Importance of Performance Appraisal

  Reviewed by: Jayne Thompson, LLB, LLM
  Written by: Annie Sisk      Updated October 25, 2018

Are performance appraisals useless holdovers from a bygone era? Some commentators think so. But a well-structured performance appraisal benefits both the employee and the business in a number of ways. Get it right, and your performance appraisal can help manage and improve poor performance, reward solid employees for excellence and develop the careers of key employees. It can also improve engagement by offering an opportunity for employees to give feedback to the company.

Tips

  • Performance appraisals give you the opportunity to correct poor job performance, reward excellence, help employees advance their own career goals and give workers a chance to be heard.

Importance of a Performance Appraisal

While some experts and business managers have criticized performance appraisals in recent years, the need for performance appraisal in an organization is as strong as ever. When appraisals are conducted regularly with attention to best practices and the real purpose of the process, everyone benefits. Employees are better equipped to do their jobs; they feel supported by management and challenged by their work, enhancing their sense of engagement. This in turn leads to a higher retention rate and increased loyalty to the job and the company.

Managers benefit from a deeper level of engagement with their employees. A fairly conducted appraisal that flows from a sense of mutual support and positivity actually improves relationships between management and employees. As a result, the entire team or department enjoys a smoother work environment and greater productivity. Finally, the company itself benefits when employees are given a clearer set of expectations, as well as support in meeting those expectations. Productivity increases, which should also help improve the bottom line.

Employee and Job Performance Management

The most commonly cited objective of performance appraisals is to give the employee feedback on how well he is meeting expectations and benchmarks for the position in question. Appraisals are a prime opportunity to offer constructive criticism to employees on aspects of job performance that need improvement. To take advantage of this opportunity, the person conducting the interview should offer specific suggestions on how to improve, as well as ways in which management and the company itself can support the employee in meeting the goals set in the appraisal.

It’s equally important to use the appraisal process as a chance to acknowledge and praise the employee’s strengths and areas of excellence. Employees who consistently or overwhelmingly exceed benchmarks for their positions should be rewarded in some way for their extra efforts. The process should acknowledge positive efforts across the board in addition to pointing out problem areas. An employee appraisal process that focuses only on areas that need improvement will eventually trigger deep resentment on the part of workers, depriving the company of many of the benefits of the appraisal process.

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Employee Career Development

Most employees don’t plan to stay forever in their current positions. Instead, workers want to progress and take on more responsibility through promotions and career advancement. A well-structured employee appraisal process gives the employer a valuable opportunity to support those employees eager for greater challenges. In turn, this benefits the business itself, as it enhances employee loyalty and engagement. Use the appraisal process to identify the employee’s career goals and to plan for future career development opportunities, such as additional training, extension courses or new projects.

Opportunity to Provide Feedback

The importance of performance reviews isn’t limited to giving feedback to the employee. It’s also a unique opportunity for the company to allow the employee to offer feedback through the manager conducting the appraisal interview. Always leave time to ask the employee some open-ended questions designed to encourage her to share insights:

  • What do you think the strengths and weaknesses of the department/team/company are?
  • How is management not serving employees now, and what do you think we can do to turn that around?
  • Do you feel supported enough to speak up when you have an idea or problem? If not, how can we change that?

Questions such as these reassure employees that their insights truly are welcome. Listening to their responses helps them feel heard and valued, which in turn increases their level of engagement at work.

Tips for More Effective Performance Appraisals

To make the most of your company’s employee appraisal process, follow these tips:

  • Offer only specific feedback. Use detailed references to projects and specific tasks to offer concrete examples. This helps employees tie the comment or observation to a specific experience, which in turn helps them gauge the need for change.
  • Tie the appraisal to benchmarks for the position. The employee should have been given a copy of those benchmarks when hired or at some point soon after. This helps keep the appraisal process completely transparent and supports the employee in meeting the job requirements.
  • Start well before the interview. Don’t wait until the last minute to hastily note observations or prepare your appraisal form. Schedule reminders a few months before appraisals are due. Ideally you should be paying attention all year, jotting down thoughts and reminders about specific issues, projects and performance issues that occur throughout the year.
  • Don’t forget to follow up. Come up with a proposed action plan for the employees and follow up to ensure they’re meeting the goals. Also find ways the company can support the employee in meeting those goals. Don’t let the face-to-face meeting be the sum total of the interaction.

About the Author

Annie Sisk is a freelance writer who lives in upstate New York. She holds a B.A. in Speech from Catawba College and a J.D. from USC. She has written extensively for publications and websites in the business, management and legal fields.

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