How Effective Performance Appraisals Can Increase Employee Performance

It’s little surprise that studies show top-performing companies are also companies that routinely conduct employee performance appraisals. A powerful tool in effective staff management, employee appraisal can transform performance at both individual and corporate levels when used correctly.

In order for the organisation to get the most from performance reviews, and also to optimise employee engagement, it’s essential that performance appraisals are conducted correctly.

Here we take a look at what a performance appraisal is, why it’s important, key errors to avoid when completing employee appraisals and why, sometimes, an employee appraisal isn’t the best performance review vehicle.

We also provide a performance appraisal template which can serve as a useful basis for conducting high-quality appraisals in your workplace.

What are employee performance appraisals?

At its most basic, a performance appraisal is an opportunity for employers to give feedback on an employee’s performance. This, at a minimum, should include consideration of strengths, as well as identify areas where improvement is needed.

It is also, importantly, a time for employees to give feedback on their own experience of the organisation: what they feel is going well, what needs improvement and what more could be done to support them in achieving both personal performance objectives and corporate goals.

The upshot of the appraisal process should be the production of a plan for positive change.

Incorporating SMART objectives and closely tied to corporate priorities, the plan should include information on: agreed additional training; future goals and expectations on the part of both the employee and the employer; a methodology and time-scales for evaluation, monitoring and review.

Performance appraisals are usually carried out by a manager (who is often not the employee’s direct manager) and a member of HR.

Why is a performance review important?

There are a number of reasons why performance reviews are a key part of many organisations’ HR policies. Among other things, performance reviews give the opportunity to:

– Recognise and reward good performance. Whatever form this takes, it’s always helpful for employees to have strong performance acknowledged.

– Poor performance can be raised, and an action plan agreed. There are all sorts of reasons why an employee’s performance may be below par. In some circumstances, the level of performance may be out of the hands of the employee (for example, a lack of resources, or problems elsewhere in the organisation).

The appraisal is an opportunity to examine ways in which performance can be improved, then agree on a plan for this to happen.

– Employees have an opportunity to air their views, as well as request changes they wish to see in order to help them do their job better. This may include requests for additional training, support or resources.

Empowering employees to do their job is a key part of any successful appraisal process.

– Appraisals provide an excellent opportunity to agree an employee’s training and development objectives for the next few months/the year.

These can then be fed into the departmental training plan, which should form part of a more strategic, corporate training policy.

– Identifying individuals who warrant a promotion. The appraisal tool provides a mechanism for obtaining feedback on employee performance from a number of different sources.

It provides greater objectivity and accountability in assessing performance than the subjective view of a line manager or supervisor can.

When it comes to identifying staff who are suitable for promotion, the appraisal ensures fair consideration of the merits of each staff member.

It can also be used to show transparency in the promotion process, providing a defence in the event that allegations of favouritism, nepotism or similar accusations are made by other employees.

– Appraisals are an opportunity to agree on performance-related pay in an objective, quantifiable manner. Achieving the objectives set out in the previous appraisal, for example, may form a key part of the criteria necessary to receive the performance-related pay award.

– Resolving grievances: in some circumstances, the performance review is a good chance to receive and act on negative employee feedback.

Mistakes in conducting appraisals that can hurt employee performance

There are several rookie errors that managers may inadvertently make when conducting an appraisal. Some of the most common are:

Only considering recent events

An employee’s performance may have improved (or declined) over the past month, but this isn’t necessarily a reflection of their overall performance.

Stereotyping employees

Despite increased awareness of the damage that stereotyping can do, it’s still a feature of many managers’ world view.

Preferential treatment

It’s human nature to like some employees more than others; favouritism, or partiality, has no place in the performance appraisal process.

Failure to appraise accurately

Particularly if a manager and/or HR representative is new to the employee appraisal process, they may not accurately identify areas of performance which need attention. There may be a tendency to judge employees over-harshly, or, conversely, with insufficient rigour.

Some managers will conduct ineffective appraisals, which classify performance as mediocre: this gives little guidance to the employee and minimises the positive organisational impact appraisal can have.

Failing to take a holistic perspective

There is always a danger of letting one quality an employee has (or doesn’t have) blind you to the totality of their performance.

For example, if you value organisational skills and you are appraising an employee who has them in buckets, the areas where they need to improve often remain unaddressed, as their organisational skills “carry” them through the appraisal process.

Comparing one employee against another

Each employee brings a different set of strengths and areas for improvement to the table. The aim of the appraisal is to provide a detailed, individualised plan that will enable each employee to achieve what’s required of them.

Are there any reasons not to have a performance appraisal process in place?

Although there are many benefits to the appraisal system, it can, in some cases, be damaging. In the main, if performance reviews are carried out correctly, the experience will be a positive one. Unfortunately, this isn’t always the case. Common criticisms of appraisals include:

Stressful for employees

Feeling that you are about to be judged on how well you do your job can be unpleasant for employees. Particularly if an increase in salary and/or promotion is riding on the results of the review, the stakes are high.

Concerns about the objectivity of the process, as well as concerns around negative outcomes over which an employee feels they have no control, can mean that appraisal becomes something to be dreaded, rather than embraced.

Resentment and disengagement

Nobody likes to be told to pull their socks up! There is a risk that an appraisal that identifies significant areas where improvement is needed can end up alienating an employee who desperately needs additional support.

Appraisals can be unfair

Managers are human and subject to unconscious bias in the same way as everyone else. If employees feel that someone else has received preferential treatment, it can lead to resentment in the workplace.

Legal action

Discrimination is illegal in the workplace. If an employee feels that their appraisal process was conducted unfairly, or with bias, this could form the basis of a legal case against the employer.

Time-consuming

Appraisals can easily take a day or two to organise, administer and write-up afterwards. For departmental heads, who may have to conduct appraisals on dozens of staff, this can add up to a significant amount of their workload.

Similarly, HR professionals end up spending a significant amount of time completing performance reviews in organisations that embrace them.

Your step-by-step guide to a successful appraisal

1. Develop clear objectives and expectations for the appraisal process. Be clear what you want to get out of the task.
2. Assess progress towards Key Performance Indicators.
3. Engage the employee in the process. This should include giving notice of the framework for appraisals, including times and dates, as well as the opportunity to complete a structured self-assessment.
4. Identify what you, as a manager, want the outcome of the appraisal to be. Whilst strong performance needs to be recognised and applauded, it’s also vital that areas of improvement are identified and addressed: leaving employees in ignorance of where they’re going wrong stunts their professional development. Use constructive criticism: deficiencies in performance are not deficiencies in the individual.
5. Determine the format the appraisal will take. The self-assessment feedback is often a good place to start, as employees may raise many of the issues you wish to discuss, without prompting.
6. Whatever the upshot of the appraisal, make sure that actions arising from it are documented and a review date agreed. To be meaningful, the appraisal record should be referred back to at subsequent appraisals (or more frequently if appropriate).

Ultimately…

While appraisals can be a valuable tool for employees and employers alike, this value is diminished if the right resources aren’t available to carry out the process correctly.

Depending on the workplace culture and the type of organisation under consideration, it may be that other ways of rewarding performance or addressing under-performance are more suitable.

Ultimately, performance appraisals are one tool in a suite of performance measures that managers can use.

Your comments and insights are welcome.

Please also check out our full list of managerial courses.

The Aptitude Team