Creating Value through Performance Appraisal

Performance appraisal is one of the most difficult HR processes to be implemented in any organisation. On one hand, managers do not want to risk damaging relationships with the individuals they count on to get work done. While on the other, employees do not want to jeopardise their pay or advancement opportunities; some may even feel that managers are unskilled at discussing their performance and coaching them.

If so, why do we even have appraisals in the first place?

The onset of the industrial age in the last century sparked off an era of unprecedented growth and the emergence of large corporations. As companies became more complex and larger in size, the job role of a “manager” was created to ensure that the “whole is greater than the sum of parts”.

As we step into a globalised economy today, the challenge of creating synergies between people has become increasingly demanding as managers face a diverse workforce and a maddening pace of change.

One of the pre-requisites of creating synergy is to create shared purposes and values. With a diverse workforce with many inherent fault-lines (e.g. generational, racial, gender, etc.), our managers will need to demonstrate finesse in managing conflicts and people interactions to get employees fully engaged to wholeheartedly support organisational goals. Lacking which, managers, like everyone else, will find the easiest way out – management by numbers. “Hit your target, and you can stay. Miss your target, and pack your bags.” Regardless of how elaborate the performance appraisal form is, if the culture is focused only on numbers, only business results matter and the rest of the form is simply a waste of time.

Manager’s AttitudesManager’s BehavioursOutcome on Performance Appraisal
Considers conflict to be undesirable and inevitable. Statements made may include: “Conflict will always be around”, “Just let them be, they will sort it out themselves”, “Stop wasting your time on unproductive arguments”, “Only the results matter”Management by numbers only(1) Performance appraisal is considered a waste of time (2) Low priority and engagement with the performance appraisal process (3) Unreliable appraisals
Understands that some conflicts are undesirable, but some can be constructive. Statements made may include: “Can someone let me know what is happening here?”, “What you have mentioned is a personal attack, which is not helpful to our discussion. Can we focus on debating about the task instead?”, “This is interesting, tell me more”, “It is not only about what you achieve, but also about how you achieve it.”Management by walking around(1) Performance appraisal is considered a time of feedback and learning (2) Higher engagement in the performance appraisal process (3) Higher sense of fairness in terms of the performance appraisal outcome (4) More accepting of areas of development

Another aspect involves creating an environment that allows for synergies to happen. This is especially challenging in today’s times with the rapid pace of change and inhibited flow of information in and out of the organisation. This has led to higher employee turnover rates and emergence of a new class of workers, especially prevalent among the millennials. The “temporary full-time worker” and the “permanently part-time worker”.

The new workers
Temporary Full-TimePermanently Part-Time
Attitudes towards workPrefers short-term, high intensity, and challenging work tasksPrefers variety of work tasks
Attitudes towards employersA stepping stone towards greater heightsWork-life balance is important. At times, work is a lower priority than life. So, please do not demand too much.
Attitudes towards rewardsHigh rewards for demanding workPay me what is fair, I know there are sacrifices to be made for being a part-time worker.
Attitudes withinPrefers change and desires to be perceived highly as a capable person who learns fast and delivers results fastPrefers variety and work-life harmony. “What’s the use of earning a lot of money just to pay the doctors?”
Potential Trade-offs(1) Trades long term relationship building for short term outcomes – may not get buy-in from other organisational members. (2) Trades depth for greater exposure – may not become the “capable” person as perceived by self.(1) Trades the opportunity to fully develop one’s potential in a challenging environment for a more comfortably paced lifestyle.

In face of such workforce trends, no wonder there are people calling for the “organisation” to be a coordinator of out-sourced components, while some are calling for managers to completely do away with the whole concept of performance appraisal.

Yet, before any strategic (read, “drastic”) changes are to be made, are there any benefits to an effective performance management system?

Numerous studies have shown that effective performance management systems are able to:

  • Clarify performance expectations and standards
  •  Improve productivity at all organisational levels
  •  Motivate employees to do their best
  •  Ensure employees have the skills and capabilities to contribute maximally
  •  Align performance between units and levels with the organisation’s values, goals and strategy
  •  Provide a basis for making operational HR decisions (e.g. Pay)
  •  Improve relationships, understanding, and insight between employees and managers

How can managers reap the above benefits?

There are many roads that lead to Rome and we have an AAA performance appreciation model for your consideration:

A: Appreciate the value of contribution one makes to the organisation

Appreciate (measure) the areas of contribution by the employee towards team and/or organisational goals.

  1. Organisation must set clear and measurable objectives, and communicate these objectives to the whole company
  2. Through a series of dialogue, individuals must be able to relate to the set objectives and see how their actions either directly contribute to the goals or facilitates others to contribute to the goals
  3. Comprehensive measures and tools can be put in place to ensure data relating to one’s contribution can be effectively and efficiently collected and measured (e.g. customer service standards can be measured using on-site customer surveys, supervisor ratings, follow up customer feedback, mystery shoppers, amount of time spent by customer in the store, purchase size per customer…)
  4. Communication channels and feedback to be always available, so that actions may be consistently reviewed and adjusted in line with prior goals

A: Appreciate the value of the individual employee through development

Appreciate (raise or grow) the value an individual employee can make towards the organisational goals. Humans are not plug-and-play machines, and have potential far exceeding that of any machine. To fully exercise that potential, learning and development is critical.

  1. Clarify the knowledge, skills and abilities an individual employee needs to perform effectively at their job tasks (which is in line with organisational goals)
  2. Put in place development programmes that are relevant and engaging for the employees and ensure they can be development without any distractions (i.e. given time-off for training, someone else will cover the workload while the employee is on course, managers are supportive of training and will even check on the results of training…)
  3. Ensure measurements prior to the training and after the training to assess the development of the individual.
  4. Create opportunities and space for mistakes, for the employee to try new behaviours and influence others in a similar fashion

A: Appreciate the value contributed through fair rewards

Appreciate (show gratitude) the employee for the value contributed through fair rewards, distributed in a fair manner.

  1. Engage your employees to explain how they measure up against the set objectives
  2. Allow for discussion and employees input prior to any decision making
  3. Listen intently using clarifying questions such as, “when you say this, what do you mean?”
  4. Use statements to clarify your perspectives and position “I am saying that…” and “I am not saying that…”
  5. When both have reached a satisfactory conclusion, a time lag is given for both parties for further reflection and check back if needed
  6. Managers might need to go through a round of calibration (facilitated by HR/ CEO) among themselves to ensure that the employees are measured in a consistent manner across the different managers
  7. Final recommendations are made and given to the highest authority for decision making
  8. Decisions are communicated to the staff and communication (or redress) channels are open to ensure all employees are fairly treated.

An effective performance management system can improve productivity at all organisational levels, motivate employees to do their best and ensure employees have the skills and capabilities to contribute maximally.

Article written by Louis.

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