It is the second week of April at a 140-person software services firm in Bengaluru. The delivery heads have each sent their ratings in a different format. One used a five-point scale, one used words, and one sent a photo of a whiteboard. The founder wants the hike letters out before the month ends, and the HR head is still waiting for two project managers who are at a client site.
This is what an appraisal cycle looks like when it grows by habit. This post sets out how to design one on purpose, with timing, ratings and hike communication in a sensible order.
Pick the cycle date for your business, not for the calendar
Many services firms run one cycle a year, often tied to the financial year. That suits finance, but it may not suit delivery. If your largest projects close or renew in the same weeks, managers cannot give considered ratings then. Look at your own project calendar first. Choose a window when most leads are free for two weeks, and avoid go-live months.
Some firms split the year: a light mid-year check and a full review at year end. Others use a single cycle with quarterly conversations. Either is fine. What matters is that people know the dates in advance and that the dates survive a busy quarter.
Decide what is being rated
Services staff produce work for clients, so the manager often sees only part of it. A developer may report to a team lead, sit under a project manager and be reviewed by a client architect. Decide who owns the rating and who only gives input. We suggest the line manager owns it and the project manager and client-facing lead give written input.
- Delivery: did the person finish what was agreed, with the quality the client accepted?
- Skills: has the person grown the skills for the next grade?
- Behaviour: how did they work with the team, the client and the support functions?
- Contribution beyond the project: interviews, mentoring, reusable code, documentation.
Keep the rating scale short
Three to five levels is enough. More levels invite arguments over the difference between a three and a four. Write one or two sentences for each level, using examples from your own projects. A level that says only 'meets expectations' will be read in ten different ways.
Calibration is the step many small firms skip. It is a meeting where the leaders look at all ratings together and check that similar work got similar ratings across projects. Without it, a generous manager creates a team that expects more than the firm can give.
The cycle, step by step
- 1
Announce the calendar
Send dates for self-review, manager review, calibration, hike decisions and letters at least a month ahead. Name one owner for each date.
- 2
Collect self-reviews
Use a one-page form: three achievements, one thing that went badly, and the skills the person wants to grow. Short forms get read.
- 3
Collect project input
Ask each project manager for two or three lines per person on their project, written, with an example. Client comments can be pasted in if the client agreed.
- 4
Write manager ratings
The line manager proposes a rating and a short reason. Keep reasons factual.
- 5
Hold calibration
Leaders compare ratings across projects, adjust where the evidence is thin, and record the reason for each change.
- 6
Decide hikes and promotions
Finance and HR check the total against the approved budget. Agree the rules for hikes before names are discussed.
- 7
Hold individual conversations
Managers talk to each person before any letter is sent. Letters follow the conversation, never lead it.
- 8
Review the cycle
Within a month, ask managers and a sample of staff what worked and what to fix next time.
Link ratings to pay by a rule you can say aloud
The budget for hikes is a company decision. It depends on revenue, margins, client rate revisions and what the market pays for similar roles. Do not set a figure before you have looked at these. What you can set early is the rule: how rating, grade position and market position together shape the outcome for a person.
A simple grid helps. Rating runs across the top, position in the pay band runs down the side, and each cell holds a hike range the leaders agreed in advance. Managers then propose within a cell. Exceptions go to a named person, and each exception is recorded.
Employee, grade and project.
Rating and one-line reason.
Position in the pay band for the grade.
Proposed change, within the agreed range for that cell.
Reason if outside the range.
Approved by and date.
Date of manager conversation and date of letter.Hike communication that holds up
People forgive a small hike that was explained. They rarely forgive a large one that arrived with no context. Brief managers with a script covering four points: the rating, what drove it, what the new pay is, and what the person should do to grow next. Give managers a day to practise and a way to escalate questions.
Do not share other people's pay. Say how the structure works, and where the person sits in it. If the answer to 'why did my friend get more?' is 'a different grade and rating', the structure has to be written down so the answer is true.
Where cycles go wrong in services firms
- Bench staff are rated by someone who has not seen their work. Assign a reviewer before the cycle opens.
- People rotated across projects get one project's view only. Collect input from every project in the review period.
- Letters go out before manager conversations, and staff hear about their hike on the group chat.
- Ratings are changed in calibration with no recorded reason, and managers lose faith in the process.
The weeks after letters go out are when resignations tend to rise. Read attrition after appraisal season before you send letters, so you have a plan ready. The performance management process page sets out how GullyHR designs goal sheets, review forms and calibration. The software development companies hub covers the neighbouring topics for firms like yours.
