Why Employee Performance Appraisals Are Critical For All Businesses

Performance Appraisal ImageEffective performance appraisals are a two way feedback system between the employer and the employee. This can lead to high performance, increased productivity and therefore significant increases in business profit.

Where an employee’s performance does not improve, the performance appraisal process can also be utilised as evidence in any subsequent defence to an unfair dismissal claim.
Would your company like to achieve a higher rate of productivity from the employee, ensure retention of that employee, or start the underperforming conversation? Then your company needs to start conducting regular performance appraisals on the employees?

A good or well-designed performance management or appraisal system should help clarify the businesses key goals and its core values or intentions. This may include several important high-levels targets that individuals and teams should be concerned about, as well as ideals such as quality, customer service, positive interpersonal communication among staff, contributions to profitability or ethical behaviour. If these expectations are clearly stated and effectively communicated through a powerful performance management system they can be very helpful in guiding an individual employee in the course of his or her daily work and help to align the whole enterprise.

Despite the positive benefits of a performance management system in theory, this does not mean that everyone likes or appreciates the process in practice. It is therefore worth taking a little time to look at why both employees and managers so often dislike many performance or appraisal systems.

Why Employees Dislike Performance Measurement or Appraisal Systems

For employees receiving performance appraisals, feelings of distrust and trepidation are easy to understand: they’re being judged, after all. Employees know well in advance when judgment will be pronounced, but often have a much vaguer idea of what standards they’re being judged by and how their manager, thinks they measure up to them.

From a practical standpoint, many things hang in the balance: salary, promotions and perhaps the specific responsibilities that will be expected of them in the future. The performance appraisal is therefore one of the most emotionally charged procedures in management. People have very strong feelings about how they are being evaluated.

 Employees can feel vulnerable at this point. If their work hasn’t been satisfactory (even a little bit), now is when the boom will fall. If they’re personally pleased with what they’ve accomplished during the appraisal period, they may know from experience that their idea of good performance may be completely at odds with their manager’s and they may be due for a rude awakening. Who knows what insidious little checkmarks are being made on forms that will go into their permanent records, informing any future manager that they “lack initiative” and “have difficulty facing the facts” about themselves. Employees may try to dispute the assessment, but they know their word carries much less weight than their boss’ supposedly expert opinion. The process may seem completely irrational to them but they don’t have much to say about it.”

No wonder employees who are comfortable in their jobs most of the year can feel like victims of authority, whether in the form of an arbitrary manager or due to the abstract expectations of the organization, as performance appraisal time approaches. In this sense, the appraisal process has a lot of obstacles to overcome before it can be trusted to deliver any of the benefits that it promises.

Unfortunately this “dislike” or perhaps natural “distrust” is a very real issue to manage even in the most empowering and culturally positive enterprises. As such, any organization that chooses to ignore this factor does so at its peril.

Why Managers Dislike the Performance Measurement or Appraisal System

Ironically, the manager, who is beginning to loom so large in the employees’ consciousness as the “day of reckoning” nears, usually feels no better about the performance appraisal. Managers can often list even more reasons for their lack of enthusiasm for the appraisal process. Most of us don’t like to sit in judgment of other people. It’s that much worse if by doing so you risk offending someone whose continuing enthusiastic cooperation is a necessity for your own success.

A manager’s individual team member performance is partly their responsibility and partly yours; but in most performance appraisal programs the appraisal – its fairness, accuracy and effect on future productivity and employee morale – are entirely the responsibility of the employee’s immediate supervisor.

  • What if what you believe is an accurate appraisal leads to an Equal Employment Opportunity complaint?
  • Can you be sure of avoiding that, even if you believe you are doing everything right?
  • How can you really be fair and objective anyway, when the tasks the employee performs are so hard to measure and when it’s so difficult to separate one employee’s contribution from the overall team effort?

So much seems to fall on the shoulders of the manager doing the performance appraisal; it’s no wonder that many managers do not relish the task.

In addition to all these reasons for lack of managerial enthusiasm there is another factor that the employee is probably unaware of, but of which the manager is very conscious: in most cases managers are not in a position to choose the system that’s going to be used in the performance appraisal. In most cases managers have had little or no input into the development of either the form or the procedures. In large organizations this is understandable and often inevitable. After all, one of the purposes of the performance appraisal is to provide comparable data across all employees in a given role; in the interests of fairness the standards used to measure each employee should be the same – and chances are they would not be the same if each manager had the option of using their own appraisal system.

In some organizations the performance appraisal is the linchpin for an company’s human resource programs, including salary administration, human resource planning and determining possible career paths. Of all human resource programs the performance appraisal may even be the only formal mechanism for communicating to employees what their job is. And increasingly, the performance appraisal is used as legal documentation for validating promotion decisions.

Finally, some managers ask if the performance appraisal is so important, why they aren’t given more support in conducting them. According to many surveys conducted in recent years, only 25% of managers who do performance appraisals receive support or training for it. When there is training, it often goes little further than to explain how to use the form, administrative procedures and deadlines for submitting and getting the forms counter-signed or approved.

There’s an inevitable temptation for managers to ignore making the performance appraisal work in reality, since the organization seems satisfied with what works only on paper. Why not “glide” through it, fill the forms out with a minimal effort and talk about it with the employee in the easiest way. Surveys show that in some companies employees are not even aware of the existence of formal performance appraisal programs – they are often therefore surprised to learn that the once a year informal chat with the boss had anything to do with a formal review of their performance. The managers administering those programs are just going through the motions. But managers who do this are selling themselves short of course, because the performance appraisal can be a powerful management tool and of all the parties involved the managers are the ones it can benefit the most.

So, how do we make the appraisal process a “win-win” for all?

Performance management should ideally be a process in which the person being appraised, their peers and other colleagues and their direct supervisor, of course, will work together in a partnership to offer regular ongoing feedback (in many ways, at multi levels and in all directions). The aim is not to give explicit instructions or criticism but to empower the individual so that he or she can learn and develop his/her abilities to respond to the changing challenges of their current job and experience growth and development for other jobs in the enterprise that he/she may be able to perform in the future (laterally or higher up in the structure).

The Performance management system should therefore be regarded as the prime vehicle for carrying out the identification and evaluation of what individuals actually do and what they are supposed to do in an organization (and then guiding the development effort that may then be necessary to close any gaps that emerge). This process requires a structured and systematic program with well-defined objectives, guidelines and procedures that are well-known and accepted by its participants at every level. In other words it should be structured so that it is a well-balanced partnership process between the manager and the employee in particular so that both genuinely feel that they can create a “win-win” relationship.

Effective and realistic performance appraisal is vital to employees for morale, their sense of belonging and their commitment to an organization. Material reward, identification of strengths and weaknesses and assessment of career opportunities and direction are also extremely important outcomes of a well-designed appraisal system. An effective performance management system can therefore significantly develop individual capability and motivation and so improve organizational capability, responsiveness to change and bottom line productivity. It also helps people to learn on the job by identifying and working on areas of their development which are holding their performance back or could be developed even further.

Performance management (when considered as an ongoing year-long process of setting goals and objectives and giving on-going coaching and feedback) can also be an important vehicle for the individual manager’s success. The performance appraisal is the annual codification of this ongoing process. It can be the means by which managers hold the reins of their department in their hands, monitor progress so that when something goes wrong you know and can make mid-course changes while they’re relatively easy to make, build and sustain good relationships with employees and encourage team development among individuals. Managers who know how to make the best use out of the performance appraisal system will therefore be the more effective managers.

Effective performance management and appraisal means more than assessing an employee’s performance at regular intervals. It unites a number of related tasks: monitoring, coaching, giving feedback, gathering information and assessing an employee’s work. It accomplishes those tasks in the context of objectives – the immediate objectives of the department and the overall goals of the organization. And it carries them out systematically, throughout the year.

For different organizations the actual means may differ, but regardless of the procedures used to implement it, the basic strategy is the same and the benefits are the same. A well setup “win-win” designed performance management approach makes better use of the appraisal because it uses the information and the manager/employee interaction to support definite goals; it also makes for a fairer and more accurate performance appraisal, because defining the aims of the organization and the department clearly helps form better more job-related and competency-based criteria for the assessment of what should be done differently in the future.

Nicole Allen is the Managing Director of Moreton Bay HR Solutions. In 1996, Nicole Allen commenced a successful career in operational and strategic human resources, recruitment, management & communications field. She has held significant positions as Group HR Manager within the Oil and Gas, Mining and Resourcing and Heavy Manufacturing businesses. With more than 18 years experience in the Human Resources Management and communications field, she brings a diverse HR and communications knowledge from the Mining and Resources, Uranium, Oil & Gas, Defence, Heavy Manufacturing, Construction, Trades, Information Technology, Utilities, Finance and small business sectors.

Nicole holds a Bachelor in Management majoring in Public Relations and a Advanced Diploma in Human Resources. Nicole lives on the gorgeous Redcliffe Peninsula, Brisbane with her husband and two energetic boys.

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