Importance of Performance Appraisal
Businesses across the world are focussed on retaining their best talent and on identifying the employees with mediocre performance, to re-skill or up-skill, or in some cases, to show them the exit door.
The process of regularly reviewing employees’ job performance is the much dreaded and maligned performance appraisal process. Post an appraisal, the goal is to implement a solid up-skilling program to help employees learn and grow.
Peter Drucker once said, “you can’t manage what you can’t measure”.
A performance appraisal process, that is well executed lets you to
- Identify the best performing employees, so as to trigger compensation and promotion decisions
- Identify the ones not performing as per expectations in your organization. These employees will be your prime focus for identifying the learning needs in your company
- Measure employee performance and provide regular feedback
- Keep employees engaged and committed with respect to the organization’s vision and strategy
In this article, we will be focussing on the aspects which will guide you to implement a seamless performance appraisal process in your organization
- Pre-requisites to the Evaluation Process
- Approaches to Performance Evaluation
- How to ensure accurate evaluation
- Post appraisal review processes
Planning to initiate the evaluation process?
Here are prerequisites to starting the evaluation process
- Involve the employee from Day 0: It can not be stressed enough – Employee Involvement determines the success of any organization level initiative. Before an appraisal process starts, make sure
- The employees are aware of the assessment metrics or KPIs (Key Performance Indicators)
- The employees have confidence in the management, that the ratings will be fair and unbiased
- The employees are able to comprehend what the ratings mean, and how they might translate into immediate and long-term rewards (can be monetary or non-monetary) for them
Involving the employees from the beginning of the performance management process will result in higher involvement, which leads to greater satisfaction and higher commitment. Employees will also be more motivated to improve their performance.
- Define OKRs: Have clearly defined objectives and key results (OKRs) in place. The OKRs need to be specific, clearly defined and measurable. If you are new to OKRs, I recommend looking up our detailed guide to adapt OKRs in your organization.
- Have a Support mechanism in place for employees to accomplish their goals: While it is imperative that the organization needs to constantly keep track of employees’ deliverables and progress, it is equally important to empower your staff with appropriate tools and support. Managers need to act as a coach to their team members, and provide them with the requisite technical tools and training, and assist them to achieve the desired outcomes. The employees should also be encouraged to be in a continuous learning mode to be able to absorb all the guidance that is being provided by their managers. While the dynamics between a manager and an employee cannot be identified clearly from an organization perspective, it is the organization’s responsibility to create a culture of continuous learning. Though managers would be primarily accountable for their team members achieving their objectives, peer to peer learning, senior management approachability, and willingness to share knowledge are some of the values the organization should promote and reward.
Once the stage for evaluation is set, it’s time to decide on the Approaches to Performance Evaluation.
The mode of Performance evaluation chosen plays a significant role in the appraisal process. While the standard evaluation processes include questionnaires that the employees and their reporting Managers update, there are alternatives to the traditional methods of evaluation that you can explore.
- Periodic Reviews and Regular Feedback: Traditionally, performance management is implemented at a point-in-time event (Annually or bi-annually) which then recurs at the same frequency. Some challenges in this method are:
- It does not capture an incremental increase in employee skills or abilities, throughout the period (six months or a year)
- It becomes difficult to deal with cases where there has been a change of manager during the year. This affects the rating received by the employees for not fault of theirs
- Recency Bias – Unknowingly, managers provide greater importance to the recent events while achievements at the beginning of the cycle are ignored or given a lower weightage.
One way to overcome the above challenges, and to ensure a fair, holistic evaluation of employees, is to take regular and timely updates from them. Managers and employees can agree upon a predefined schedule to meet one-on-one every week or every fortnight, and discuss various aspects of work. Employees can open up on the job challenges as well as achievements while managers can provide regular feedback on their expectations versus how the employee is performing. Such recurring interactions must be documented, to refer to at a later point in time, when the formal appraisal happens. By having scheduled one on one with managers, employees can ensure that no important inputs are missed out during the formal evaluation and there are no surprises later.
Additionally, managers and employees communicating honestly on a regular basis, will lead to a healthier relationship between them over time.
2. 360-degree review: One of the most important aspects of Performance Evaluation, which is often ignored by companies is to take a 360 degree view or feedback for everyone. 360 degree review is a philosophy where apart from manager evaluation, peers, direct reports, co-workers, customers, and vendors provide feedback about the employees. This ensure a holistic evaluation of all the aspects of one’s work and doesn’t rely on the manager’s assessment.
While traditional appraisal can be used as a way to measure objective things such as attendance, sales quota achievement etc., a 360 degree review can be used to evaluate the softer aspects, i.e. the qualitative behavioral aspects of the employees.
Once this is set up, the next step is to ensure a fair and accurate evaluation process.
Ensuring accuracy in evaluation plays a key role in identifying the learning needs of your organization. Here are the most important points to note:
- Eliminate bias in evaluation:
“The confidence people have in their beliefs is not a measure of the quality of evidence but of the coherence of the story the mind has managed to construct” – Daniel Kahneman
Human beings, by nature, have biases and are prejudiced. This is relevant in case of Performance Evaluation as well. While it is natural for evaluators to incorporate bias, and prejudice unknowingly in the evaluation process, it is the responsibility of the organization to identify, educate, and eliminate as much bias as possible from the evaluation process, in order to ensure a fair appraisal.
Listed below, are some of the famous yet common biases that might need your attention.
- Appraisal Bias. This type of bias happens when the evaluation form is faultily designed. For instance, if you set up an evaluation form that emphasizes creativity and communication, then an employee in marketing will score very well but an employee in production will score poorly. The skills required vary depending on job roles, and hence it is important that you design appraisal forms, as per the role of employee in the organization. A high quality performance evaluation software like Qandle can help you in setting role specific goals for different employees with ease.
- Horn effect and Halo effect. This is a cognitive bias that managers might have when they allow one trait, either good (halo) or bad (horns), to overshadow other traits, behaviors, and actions of employees. This becomes especially prominent while evaluating someone’s competencies and behavioral aspects.
- Similar-to-me bias. As the term suggests, it is the tendency of a manager to give a higher rating to a team member who exhibits similar traits as them. For example, managers with a higher education degree might view subordinates with a similar higher education degrees more favorably than those without.
“Mind sees what it wants to see” – The Da Vinci Code (movie)
The best way to reduce bias (let’s face it, we are humans and we cannot eliminate all bias) in the evaluation process is to acknowledge its presence, and then educate all evaluators to be careful of not falling into the traps. Asking them to justify their rating with a comments/remarks section next to each rating question will surely nudge them to provide some reasoning of their evaluation and can help alleviate some of these biases. Including multiple reviewers and normalizing ratings across reviewers will additionally ensure a fairer evaluation of employees’ performances.
2. Use a Performance Management Software: A good performance management software includes both performance appraisal and employee development and it will come in as a handy tool for you to automate the entire process. Instead of having to go through multiple shared excel sheets, incorporating a software will help you to regularly record achievements, set up the different rules like timelines, evaluators selection, rating scale. It will also help in setting up a learning calendar, or set up a performance improvement plan (PIP) for the laggards.
Thus, laying solid foundations of a culture that rewards meritocracy, is transparent and employee-centric.
What’s next ? Post Appraisal process review :
It is important that the feedback on progress towards goals and actual job performance is shared with the employee. The feedback that the employee receives will direct them to increase their focus towards achieving their updated objectives.
No performance management process is complete without integration of Performance Improvement Plan(PIP) and Learning and Development Plans (L&D) with the appraisal process. By implementing a continuous cycle of performance appraisal, combined with PIP and L&D plans, your organization, HR and L&D teams
- will get visibility into the skills, knowledge and competency of employees
- can align resources and focus training on selected individuals, to optimize existing resources
- can link employe performance review feedback and learning content to close gaps
- plan for future L&D needs of employees
It is not easy to set up a culture of continuous learning and of fair evaluation, but the rewards are disproportionately higher, and with a little effort, proper guidance, and the requisite tools, it can be done without too much sweat as well.