How to Manage Employee Reviews

In 2004, Associate Professor Alan Nankervis of the Royal Melbourne Institute of Technology looked into the practices of 992 organisations and found that the main method assessing of employee performance in Australia is via an appraisal. This research shows, unequivocally, that appraisals are pretty much the norm in Australia; they are the standard way that companies assess employee performance.

But is the fact that everyone else is doing it sufficient justification for your business to do it? No, definitely not, introducing and conducting appraisals must be more than just a process of following the crowd. If you are to get the maximise effect from doing appraisals you must understand the reasons behind doing appraisals and you must also execute them in the right way. In this article we will explain exactly how you can achieve this.

Appraisals Help to Set Clear Expectations For Performance

A key part of the appraisal process is to establish goals for each staff member over the coming year and to assess their performance against these goals over the previous year. This goal setting process is the best way for a manager to direct, steer, guide and prioritise the work of a staff member. It ensures that the employee knows what is expected of them, meaning they will perform better.

Higher Financial Returns if Appraisals Aligned With Corporate Goals

Research has shown that companies that conducted effective appraisals – e.g. if the appraisal process is properly aligned with company goals – deliver on average 20%-38% higher return on equity than those without alignment. In short, if you conduct appraisals and do them properly, the overall performance of your business will be better.

So, how do you ensure your appraisals are aligned with corporate goals? This is easier than it sounds. The first step is to develop some high level corporate goals. These might be items such as: revenue, profitability, output, quality, customer satisfaction etc….

These high level goals should then be cascaded down right down the management level to every employee in the organisation. Each employee must be given goals which are linked to corporate goals. For example, a sales person, may receive, revenue and profitability targets and a production employee may receive productivity or quality targets. These corporately aligned goals should be included in the employee’s performance appraisal and the employee should be assessed against these goals regularly.

Build Your Work Culture

Appraisals typically include a section where an employee performance is assessed against 10 or so performance dimensions, which have been designed to reflect your work culture, such as communication skills, financial awareness, customer satisfaction, teamwork, and so on. Employees are assessed against these dimensions and encouraged to exhibit behaviours that reflect your culture and core values.

Target Areas for Development to Ensure Continuous Improvement

Appraisals usually contain a section called ‘areas for development’, where both employee and manage identify areas of weakness in terms of their performance. Working in tandem with the company the employee can set out to develop the required new skills and improve their all round performance. This will ensure that there is a process of continuous improvement in the company.

Career Development

Most appraisals include a career development planning discussion, where the employee sets out career goals for the next 3-5 years. This means that the employer can help the employee to develop the right skills so they can progress in their career. Without formal career development planning, employees can stagnate, become disengaged and then leave your business. So, if you want to retain top talent, then you should conduct performance appraisals, ensuring they include a career development planning element.
So in summary, appraisals, if implemented correctly, can help your company to direct, motivate, develop and retain staff while at the same time increasing overall company performance.