Employee Performance Appraisal is the periodical process of reviewing employee's performance in specific areas versus predefined standards. This Employee Performance Appraisal is initiated, supervised and sponsored by HR, but essentially is conducted by immediate supervisor with his subordinate.

- 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 as a part of Employee Performance Appraisal. 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 during the Employee Performance Appraisal, 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 the Employee Performance Appraisal cycle, which is the end of the 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. All review grading is written into Employee Performance Appraisal form. Basically the outcome of the whole process is a good basis for next year's Employee Performance 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, through several Employee Performance Appraisal cycles, 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".

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

Employee Performance 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.