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Employee Benefits
Why performance appraisals fail and 6 steps to fix them
September 9, 2021
It's that time of the year again. The manager started reflecting on her team’s' behaviours, actions, and performance to prepare for the performance appraisal discussion. She'd open her notebook and write notes to be discussed with her subordinates.
During the meetings, she praised or criticised specific behaviours and actions — including those that happened at the beginning of the year — that affected the employee's performance "points".
Now, imagine you're the employee hearing the manager telling you about the mistakes you made 10 months ago. How would that make you feel?
Probably, your first response would be, "Why didn't you tell me earlier? If I knew it back then, I could have corrected it at that time and increased my performance points!"
And that is one of the common problems of performance appraisal. The feedback often comes too late and has little impact on the employee's development. Worse, it destroys the manager-employee relationship.
If your company's managers do performance appraisals this way, you're not alone. In fact, nearly half of the employees said they receive feedback from their managers a few times a year or less.
As a result, performance appraisals actually made employees feel underappreciated, demotivated, and confused. In turn, this leads to low productivity and engagement — which is the opposite of what you want.
The question is, how do you make performance appraisals work — as a tool to motivate your employees and boost their performance?
This is what the article is all about. You'll learn:
- What is a performance appraisal?
- Why do performance appraisal programs fail?
- When should a performance appraisal take place?
- What are the types of performance appraisals?
- How to conduct a performance appraisal in the workplace (step-by-step guide)
What is a performance appraisal?
Performance appraisal, also known as a performance review or performance management, has three basic functions:
- To provide adequate feedback to each person's performance;
- To modify or change behaviours that are more efficient and effective; and
- To offer managers information on future job assignments and compensation so they may make informed judgments.
However, present methodologies for assessing performance do not effectively increase employee engagement and provide enough data for succession planning.
And that is due to a few reasons why appraisals fail in most corporations today.
Why do performance appraisal programs fail?
Reason 1: Appraisals are done annually or semi-annually
In most performance management, feedback is usually given only once or twice a year. It doesn't offer the chance for employees to improve themselves continuously.
As a result, feedback might not be accurate and it becomes too late to improve the employee's performance.
Luckily, “progressive HR leaders are realizing that they need continuous, real-time feedback and solutions,” as SHRM reported.
Reason 2: Performance reviews are conducted in formal meetings.
Typically, managers would open their notebooks and start writing comments about the employee when it’s about time for performance management.
In these formal meetings, employees feel as if they were being judged or assessed by their superiors, which doesn't make them feel comfortable enough to freely express themselves during the meeting.
In turn, this makes employees not want to participate in future review meetings. The truth is that 1 in 4 millennial workers called in sick to avoid performance reviews.
Reason 3: Managers are not trained to carry out performance reviews effectively
It's a given that all managers are required to do performance appraisals with their subordinates, but are they trained to coach and give feedback without pushing the employees away?
Chances are, the leadership "expects" the managers to know how to give feedback effectively and create safe conversations naturally.
Little did they know that this assumption spells the doom for performance reviews. In fact, managers who don't know how to articulate negative reviews could instigate nearly 30% of workers to look for another job.
When should a performance appraisal take place?
That said, companies shouldn't just throw performance reviews out the window. When done and managed right, the performance appraisal system can help improve employees' performance, engagement, and retention.
Now, you know that effective performance appraisal is necessary and shouldn't be carried out annually or semiannually.
So, when should you do a performance appraisal?
Let's look at Paycor for a moment. They renamed their performance review sessions as "CONNECT" sessions and they're done once every 12 weeks (3 months). The sessions are quick-hit reviews of what's been accomplished, what's next and how the person is developing.
Or Zety, a job search platform based in Warsaw, Poland. The co-founder recommended even more regular appraisals: monthly or bi-weekly.
Looking at how other companies did it, it's fair to say that the sweet spot for performance appraisal is between weekly to quarterly.
Types of appraisal processes
As 70% of companies are overhauling their performance appraisals, new types of appraisals are mushrooming up.
These new types have patched the gaps in the traditional appraisal system and presented a more holistic feedback approach.
Let's look at 3 emerging types of performance appraisal processes:
- Management by Objectives (MBO): A way to set clear goals (matched between organisation goals and employee objectives) for employees and managers who then discuss the progress made to achieve those goals. During MBO sessions, employees are judged on their performance and successful employees are rewarded.
- 360-Degree Feedback: A multidimensional method that evaluates an employee's performance by collecting feedback from various sources, thus eliminating bias.
- Behaviorally Anchored Rating Scales (BARS): A type of performance management scale that uses behaviour "statements" as a reference point for rankings. For example, Level 1 = often late, and Level 5 = always punctual.
How to do a performance appraisal (step-by-step)
While each company has their own succession planning strategy, it can be generalised under the 5-Step Succession Planning Framework.
Step 1: Establish employee performance standards
The performance standards are set to ensure that departments meet their targets and the organisation's overall strategy and objectives. Standards should be "SMART:" specific, measurable, attainable, relevant, and time-bound in order to be clearly understood and recognized as objective.
While a list of major responsibilities informs an employee what needs to be done, performance standards provide employees with precise expectations for each major task. Performance standards include both observable actions — the "how" — and the desired outcomes.
Step 2: Communicate performance standards
Performance standards must be effectively conveyed and understood in order to be effective. The underlying assumption for performance standards is that the employee is good at their job.
However not every employee is well-trained to achieve the standards. Thus, a series of training should also be offered to help employees reach the agreed standards (this should be communicated too).
Step 3: Measure performance
Performance that is expressed in numeric terms — for example, cost, quantity, quality, timeliness — is relatively easy to measure.
Performance in the area of soft skills — for example, communication, customer service and leadership — is more difficult to evaluate.
It's recommended to use a variety of sources of information including personal observation, oral reports and written reports.
Now, companies are less reliant on self-reporting and observations. Instead, they use the power of data to give them informed and accurate information about an employee's performance. For example, data software packages such as 7Geese, Bamboo HR, CRG emPerform, Officevibe and Saba Cloud all have tools to help managers provide feedback on a regular, year-round basis.
Step 4: Compare actual outcomes to standards
The manager compares the actual outcomes to the performance standards in this stage of the appraisal process. The documentation should include information on activities and outcomes. For example, "Karen advised the customer to do A when the correct method is B."
Step 5: Discuss with the employee
This is often the most challenging stage in the process for both managers and employees, as it can be difficult to handle emotions as well as expectations.
Even when performance is positive, there may be disputes about the next step. However, if the manager is well-trained and gives feedback regularly, this likely wouldn't happen.
On the other hand, if an employee's performance is consistently poor, the problem should be addressed — corrective action should be taken — as soon as possible rather than being postponed to an annual review.
Management may employ a self-evaluation prior to the appraisal meeting to identify and prepare for differences of opinion.
It's also critical to remember that the manager's capacity to remain calm and objective will have a significant impact on the employee's motivation, confidence, and future performance.
Step 6: Give rewards or advise corrective actions
The appraisal's conclusion is the discussion and/or implementation of any next steps: a reward of some sort — a raise, promotion, or coveted development opportunity — or corrective action — a performance plan or termination.
It's important to note that if you can help your employee improve, give feedback immediately. Do not wait until the next formal appraisal.
Managers should take the time to figure out why performance isn't living up to expectations and whether the employee can meet those standards with some more training or coaching.
Final words
Performance appraisal has been around for decades yet it’s not living up to the expectations. The conventional way is costly, time-consuming, and ineffective.
Thus, an overhaul is needed to create a positive employee experience.
MBO, 360-Degree Feedback, and BARS are some of the modern appraisal systems available today.
Pick one of the systems and follow the 6 steps above to create an appraisal process that works for you.
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