Performance Appraisals: What’s In It For Your Business?

In our experience, there are a number of reasons businesses do performance appraisals:

• They know they should. Businesses understand the need to give regular and structured feedback to employees and use the performance appraisal process to do this. Feedback should be given to employees but we’d challenge the need for this to be done through an annual process; feedback on an on-going basis is far quicker and easier than trying to remember what happened a year ago as part of an annual performance appraisal.
• To link performance appraisal to salary reviews and bonus payments. The plus side of this approach is that there’s definitely less need to chase employees to engage with the process! The downside is that it becomes very difficult to get employees to present a balanced view of themselves (as they use the process as an opportunity to tell you how amazing they are and therefore what an enormous salary increase and bonus they should be receiving).
• An opportunity to identify the top performers and the poor performers. Again, we’d challenge this. Businesses invariably know who the stars are and equally they know who the under performers are.
• It’s about identifying training needs. Again, you already know who needs training and what training they need.

This all leads to the question, what’s the point of performance appraisals?

We encourage you to start thinking about performance appraisals in a different way.

Performance appraisals are time consuming. They take a lot of management and employee time, and we feel that they have to deliver real benefit to the business in order for this time investment to be justified.

Performance appraisals should deliver your business with a set of metrics that can be used to measure how effectively you are utilising the skills of your employees. Additionally, they should tell you how well your employees are contributing to the achievement of your business goals.

One of the ways in which performance appraisals can be flawed is that they look to assess employees against a set of criteria that are in no way linked to your business goals. This is the first element that needs to be addressed. You need to take a look at your organisation and consider the following:

1. What are my business goals?
2. How are these goals measured (KPIs)?
3. How does each role in my organisation contribute to the achievement of these goals?
4. What are the KPIs for each role? How will the person in the role know whether or not they are successful?

Then, your performance appraisal process needs to provide you with data that allows you to understand how your human capital is contributing to the achievement of your business goals.