Ask managers about employee appraisals and you’ll probably get a groan and complaints about how much time it takes to do them. Ask an employee and you’ll probably get the same groan and comments about how little value the process has. Historically annual reviews of employees have been used to provide both legal protection and some criteria for making salary decisions. Now there is a much more compelling reason to take time with your performance appraisal process AND to make it effective for both employees and managers.

A study by Hewitt Associates was able to show a direct relationship between good performance management and profitability. Participating companies ranged from very small (under ten employees) to very large (more than 100,000 employees). This study was able to document that companies with a performance management processes in place outperformed industry standards in a number of real financial terms, including ROE, ROI, Sales/Assets, Shareholder Return and Sales per Employee. Based on this information, you may want to review the quality of the employee performance management process in both your own and your client’s companies.

Performance management includes employee appraisals, but is also an ongoing process of providing information and problems solving throughout the year. Here are some keys to a good performance management/employee appraisal process:

1. Set expectations - be sure the employee and supervisor are clear on what is expected of the employee through discussions and specific job descriptions. Include goals set by the employee for their performance in the coming year. Be sure the goals and expectations for employees are connected to your company goals and objectives. In order to be effective, the goals must be measurable. Otherwise, the determination of whether goals are met or not will be subjective and of little value.
2. Coaching and feedback - provide ongoing feedback to employees throughout the year. Discuss how they are meeting expectations and work on problem areas on an ongoing basis. Be sure that the employees have the resources they need to accomplish the goals. These resources could be training, equipment, support from other departments, or staffing.
3. Reviewing and rewarding - measure the employee performance based on the specific goals and expectations. This is not about personality, but about actual performance. It is often helpful to have two separate review processes each year - one to determine and discuss compensation and another to set goals and solve problems.

The form you use in the appraisal is less important than the communication between the employee and the supervisor. If employees understand what they are expected to do and how their job impacts the success company, they will be more motivated and productive.

In every organization the potential for failure or success rests in the hands of the employees. Well managed, profitable companies use the performance management process as a way to keep employees motivated and the organization aligned to achieve a clear set of goals.

Noal Hebert
Tessera Strategies
1130 20th Street
Santa Monica, CA 90403

Phone: 310-804-2382
Fax: 310-829-4822

noalhebert@eaarthlink.net