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Integrated Management
If you see performance appraisals as an annual chore to get out of the way, the chances are that your company isnt doing them properly, writes Ann Norton.

About 65 per cent of UK companies conduct performance appraisals for their staff, but the intended benefits of this exercise to individuals and their organisations arent always realised, according to a 2004 survey by the Chartered Institute of Personnel and Development. The research also found that, while many organisations believed that performance management motivated people, around a quarter of the respondents considered the process time-consuming and bureaucratic. Other reasons why performance appraisal systems often receive a bad press include a lack of commitment to them among senior managers and a lack of preparation among the line managers who conduct the process. Also, appraisals sometimes fail to result in action. For example, employees may identify a number of training needs but arent then sent on the requisite courses, which has a demotivating effect. So why should organisations bother investing in appraisals? To answer this its worth first exploring the purpose of appraisal and what the benefits could be for both employer and employee. In essence, its a tool that can help line managers to improve the efficiency and effectiveness of the organisation. It lets employees know how their performance compares with expectations and it can be used to identify areas where they require support to allow them to perform to the best of their ability. Although most performance appraisal systems are designed to be developmental, appraisal does have an evaluation aspect, so it forms part of an organisations control system. Inevitably, there are tensions between the developmental and judgmental aspects of appraisal, which tends to cause implementation difficulties. Problems can arise when appraisals are linked to rewards, for example, because the organisation is trying to achieve what could be seen as a number of conflicting aims. Employees will probably play down their weaknesses and be unwilling to admit to any problems if their next pay increase depends on the result of their appraisal. On the other hand, appraisals can be used to identify better-performing employees who should receive merit pay rises, bonuses and promotions, thereby providing a fairer process for reward decisions. In a busy workplace a performance appraisal provides an opportunity for useful one-to-one discussion. It may be the only time that an employee has exclusive and uninterrupted access to their line manager. It should be used to give individuals recognition for their efforts and signal that the organisation is genuinely interested in identifying their training and development needs. If done properly, this can have a positive effect on the recipients motivation and commitment to their organisation.
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Double entry: both parties should retain a record of what has been agreed.

Employers can use the information gleaned from appraisals in a number of ways. Apart from allowing them to assess individuals performance, it can help them to identify skills gaps, make promotion decisions and evaluate the effectiveness of their recruitment and induction processes. While there is no one recipe for introducing successful staff performance appraisal systems, there are some essential ingredients. The approach to conducting appraisals will depend to some extent on the nature of the enterprise and the people involved, but it should be consistent throughout the organisation. One of the main requirements is the need for visible commitment and support from the senior managers. It is vital that they believe in the value of the process and act as role-models for everyone else. The system should serve as a framework for measuring the performance of the business by assessing its employees achievements against jointly agreed targets. In this sense it must relate to the main goals of the organisation, which then need to be converted into clear targets that can be built into peoples day-to-day work. This is often the difficult part, but it should allow employees to know what standards are being used to evaluate their performance, providing the links between individual performance and overall organisational performance. The measurement system needs to be designed carefully, with well-defined performance standards that can accurately reflect an individuals level of achievement. Employees should be encouraged to help set their own performance goals as part of the process. This should make their objectives more acceptable than they would be if they were imposed unilaterally. The determination of appropriate measures should also minimise the

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Photograph: iStockphoto

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potential for subjective and biased appraisals based on stereotyping or the appraisers liking, or otherwise, for the appraisee. Although part of the appraisal should be about reviewing past performance, it should also be used to plan future improvements and make development plans. Where training needs are identified, its vital that they are acted upon if the system is to be seen as worthwhile. Line managers have a crucial role to play in performance appraisals. They need to: n ork with employees to translate organisational goals into W individual objectives. n ommunicate their expectations of individual performance. C n onitor employees progress against these expectations. M n rovide feedback on employees performance. P n iagnose individuals strengths and weaknesses. D n etermine development activities that could help employees D to build their skills and improve their performance. n eward good performance with praise and recognition. R Line managers require appropriate training to be able to fulfil such important responsibilities. A course should be designed to help them understand why the organisation has a staff performance appraisal system and appreciate how it fits into the wider strategic process. It should help them to develop the necessary interpersonal skills for example, coaching, counselling, providing constructive feedback, setting performance standards, assessing performance and holding appraisal interviews. Training should also be provided for appraisees to help them understand the purpose of the system and how to set targets. The appraisal interview itself is fundamental to the success of the system. Both parties must prepare thoroughly for this meeting if it is to be meaningful. All too often the appraisal interview is put to the bottom of the list of work priorities and

the appraiser turns up late to the meeting, ill-prepared for the discussion. This signals that the process is not being taken seriously, which in turn can demotivate the appraisee perhaps more so than having no system at all. An appraiser needs to show that they are knowledgable about the employees job and how they are performing in it. The interview should be a fair and honest two-way process. The appraiser should encourage the appraisee to talk freely about their performance and focus on their strengths as well as their weaknesses. Any negative feedback must be given in a constructive manner, since insensitive criticism tends to cause conflict, resentment and denial.

A performance appraisal meeting may be the only time that an employee has exclusive and uninterrupted access to their line manager
The frequency of meetings is also important. Appraisal should be considered not as an annual event but as an ongoing process. Frequent mini-appraisals will help to ensure that employees receive guidance and support when they need it. These reviews can also be used to clarify or revise objectives. The longer a problem is allowed to continue, the harder it is to take corrective action, but line managers often complain that they dont have time to provide the support needed and that performance appraisal is not given as high a priority as other tasks. Although managers are critical of the administrative burden of appraisals, it is important to have formal documentation and maintain accurate performance records. This helps to prevent either party from being selective in their memory of what has been said. Employees should be encouraged to keep records themselves, reinforcing the fact that the process is developmental. Organisations doing business in competitive environments cannot afford to employ unmotivated and uncommitted people. If staff performance appraisal is viewed simply as an annual form-filling admin exercise, it will serve little purpose. But an effective system should help to promote the development of employees and make them feel that they have contributed to the overall success of their organisation. The system can also lead to increased organisational productivity, performance and continuous improvement a win-win result. fm Ann Norton is principal lecturer in strategic management at Sheffield Hallam University.

P5 Recommended reading
D Harris, Integrated Management Learning System (2007 edition), CIMA Publishing, 2006. R Lynch, Corporate Strategy (third edition), Financial Times/Prentice Hall, 2002. H Maylor, Project Management (third edition), Financial Times/Prentice Hall, 2003. L Mullins, Management and Organisational Behaviour (sixth edition), Financial Times/Prentice Hall, 2002.

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financial management April 2007