Effective Performance Appraisal

Category: Performance Management.

No matter what industry you are in, it’s important to set actionable objectives of appraisal that are tied to the organization’s larger goals. Performance appraisal shouldn’t be seen as an annual or bi-annual activity that’s solely done to evaluate the employee’s chances of promotion. The goals of performance appraisal should be broader, more consistent, and rooted in the key principles of talent management. Your performance management system should create a corporate culture that rewards outstanding performance and recognizes hard work.

Steve-Jobs-Quote

Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.

Steve Jobs

Defining performance appraisal

Performance appraisal can be defined as a systematic and continuous process of analyzing the performance of employees based on previously defined goals that are in sync with the objectives of the company. It is completed through a well-defined process of review that analyzes each employee’s professional and personal skill set against the desired strategic outcomes of the organization.

Reviewing the reviews

Before we get to the ideal appraisal structure and systems, it’s important to analyze where we stand today. As all-encompassing and noble as those objectives of performance appraisal sound, the process doesn’t get the expected involvement from the employees and not enough encouragement from the management. According to a particular study, 95% of human resources managers. are unhappy with their company’s performance appraisal methods.

Research has also revealed that familiarity between who does the appraisal and who gets assessed could skew the performance ratings. This ‘rater bias’ shows that raters tend to give high-performance ratings to individuals who are like them. This deeply questions and erodes the belief in the objective, meritocratic basis for performance appraisals and their eventual results.

No wonder then some analysts have called performance appraisals a relic and rite of a bygone era that’s struggling to find its relevance today. Some believe that it’s a vestige of the last century with little relevance today in their current form. Among employees, only 55% feel that they serve any purpose. Obviously, something needs to be changed. Should you decide to go ahead with annual reviews as a way of evaluating employee performance, consider these annual review tips to make it more meaningful and relevant to today’s work culture.

The new corporate reality

The traditional models of performance appraisal were designed and instituted in a different corporate world that had longer tenures of employees and relatively little scope for lateral movements. Gone are the days when people were expected to stay with the same company for decades. As of 2018, male employees spend, on average, 4.3 years with a company. For women, the average tenure is 4 years.

Less time invested with a company translates to lesser perceived outcome from performance appraisals. With no stigma associated with early exits, it’s natural that employees feel less engaged to participate in appraisals.

Performance review objectives were also primarily seen as the management’s annual review of the employees. In other words, this was the feedback that the firm was giving its staff. These would have demonstrable effects on the remuneration of the employees and their growth prospects. Those models served the industry well for decades but the new realities demand a deeper assessment of performance review objectives.

The digital dissonance

As we define appraisal objectives, it’s also important to understand the cultural shifts that have taken place over the last decade or so. Digitization has also led us to a world of instant feedback. Employees are also consumers who are used to giving and receiving immediate feedback, on everything from what they eat, to where they travel to, and where they work.

In such a digital world of immediate reviews, an annual appraisal may seem less effective, which creates a serious dissonance. Social media has fueled the urge for reviews that are not just instantaneous but also conversational in nature. Employees are seen to be inclined to have more regular but casual conversations about their performance rather than a formal, infrequent appraisal. Unfortunately, the system is programmed to do mostly annual reviews.

An objective appraisal

An effective performance appraisal is a function of its stated purpose and objectives. The managers and the employees will have to know the reason for the exercise. Is it a regular exercise to figure out whether an employee deserves an increase in salary, and if so, how much? Is it to understand whether the employee is suitable for a change in their role and be promoted? Is it to give pointed feedback on personality traits that could improve their performance? Or is it to give feedback on the need for re-skilling or up-skilling?

Once due consideration is given to the situation, the objectives can be aptly defined and applied. While doing so, it’s pertinent to ensure that they are in sync with the business objectives. To help you with that, here are 5 objectives of performance appraisal that organizations can implement for a result-oriented process.

5. Objectives of Performance Appraisal

Objectives of Performance Appraisal

1. Set goals

Goal setting is one of the key elements and universally accepted outcomes of performance appraisals. HR managers should also effectively communicate why those goals are important. The employees should understand why and how their goals are important to their growth and the growth of the organization. What’s important is transparency and clarity of communication. The employee should know precisely what the organization expects them to achieve within a given time.

A well-accepted system in goal setting is to follow the SMART method. Under this, the goals should be specific, measurable, achievable, relevant, and timely. This ensures transparency, accountability, and makes the objectives of performance appraisal quantifiable. Employees will know what they have to do in a given context that will be in sync with their objectives.

Goal setting should be done with employee engagement. Autonomy leads to empowerment when the employees know that it’s within their power to work towards those goals. For example, an employee may opt for an up-skilling course to aid them in their objectives. Wherever needed, it should be broken down into actionable items. That will make it easy for employees to align their daily actions with the long-term business objectives of the company.

2. Recognize performance

Nothing motivates performance more than recognition. Recognizing and rewarding high-performers should be an integral part of performance review objectives. The key part of this objective is a merit-based and transparent rating that inspires confidence among the employees. They should know what the parameters are for rewarding someone’s performance. The metrics should be carefully put together with objectivity and no room for personal bias. Recognition can be through an increase in compensation, a bonus, or through non-monetary methods like awards.

Research has revealed that up to 66% of all employees would leave their organization if they feel they are unrecognized. Among millennials, that figure is more than 75%. Appreciating employees for their performance will have a ripple effect on motivating others. It makes excellence relatable. When management conveys that a particular individual has been rewarded for their services, it makes it easier for others to emulate them.

3. Provide regular feedback

HR managers should strive to give periodic feedback that compares an employee’s performance against their goals. It has to be honest, realistic, and, most importantly, constructive. This means that the analysis should take into account the overall organizational context and the changes that may have taken place. Managers must give suggestions and actionable advice on how the employee can correct the course if the situation demands it.

One of the reasons people don’t look forward to performance appraisals is that it’s not rooted in the present but is seen as a reflection of the past. One of the objectives of performance appraisal has to be to give feedback that can lead to action. When the employees don’t know that their actions need to be changed, and are informed of it months later, the exercise becomes ineffective at best and punitive at worst. For the process to be relevant, it has to be regular. You can learn about the benefits of continuous performance management activities here.

4. Develop talent

As HR managers know, it’s easier – and cheaper – to retain talent than to hire them. Talent stays where it sees a path forward. Therefore, a key performance review objective should be to groom in-house talent for the future. Instead of a one-off broad event, talent development must be a periodic affair, tailored to the specific demands of the employees. That begins with identifying both top performers and those employees who can excel with some guidance.

Managers and supervisors should identify key personnel that, with the right kind of personalized development, can go from good to great. This needs to be deeper than a broad-based corporate training plan. In detailed consultation with the top performers, managers should develop a growth plan that the employees can identify with. When they realize that the firm is interested in their growth, they will feel secure and have fewer incentives to leave. Ultimately, talent development is organizational development.

5. Identify weak links

In a knowledge-based economy where rapid change and adaptability are the keys to success, a sustained weak link can spell doom. What may be limited to a specific team could overtime become a hindrance to business growth at a larger level. But identifying those weak performers should be with the intent of coaching and managing their talent to get the best out of them. For that to succeed, an honest review of their performance, backed by data, is necessary.

Managers should spend time with those individuals and take them through their performance and share their suggestions with them. Then, they should listen to the employees to hear their version. Maybe all it needs is a slight change in their work environment or up-skilling. The intent is not to be punitive but to give them honest feedback, a constructive remedial plan, and a timeline for demonstrable change.

Final Thoughts: An effective appraisal system

If those are the objectives of performance appraisal, what would an effective appraisal system look like? What would be its defining characteristics? For it to be effective, functional, and a growth driver for the company, HR managers and supervisors should keep the following points in mind.

  • The HR team should think and act like career coaches who are in sync with the strategic objectives of the firm
  • An effective appraisal system is based on a clear set of objectives. Without it, everything else is academic
  • There should be both pre-and post-appraisal communication to assess the change
  • The process should be transparent and merit-based
  • All metrics should be backed by data and without personal bias
  • High performers should be recognized with inspiring rewards
  • Training needs to be customized to individual needs
  • The system should facilitate mentorship with clear growth plans

Planning for the future is pointless if you don’t have an understanding of the past. As Tim Ferriss says, “I have found “past year reviews” more informed, valuable, and actionable than half-blindly looking forward with broad resolutions.” An effective performance appraisal system thoroughly analyzes the past, finds both strengths and weaknesses, works in the interest of both the organization and its employees, and importantly, institutionalizes growth. It will take some effort to put it in place but once it’s done, it will benefit everyone concerned.

Performance Appraisal and Profit.co

Profit.co’s performance management module allows HR administrators and managers to conduct customizable, detailed, and efficient performance reviews that work for both reviewers and reviewed employees.

Profit.co supports two types of performance reviews– standard reviews, and affinity-based reviews.

Standard Reviews

Standard reviews– also called conversation and feedback reviews– allow HR administrators to customize a group of open-ended questions answered by both managers and reviewed employees.

The digital format of this review allows both employees and managers ample time to consider their responses and provide detailed examples to support them. This review is typically followed by an in-person one-on-one review and makes for a more comprehensive and valuable employee performance appraisal.

Affinity-Based Reviews

Affinity-based reviews are reliant on competency rating scales to help quantify employee skills and attributes. Competencies are skills or attributes that employees are required to have in order to find professional success in their position.

This type of review is commonly used when conducting a 360-degree review that includes peer reviewers. Managers can derive both quantitative and qualitative information from this review, as well as hear the perspective of the reviewed employee and their peers.

With Profit.co’s performance management module, you can work to create a feedback-driven company culture that allows for continuous improvement and effective and efficient performance appraisals.

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