Getting the Performance Appraisal Right

By: Tushar Bhatia
Date: April 19th, 2010
Posted in: Employee Appraisals, HR Best Practices, HR Technology, Human Resources, Performance Management | 39 Comments »

Most companies want to appraise their employees on a periodic basis and their Human Resources department is generally responsible to manage this process. I have often seen that the buy-in and participation from the Line managers is not as much as one would expect. Based on my meetings with a large number of HR managers, Line Managers & Senior Level Executives, I have come to realize that there is much more to a Performance Appraisal than what is truly understood by all stakeholders.

This article discusses how HR Managers can create a Performance Appraisal System that adds true value to the organization and becomes a useful and strategic employee development tool.

Define the Objectives

Do HR managers understand why organizations need to carry out the Performance Appraisal process? Some of the common reasons are:

1. Salary Increments: Commonly believed to be the only purpose from an employee’s perspective and typically the least important from the management’s perspective.
2. Goal achievements and related bonuses/commissions.
3. Promotions and transfers
4. Succession Planning
5. Identification of Top Performers and Non-performers
6. Identifying Competencies Gaps for Training Management
7. Confirmation of probationers

The objectives may differ for different levels of employees but together these help in defining the appraisal content, forms, ratings, weights & scales, employee evaluation parameters and the appropriate process for conducting the appraisal.

Understand the Process

Once objectives for the Performance Appraisal are identified, it is important to define the different steps in the appraisal process. The same process may not fit all situations.

For instance, Succession Planning, Promotions and Transfers will typically involve Heads of Departments and Senior level managers in the decision cycle whereas Salary Increments, Goal Achievements, Confirmation of probationers & competency gap analysis, may require participation of Line Managers and 2nd level managers.

In cases where only white-collar employees are being appraised, we may like to involve appraisees at the start of the process by including a self appraisal and an appraisal acceptance at the end of the process. In appraisals for blue-collared employees, the employees may be involved only at the end.

Similarly, in an hierarchical organization the work-flow and relationships will need to be defined well to begin with (especially for special cases such as heads of departments, General Managers etc.) and in a Matrix organization the focus may be on peer, senior and subordinate reviews.

Without getting the process right, it is very difficult to get required participation from the stakeholders.

Communicate-communicate and communicate

HR can play a vital role by communicating the objectives of the appraisal process to both employees and their managers. Structured and timely communication can help everyone appreciate the process and encourage transparency and objectivity. I have found that if HR communicates the process extensively, the level of participation and enthusiasm is higher and the process completes without delays.

The different ways in which communication can be carried out include:

1. Publish on the employee portal the start of the appraisals, the process details and key time-lines.
2. If yours is a large company, it may be a good idea to print some posters and display these at strategic locations.
3. Definitely include the performance appraisal process in the Employee Handbook.
4. Hold workshops for employees and managers: explain the process, answer queries, describe scenarios and mention benefits.
5. Develop an appraisal form that should communicate the process from each stakeholder’s perspective. The form should communicate the role of employee, manager, and any other people involved in the process.
6. Don’t hide any surprises. If you Normalize employee scores, include that in all communications such that employees and managers are aware that final scores may be changed.
7. If possible, involve senior management in talking about the importance of the process and its timely completion.

Timely completion is a must

Stated mathematically: Enthusiasm is inversely proportional to the time taken to complete the activity i.e if the appraisal process takes longer, the enthusiasm in it will wane. So, what are the ideal time-lines for an appraisal process?

In working with many companies I have found that each step in the appraisal process should take no longer than 4 – 5 business days. As an illustration, the different steps in the appraisal process and their time-lines may be :

STEP	PROPOSED TIME-LINES (business days)
Employee Completing their self-appraisal and submitting to their managers	2 days
Managers completing the appraisal process and submitting to Heads of Departments	5 to 10 days (depending on the team size)
Heads of Departments finalizing employee scores for their departments and releasing to HR	2 to 5 days
HR conducting Normalization (removal of departmental bias) across the organization , finalizing appraisal scores and submitting appraisals to managers	3 to 12 days (depends on the level of interaction required)
Managers discussing appraisals with employees and submitting for their final acceptance	2 to 5 days (depending on the team size)
Employees accepting their appraisal and signing off	1 day
Total Time Taken	15 to 35 days

To ensure that the time-lines are met, HR should constantly get a status check on the process and not hesitate to remind employees & managers when behind schedule. Don’t hesitate to involve senior managers if the process is way behind schedule.

Does access to archived appraisals help?

Managers expect behavioral changes in their employees based on past years appraisal discussions. In addition, employees and managers decide on an achievement plan for the next year which could include target achievement plan, development plan, mentoring plan etc.. Without access to these notes, recording achievements in the next years appraisal is not only difficult, but it makes the process less objective.

Add to this the challenge of changed employee-manager relationships over the year; each year’s appraisal becomes a new beginning instead of a continuation of the employee’s performance over many years.

How can the HR department help in this?

For one, HR should introduce a process of goal setting where employees and managers define the goals at the beginning of the year and submit to HR after finalization. Don’t worry if the goals are not SMART to begin with.

Secondly, HR should provide access to past appraisals and goal achievements of employees to the managers.

Of course, this can be a challenge if you are spread across many locations or have difficulty in managing thousands of electronic or paper based appraisals. We shall discuss this in the “Technology as an enabler” section ahead.

Integration with other data is important

In most organizations, appraisals are largely carried out on goal achievements and competencies or skills. Are these the only two areas on which managers should appraise employees? Would it be helpful to know details of many intangibles such as:

1. Number of rewards/ recognitions
2. Involvement in a disciplinary case,and violation of safety norms
3. Timeliness of employee (How many times was the employee late, how many times did the employee take leave without permission from the manager etc.)
4. Type & duration of training attended
5. Employee counseling records.
6. Participation in external events that got the company some recognition
7. Publications/ contributions to professional journals.
8. Opinions of other employees and seniors, especially for employees in leadership roles.
9. Length of service and other employee related data, especially past experience & qualifications
10. Employee achievements note with review by the manager & seniors.

Our experience, while working with many organizations, reveals that most managers remember the last few months of employees contributions (or the lack-of it) and rate employees on that bias. To avoid this, we strongly recommend that multiple data points are linked to the appraisal and are freely accessible to the manager to accurately rate an employee.

Technology as an enabler

The biggest challenge to implement an effective Performance Appraisal process is the large volume of data that has to be collected and managed on a daily basis. In addition, linking data from various sources, providing up-to-date status reports to the management, validation of completed appraisals, normalization of scores, and finalization of appraisals for increments, promotions etc. is a time consuming and laborious task.

Availability of on-line help, for example details of rating – that pops-up when the manager wants to rate a competency can help managers quickly complete the appraisal.

Recording on the employee’s Goal Sheet the periodic achievements & status of completion of each goal along with counseling notes of the manager is not possible without technology.

Technology can become a big savior and an Integrated HR product such as EmpXtrack can help in quickly meeting the objectives of the process with minimum transaction effort.

The ready-to-use Employee Appraisal module with multiple form templates, numerous work-flows, built in validation and automatic calculation of scores, reminders and escalation messages, on-line help and availability of instant status updates helps in putting the process on an auto-pilot and can save significant time for both HR and the line managers.

EmpXtrack is an integrated HR software that combines all aspects of an employee’s life cycle in an easy-to-use browser-based application. It integrates Goal Setting and Tracking, Appraisals, Training, Time, Leave and Attendance, Recruitment, Rewards and Recognitions or other employee related data. All these can be automatically captured or imported in EmpXtrack and can be linked to the Employee Appraisal module for an effective, transparent and objective evaluation.

Read more on ‘Employee Performance Management (EPM)’ in our white paper published on our web-site earlier.

To help design an Appraisal System for your organization or to enable an existing process on a web-based software you may Contact Us with details of your requirements.