify the suitability of policy before using the content given in the sample policy. 

Performance Appraisal Policy of a Company

Sample Template format and Example


Performance Appraisal - Introduction

Performance Appraisal is a process in which the achievement of set objectives is verified, the demonstration of good behavior and values are appreciated and necessary action is taken to ensure the development of individual employees working in the organization. Here, appraise is the employee who’s performance is assessed while appraiser is the one who assesses the performance. The objective against which the performance is assessed has to be conveyed to the employee and necessary resources should be provided to achieve the set objectives. The performance appraisal system is a part of talent management and successor planning of the organization. It is a step taken by the organization to know about the ability, potential, and aspirations of the employees. The performance appraisal policy is designed to ensure the proper conduct of performance appraisal of all the employees working in the organization. This sample will provide you with the performance appraisal policy and procedure which is simple to execute.

Purpose of Performance Appraisal Policy

The purpose of the performance review policy is to make employees aware of the company’s performance appraisal system, framework and participation process.

The aim of the performance review policy is-

To ensure that performance of every employee is assessed as per the set norms of the company
To make sure that performance grading is carried out in a fair manner and performance review is undertaken regularly.
To create trust among the employees regarding company’s performance appraisal system.

Objective of  Performance Appraisal policy and procedure

The performance appraisal system of the company is developed based on the long-term goal. The objective of performance appraisal policy is to-
•  Make employee’s aware of the future prospect in the company.
• Create a supportive environment in the company to discuss the career aspirations and developmental  

 Opportunities for the Employees.

•  Build a pathway to bring job satisfaction among the employees.
• Identify and develop successors for the critical, high responsibility positions in the company.

Scope of  Performance Appraisal Policy 

The performance appraisal system provides a robust way to discuss, plan and review the performance of existing staff of the company. The scope of performance appraisal is wider and applicable to each and every staff member. The company is bound to provide the fundamental right of performance review and performance-based increment to all the working employees


The performance appraisal policy provides certain responsibilities to the individual employees and their respective managers to execute the performance review process.

Responsibilities of individual employees

​The responsibilities of individual employees include-

•  Submission of self-assessment forms by comparing the achievement and work progress against the set objectives assigned by the company.
•  Attend appraisal meetings throughout the year
• Post-performance review every individual employee should agree to follow the Personal Development Plan (PDP), suggested by appraiser or HR Department of the company.
•  Providing evidence of learning process followed throughout the year
• Completion of training program/courses as per PDP designed previous year (or soon after joining).

Responsibilities of Team Manager/Project Manager/Appraisers

The manager or appraiser plays important role in the execution of performance management policy. The responsibilities of appraisers include-
To conduct regular meetings to discuss the performance and development of team members.
To provide feedback on performance, achievement, and progress throughout the year.
To identify the successor for critical positions in the organization and implement PDP for the employees.
To promote the importance of personal health and well-being of the employees.
To ensure the healthy communication between team members and create the supportive working environment.
To follow fair performance appraisal process and provide a deserved grade to the team members.
To keep a record of yearly performance appraisal data on Electronic Staff Record.

Responsibilities of Management teams/HR department

The HR department should design an ideal performance management policy template which will help the employees to understand the employee performance review process. Management team or HR department is responsible for compiling the self-assessment record submitted by the individual employees along with the grades provided by their respective managers. After compilation of data Human Resource department will issue the applicable hike in the salary, bonus the employee can claim and performance incentives that can be added to the salary of individual employees.

Guidelines to Conduct Performance Appraisal

Each and every employee in the company should understand the guidelines and follow them to ensure the fair conduct of performance appraisal process.
It is a fundamental right of all the employees to understand the performance expectations and thus should take efforts to make sure they know what job responsibilities are assigned to them.
It is mandatory to the management or manager to provide necessary resources required to improve the performance of the employees. 
The performance management policy is applicable to all permanent employees of the company.
Every employee has a right to ask for the feedback on their performance.
The performance appraisal process should be thoughtful and meaningful not just random ‘tick box’ task.
Managers should identify the talent and encourage the employees to progress in their work.
The performance appraisal should be centered around the specific job skills.
Job skills, teamwork, extra competencies, contribution to the organization, results of given task, special achievements, social skills and organizational citizenship behavior are the important points considered for performance appraisal.

Scheduled of Performance Appraisal

The company will organize the performance appraisal twice a year. The month of March and September will be considered as appraisal months. The specific date of submission of self-appraisal forms and team evaluation form will be informed by the management or HR team.

​Performance Grading and Further Actions

The grading under performance appraisal system is done on overall performance score. The performance score will be calculated against the ideal points given to the employee once the set objective is achieved. Other important scores which are considered for appraisal are behavioral score and essential skills compliance.
Overall performance assessment score is the combination of performance score, behavioral score, and essential skill compliance. Based on the overall performance assessment score the further action of salary hike, incentives and bonus will be taken by the management.

 Salary increment bands

The salary increment will be applied twice a year based on the overall performance assessment score. The employees who successfully reach the 75% cut off of the overall performance assessment score will be eligible for salary increment. The employees with less than 50% of the score as compared to the set ideal score will be considered for skill improvement training and could receive warnings/memo for poor performance. The employees with extraordinary 90% and above ratings will be eligible for performance incentives. The bonus will be distributed among employees based on the contribution of employees in the profit margin of the company.

Mandatory Actions

It is mandatory for the employees to generate proofs of their performance in the organization. The task completion points of the employees will get verified from the reporting managers. The managers should provide fair grades to the team members and shall be responsible to generate proofs regarding the given grades. The submission of self-appraisal form and team evaluation form should be done on or before the given deadline. To make the process transparent employees will receive the information about their overall performance assessment score. However, the specific grades given by the managers will remain confidential. The employees can approach the grievances cell for any dissatisfaction or clarification required.  
The above performance management policy example can act as a guideline to develop a customized performance management policy for the company.  
Free to Download Appraisal letter Sample Template

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