Special Report - Establishing A Valued Appraisal System

Performance appraisals can be an organization’s greatest leadership tool. So why are performance appraisals often “the job nobody wants”? Because of the way the appraisal process is designed and implemented. Organizations that establish their strategic objectives and values, design their appraisal system to specifically measure progress toward these objectives, and involve their employees in the process report substantial increases in productivity and morale, and outperform organizations without performance management systems in almost every measurable financial and productivity category.

Many of the organizations we work with have experienced dramatic changes in both the way people work and the actual outcomes of the work when they developed a different approach to their appraisal system. Their new system clearly outlines individual performance objectives, provides employees with feedback about areas of success and areas needing improvement, and recognizes employees for their contribution to the organization.

We are often asked to help organizations looking for a boost in productivity and morale. What we find are employees who frequently express the same concern...“It doesn’t matter how hard I work or how much value I add to the organization, I get the same recognition and reward as my co-workers who contribute substantially less.” In these organizations, performance management centers on unclear statements of business objectives, and feedback is reduced to uncomfortable discussions of personality traits. Even worse, rewards are seen as either whimsical, bearing no relation to performance, or as ironclad entitlements that follow cycles as predictable as the seasons. In either case, there is no motivation for employees to improve their performance.

Our Employee Opinion Survey Benchmark of the top twenty-five percent of the companies that we have surveyed clearly demonstrates that in organizations where managers provide employees with constructive feedback and timely performance appraisals, employees report better teamwork, higher morale, and an increased ability to accept and implement constructive feedback. Organizations with structured performance appraisal systems also boast of organizational growth beyond the projected measurements.

To capture these benefits, be sure that your performance appraisal system addresses the following ten key elements:

1. Align individual performance expectations with the organization’s vision and values

A successful performance appraisal system always starts with a clear definition of the organization’s vision, strategic objectives, goals, and values. Then, align performance expectations for each position with the organization’s strategic objectives by clearly defining what is expected for each position, and ensuring that each performance measure directly supports the organization’s strategic objectives and goals.

2. Measure key results and competencies

Key results define what is to be accomplished or the job’s end result, e.g., the number of parts to be manufactured or the amount of sales. Competencies reflect the organization’s values and describe what the organization feels is important in regard to how the work is to be accomplished, e.g., teamwork, initiative, communication. Measuring both key results and competencies is critical to an effective performance appraisal process.

3. Appraise clearly defined performance expectations

Employees must know exactly what they are to accomplish if they are truly expected to add value to the organization. Performance expectations should be objective and data-oriented, and should be designed to allow employees to count, rank, or rate their progress on a regular basis so that they can make adjustments as needed. Employees should be able to accurately evaluate their own performance and should not be “taken by surprise” at the annual performance appraisal meeting.

4. Work together to develop performance expectations

Employees who have a role in developing their own performance expectations are more likely to view the goals as achievable and to make a greater commitment to accomplishing the goals. Individuals who help develop their objectives have a greater understanding about the link between their job and the organization’s larger purpose. Employees who clearly see their role in the organization’s success are substantially more motivated.

5. Provide frequent and timely feedback

Measures alone will have little impact on performance if they are not translated into feedback or rewards. Feedback should be frequent and provided at regular intervals throughout the appraisal period. Feedback must be timely enough to allow employees an opportunity to make appropriate adjustments. A simple way to frustrate employees is to withhold feedback until the annual appraisal when it is too late for the employee to do anything to improve.

6. Conduct performance appraisals as scheduled

Managers and supervisors who conduct performance appraisals on time send a message loud and clear to their employees that says, “I care about you. Your performance and success is important to me and the organization.” By contrast, managers who delay performance evaluations also send a clear message that employees interpret as, “I expect you to meet your goals, but I’m not really interested in you or your success.” The appraisal should be representative of performance throughout the entire appraisal period not just the week before the appraisal meeting.

7. Encourage employees to conduct a self-appraisal

Organizations that promote self-appraisal as part of the annual appraisal process report increased productivity and greater rapport between supervisor and employees. Employees that participate in the appraisal are more familiar with their standards of performance, work harder to exceed the standards, and come to the appraisal meeting prepared to identify ways to improve rather than passively waiting for their supervisor to “pass judgment” on them.

8. Evaluate employee performance against established performance standards

Performance should be compared against standards of acceptable performance for the position, not to a co-worker’s on-the-job performance. A system that compares employees to each other, requires managers to rank order employees, or evaluates performance on a curve, is a sure way to undermine teamwork, communication, and morale.

9. Schedule training on the appraisal process

Successful implementation of the appraisal process is the responsibility of every employee. The organization’s responsibility is to provide adequate training for every employee to ensure that the program is implemented successfully at every level. In addition, it is important to provide managers and supervisors with training on coaching, providing constructive feedback, and effectively dealing with performance problems and difficult employees.

10. Demonstrate management commitment

A successful performance appraisal system starts at the top of the organization. Senior managers must be committed to the program. Commitment is best demonstrated by managers who work with their employees to define performance expectations, help them develop skills to meet the expectations, and conduct performance appraisals on time.

When managers and supervisors view performance appraisals as part of an ongoing process which can positively lead to improved employee performance, there are far-reaching benefits not only for the individual, but also for the organization as a whole. Managers with that perspective no longer view conducting performance appraisals as “the job nobody wants.” Instead, they recognize the valuable treasure of this leadership tool.