The Importance of Effective Performance Appraisals

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Published: 19th January 2011
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Organisations implementing effective performance appraisals enjoy many benefits; not the least of which is enhanced employee morale. Yet, time after time, organisations require help with staffing issues which are traceable to an ineffective performance appraisal process. Some managers do an excellent job of appraising employee performance. Others barely manage, and many simply never conduct performance appraisals.

"The irony is that our organisation has been doing formal appraisals for at least 30 years and we still struggle to do them right. It takes a clear purpose, a good system, and effective managers all operating together to get the job done." ‐‐ HR Director, Fortune 500 manufacturing organisation, as reported in Entrepreneur Magazine

Often, managers lack the confidence and top‐down direction to conduct performance appraisals in a meaningful way. However, performance appraisals are a necessary component of an organisation. Through the performance appraisal, the organisation can determine (and justify, if necessary) promotions, demotions, pay increases, terminations, job suitability, etc., as well as providing the basis for sound evaluation of training and recruitment needs. As well, the savvy organisation recognises the competitive edge that is to be gained through effective performance appraisals.

According to Entrepreneur Magazine, "In a recent study of high‐performance organisations, the practice of employing a value‐added performance appraisal process was cited as one of the top 10 vehicles for creating competitive advantage…an effective appraisal and review process created focus, a platform for measurement, a vehicle for employee improvement, and a means of linking key outcomes to performance."

Keys to an Effective Performance Appraisal

Three vital components define the effective performance appraisal:

1.Systems design

2.Managerial practices

3.Appraisal support

Systems Design

The most effective appraisal system defines why performance appraisals are being conducted, informs managers of their responsibilities and accountabilities, and communicates program goals to employees. Failure to lay this groundwork can compromise results. On the other hand, when employees and managers participate in the design of the appraisal performance system, this fosters a sense of ownership, boosts motivation, and enhances organisational goals.

Additionally, the evaluation system must be straightforward, ensuring that performance criteria, feedback and ratings have meaning for both the employer and employee; maintaining focus on important aspects of the employee’s job.

Managerial Practices

Effective appraisal systems go beyond the yearly performance review. Managers should provide employees with informal feedback throughout the performance review period, so that minor problems can be corrected before becoming major, and employees can remain motivated to perform productively. Employees often misinterpret a lack of managerial feedback as a sign of a supervisor’s disinterest.

To avoid this scenario, begin to think about performance appraisals, not in terms of how to "get it over with," but in terms of recognising how the performance appraisal process can jumpstart the effectiveness and efficiency of your team.

Appraisal Support

For managers to effectively implement performance appraisals, support from top management is crucial. Studies demonstrate that managers emulate their leaders. Leaders who fail to "practice what they preach" affect their organisations in untold ways.

Motivating Your Work Force

Much research has shown that employees are motivated by recognition, contrary to popular employer belief that employees are motivated only by pay. The ineffective performance appraisal has a negative impact on the organisation and the employee. Employees recognised for striving towards the goal of superior job performance are motivated to continue excelling.

If your current performance appraisal system is not adding value to your organisation, this may be an appropriate time to conduct an assessment to determine where improvements can be made to achieve higher performance.

© inemmo Limited 2010

Joy Maitland MIBC FCMI FinstLM is a director of inemmo Business Coaching and Consulting

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