Performance appraisals: keeping track of the company’s internal potential

Performance appraisals: keeping track of the company’s internal potential

Systematic employees’ evaluation improves the efficiency of the entire business

Companies’ productivity, growth and business results strongly depend on the quality and performance of the workforce. These human capital variables are always closely monitored by the HR managers that support business leaders in the evaluation of the employees’ performance on a regular (usually, annual) basis. One of the most common forms of this kind of reviews is a performance appraisal.

Performance appraisal is defined as “a systematic evaluation of the individual with respect to his performance on the job and his potential for development. The overall objective of performance appraisal is to improve the efficiency of enterprise by attempting to mobilise the best possible efforts from individuals employed in it”. Appraisals can take form of traditional review sessions (sitting down with an employee and discussing the previous performance period), self-appraisals (the process of self-assessing own achievements, development, and failures), employee-initiated reviews (an on-demand appraisal that endorses an attitude of self-management among the staff), and 360-degree feedback (an appraisal process based on the feedback from the managers, external customers, the employee himself, and the peers).

In recent years, the unique value of annual appraisals has been sometimes put in doubt in favour of regular feedback sessions – nonetheless, performance appraisals remain crucial for the entire performance management cycle. According to the 2018 CEB (Corporate Executive Board) calculation, “a company employing over 10,000 people spends about $35 million a year on performance reviews”.

Performance appraisal benefits

As explained by Inc., “appraisals are important to help staff members improve their performance and as an avenue by which they can be rewarded or recognized for a job well done. In addition, they can serve a host of other functions, providing a launching point from which companies can shape responsibilities in accordance with business trends, clear lines of management-employee communication, and spur re-examinations of potentially hoary business practices”. Moreover, for senior management and HR executives, a performance review validates the effectiveness of the hiring process.

Regular evaluation is highly beneficial for the entire corporate culture: it raises awareness of the internal potential of the human capital. Streamlined performance appraisal strategies allow the HR department to combat high rates of employee turnover, scarce engagement, and absenteeism.

How to do it right: best tips

  • Get the employees’ input ahead of the appraisal

The best way to prepare the ground for the evaluation is to give an employee the set of topics to be discussed before the review. In this manner, the employee has a chance to go through the high and low points of the past year and explore the areas identified as “problematic” in his/her performance. Make the review session a two-way street: listen to the employee’s input during the appraisal, always give a chance to respond. It will leave you with a better understanding of the circumstances and the results from the employee’s standpoint.

  • Don’t fall under the spell of the “Halo Effect”

The so-called “halo effect” is a predominant influence of more recent events over the ones in the past. It can be positive or negative, and sometimes has serious impact on the judgement. Certainly, it is never fair, and may damage the entire evaluation process. A performance appraisal should always stay objective and refer to the entire period under the evaluation.

  • Mix positive and critically constructive feedback

Sometimes the information you need to deliver to the employee is quite unpleasant. But bear in view that even in cases of unsatisfactory performance, it is possible to keep the review focus on the improvements and possible growth instead of the bitter failures. Each worker has some strength and valuable competence that can be further developed. So, organise the performance appraisal around the encouragement, adding, if needed, solely constructive and fact-motivated criticism.

  • Thoroughly document performance appraisal sessions

 Review sessions should always be meticulously registered: no data can be lost or misinterpreted. Therefore, collect and document the information from the appraisal meetings in a standardized way across the company and store it in a centralized database to reinforce objectivity and transparency of the entire evaluation process.

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