For many employees, appraisal season brings hope and anxiety in equal measure — hope for a strong rating, and worry about a disappointing one. The weeks leading up to it are usually busy, as employees put together a case for their own achievements ahead of the review.
At its core, performance appraisal is the process of evaluating an employee’s performance over a set period — typically six months or a year — and deciding where that performance stands relative to peers in the same role or band. That comparison then feeds directly into decisions about salary increases and bonus payouts.
How the Appraisal Cycle Is Structured
The appraisal cycle usually kicks off a month or two before the review period officially ends, and organizations run it either half-yearly or yearly, aligned to either the calendar year or their financial year.
Most appraisal processes move through the same three rounds:
- Employee and manager: the employee (the “appraisee”) completes a self-evaluation, and the manager (the “appraiser”) gives a frank, objective assessment of performance. This is the round where achievements and shortfalls are discussed directly.
- Manager and manager’s manager: this round decides which performance band the employee falls into relative to peers — a step commonly known as normalization.
- HR sign-off (in many organizations): a final round where HR reviews and approves the ratings before bonus or salary decisions are finalized.
What “Normalization” Means (and Why It’s Controversial)
Normalization is the process of rationalizing one employee’s rating against their peers’ rather than judging performance in isolation. In theory, this keeps ratings consistent across a team or department instead of depending purely on one manager’s subjective view.
In practice, it’s also the most criticized part of the process. Because normalization effectively works on a “winner takes all” basis, moderate performers can end up bracketed together with genuinely poor performers simply because a team has a few standout scores pulling the curve. This relative-grading approach — closer to grading on a curve than to fixed, absolute standards — introduces an element of competitive rivalry that leaves some employees feeling the outcome was unfair, even when their actual performance was solid.
What the Appraisal Process Actually Decides
The end result of the process is a performance grade, along with a decision on salary hike and/or bonus. Many organizations deliberately run separate cycles for salary decisions and bonus decisions rather than deciding both at once, specifically to avoid overlap and keep each decision fair on its own terms.
Where the Process Breaks Down
The whole system depends on everyone involved approaching it objectively — and that’s harder in practice than management theory suggests. Personal bias between a manager and an employee has a way of surfacing during ratings, especially where the two don’t see eye to eye on other issues.
The consequences are measurable: surveys consistently find that the majority of employees who quit an organization do so over disagreements about their rating, not unrelated reasons. That makes the fairness of the appraisal process a genuine retention issue, not just an HR formality.
The fix isn’t to abandon structured comparison altogether, but to apply it with more nuance — recognizing that employees have different working styles and motivations, rather than forcing every rating into a rigid curve.
The Three Rounds of a Typical Appraisal Cycle
| Round | Participants | What Happens |
|---|---|---|
| Round 1 | Employee & manager | Self-evaluation plus manager’s objective assessment |
| Round 2 (Normalization) | Manager & manager’s manager | Rating compared against peers to decide performance band |
| Round 3 (in many orgs) | HR manager | Final review and sign-off before bonus/salary is decided |
Relative Grading vs. Absolute Rating
| Approach | How It Works | Main Drawback |
|---|---|---|
| Relative grading (normalization) | Ratings compared against peers within a band or team | Moderate performers can be grouped with poor performers on a strong team |
| Absolute rating | Performance judged against fixed, predefined standards | Doesn’t account for differences in team difficulty or role scope |
Frequently Asked Questions
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What is the performance appraisal process?
It’s the structured process of evaluating an employee’s performance over a set period (usually six months or a year) and using that evaluation to decide ratings, salary increases, and bonus payouts.
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What is “normalization” in performance appraisals?
Normalization is the step where a manager’s rating of an employee is compared against and adjusted relative to peers in the same band, rather than being judged purely on its own — intended to keep ratings consistent across a team.
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How many rounds does a typical appraisal process have?
Most follow three rounds: an employee-manager round (self-evaluation plus manager assessment), a manager-to-manager’s-manager round (normalization), and, in many organizations, a final HR sign-off before decisions are finalized.
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Why do so many employees quit after appraisals?
Surveys consistently show that disagreement over ratings — not unrelated career reasons — is the most common reason employees cite for leaving shortly after an appraisal cycle, which is why getting the process right matters for retention.
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What’s the difference between relative grading and absolute ratings?
Relative grading (normalization) compares an employee’s performance against peers to decide their band, while absolute rating judges performance purely against fixed standards, independent of how peers performed.
