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Creating an effective performance appraisal system

Part two of a two-part series.

The last installment of this column outlined the reasons why performance appraisal systems are disappointing for so many organizations. Many appraisal processes suffer from inflated expectations, undue complexity, poor timing, and the natural human tendency to avoid conversations too often seen as negative.

The column also identified two key factors in improving appraisal systems. Increasing the frequency of interaction makes the feedback more relevant and takes the pressure off that oft-dreaded annual or biannual review. And separating money conversations from feedback eliminates the probability that the “how much” question will overshadow everything else discussed.

More factors in a successful appraisal system

Everyone is looking for E=MC2 when it comes to performance appraisals – but there’s no perfect formula. Evaluating and motivating employees involves doing a lot of little things right, all the time, rather than creating the perfect form. What are the most important things to do right?

1. Train supervisors. Performance appraisals involve one of the most emotionally charged activities in the workplace: assessing a person’s contribution and ability. The outcome of these assessments can strongly impact an individual’s self-esteem and subsequent performance. Poorly delivered feedback demoralizes employees, damages workplace trust and increases turnover. Given such consequences, why do we often assume that supervisors and managers innately possess all the skills necessary to coach and mentor their employees?

Sharon Frankovich, a consultant with HR Works, says managers must be trained in the appraisal process itself – including the importance of giving specific, constructive feedback, and realizing the impact of providing inaccurate or zero feedback.

“Coach managers on how to give negative feedback,” Frankovich advises. “Many managers don’t know how to do this, and so they avoid it.”

In addition, recent court decisions reveal that, to successfully defend a performance appraisal program, employers must demonstrate that supervisors received written instructions and training on how to complete appraisals.

2. Focus on the future. Increasingly, organizations like the CPA firm of Heveron & Heveron are basing their appraisal systems primarily on performance previews rather than reviews. Together, the individual and manager discuss how the employee’s responsibilities might change in the coming year; decide what training and tools will help in achieving certain agreed-upon goals; and identify, if appropriate, an experienced mentor who will guide the employee’s on-the-job training.

President John Heveron says the firm began focusing on previews nearly 10 years ago and considers them one factor in the organization’s better-than-average record in attracting and retaining employees.
Focusing on previewing, however, does not mean ignoring the past. Objectives set during previous appraisals need to be revisited, as they are valuable measuring tools.

3. Empower and train employees to self-track and take responsibility for getting the feedback they need, rather than waiting for a supervisor to do it all. In many organizations, the employee is a passive observer to the appraisal process, contributing little to the interaction and waiting for the manager to pass judgment.

More companies now incorporate some form of self-appraisal into their performance management systems. Self-appraisal allows employees the freedom to articulate their interests and goals, and their opinions about their contributions, without being encumbered by their supervisors’ judgment or conclusions. Including self-appraisal fosters more direct interaction between supervisors and subordinates, making the performance management system a two-way process. When supervisors and employees agree on goals together, employees are more likely to accept them.

Innovative approaches in action

1. Goals for the appraisal process. Senior management must clarify the purpose of performance appraisals. Some savvy organizations use the process to replace best-effort cultures with results-driven cultures; to establish and reinforce core competencies; and to target poor performers for termination.

In his final letter to share owners, General Electric’s Jack Welch stressed that “the top 20 percent must be loved, nurtured and rewarded in the soul and wallet, because these are the ones who make magic happen.” He also urged that the bottom 10 percent be removed. An effective appraisal process, then, becomes a tool in identifying both groups and in supporting necessary action.

2. Bottom-up appraisals. At Heveron & Heveron, each employee rates his or her supervisor in areas such as how well the employee understands his or her responsibilities, receives the help necessary to succeed, enjoys active encouragement, and so on.

3. Continuous performance feedback. The best performance appraisal is the ongoing appraisal. At SAS, an international software company with 8,000 employees, formal appraisals have been scrapped in favor of continuous feedback, which removes the stress and awkwardness of annual reviews.

At SELCO Credit Union in Eugene, Ore., appraisals consist of regular, face-to-face conversations with employees, write Tim Coens and Mary Jenkins in their book, “Abolishing Performance Appraisals.” In addition, Coens and Jenkins report, SELCO has dropped its complex set of matrices to determine raises, and gives managers a pool of money for awarding bonuses and raises.

“We figure that we’ve saved at least $350,000 in time spent alone,” Bruce Mallory, SELCO vice president of financial services, is quoted as saying. “It doesn’t mean that we’re spending any less time with the people. But it’s time better spent. It’s managing people differently, rather than managing the paper flow.”

As organizations evolve, so must the process for delivering feedback. Best-practice performance appraisals are much less about judging a contribution than about finding ways to make that contribution as valuable as possible. While there’s no perfect template, it’s clear that increasing the frequency of feedback, training supervisors to offer effective appraisals, and involving employees are key elements in creating performance management systems that get results.

© HR Works, Inc.

HR Works, Inc., headquartered at 200 WillowBrook Office Park in Fairport (Rochester), New York, with an office in East Syracuse, is a human resource management outsourcing and consulting firm serving clients throughout the United States. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.