5 Key Objectives of Effective Performance Appraisal

No matter what industry you are in, it’s important to set actionable objectives of appraisal that
are tied to the organization’s larger goals. Performance appraisal shouldn’t be seen as an annual
or bi-annual activity that’s solely done to evaluate the employee’s chances of promotion. The
goals of performance appraisal should be broader, more consistent, and rooted in the key
principles of talent management. Your performance management system should create a
corporate culture that rewards outstanding performance and recognizes hard work.

Be a yardstick of quality. Some people aren’t used to an environment where excellence is

expected.

Defining performance appraisal

Performance appraisal can be defined as a systematic and continuous process of analyzing the
performance of employees based on previously defined goals that are in sync with the objectives
of the company. It is completed through a well-defined process of review that analyzes each
employee’s professional and personal skill set against the desired strategic outcomes of the
organization.

Reviewing the reviews

Before we get to the ideal appraisal structure and systems, it’s important to analyze where we
stand today. As all-encompassing and noble as those objectives of performance appraisal sound,
the process doesn’t get the expected involvement from the employees and not enough
encouragement from the management. According to a particular study, 95% of human resources
managers. are unhappy with their company’s performance appraisal methods.

Research has also revealed that familiarity between who does the appraisal and who gets
assessed could skew the performance ratings. This ‘rater bias’ shows that raters tend to give
high-performance ratings to individuals who are like them. This deeply questions and erodes the
belief in the objective, meritocratic basis for performance appraisals and their eventual results.

No wonder then some analysts have called performance appraisals a relic and rite of a bygone
era that’s struggling to find its relevance today. Some believe that it’s a vestige of the last
century with little relevance today in their current form. Among employees, only 55% feel that
they serve any purpose. Obviously, something needs to be changed. Should you decide to go
ahead with annual reviews as a way of evaluating employee performance, consider these annual
review tips to make it more meaningful and relevant to today’s work culture.

The new corporate reality

The traditional models of performance appraisal were designed and instituted in a different
corporate world that had longer tenures of employees and relatively little scope for lateral
movements. Gone are the days when people were expected to stay with the same company for
decades. As of 2018, male employees spend, on average, 4.3 years with a company. For women,
the average tenure is 4 years.

Less time invested with a company translates to lesser perceived outcome from performance
appraisals. With no stigma associated with early exits, it’s natural that employees feel less
engaged to participate in appraisals.

Performance review objectives were also primarily seen as the management’s annual review of
the employees. In other words, this was the feedback that the firm was giving its staff. These
would have demonstrable effects on the remuneration of the employees and their growth
prospects. Those models served the industry well for decades but the new realities demand a
deeper assessment of performance review objectives.

The digital dissonance

As we define appraisal objectives, it’s also important to understand the cultural shifts that have
taken place over the last decade or so. Digitization has also led us to a world of instant feedback.
Employees are also consumers who are used to giving and receiving immediate feedback, on
everything from what they eat, to where they travel to, and where they work.

In such a digital world of immediate reviews, an annual appraisal may seem less effective, which
creates a serious dissonance. Social media has fueled the urge for reviews that are not just
instantaneous but also conversational in nature. Employees are seen to be inclined to have more
regular but casual conversations about their performance rather than a formal, infrequent
appraisal. Unfortunately, the system is programmed to do mostly annual reviews.

An objective appraisal

An effective performance appraisal is a function of its stated purpose and objectives. The
managers and the employees will have to know the reason for the exercise. Is it a regular
exercise to figure out whether an employee deserves an increase in salary, and if so, how much?
Is it to understand whether the employee is suitable for a change in their role and be promoted?
Is it to give pointed feedback on personality traits that could improve their performance? Or is it
to give feedback on the need for re-skilling or up-skilling?

Once due consideration is given to the situation, the objectives can be aptly defined and applied.
While doing so, it’s pertinent to ensure that they are in sync with the business objectives. To help
you with that, here are 5 objectives of performance appraisal that organizations can implement
for a result-oriented process.

5. Objectives of Performance Appraisal

1. Set goals
Goal setting is one of the key elements and universally accepted outcomes of performance
appraisals. HR managers should also effectively communicate why those goals are important.
The employees should understand why and how their goals are important to their growth and the
growth of the organization. What’s important is transparency and clarity of communication. The
employee should know precisely what the organization expects them to achieve within a given
time.

A well-accepted system in goal setting is to follow the SMART method. Under this, the goals
should be specific, measurable, achievable, relevant, and timely. This ensures transparency,
accountability, and makes the objectives of performance appraisal quantifiable. Employees will
know what they have to do in a given context that will be in sync with their objectives.

Goal setting should be done with employee engagement. Autonomy leads to empowerment when
the employees know that it’s within their power to work towards those goals. For example, an
employee may opt for an up-skilling course to aid them in their objectives. Wherever needed, it
should be broken down into actionable items. That will make it easy for employees to align their
daily actions with the long-term business objectives of the company.

2. Recognize performance

Nothing motivates performance more than recognition. Recognizing and rewarding high-
performers should be an integral part of performance review objectives. The key part of this
objective is a merit-based and transparent rating that inspires confidence among the employees.
They should know what the parameters are for rewarding someone’s performance. The metrics
should be carefully put together with objectivity and no room for personal bias. Recognition can
be through an increase in compensation, a bonus, or through non-monetary methods like awards.

Research has revealed that up to 66% of all employees would leave their organization if they feel
they are unrecognized. Among millennials, that figure is more than 75%. Appreciating
employees for their performance will have a ripple effect on motivating others. It makes
excellence relatable. When management conveys that a particular individual has been rewarded
for their services, it makes it easier for others to emulate them.

3. Provide regular feedback

HR managers should strive to give periodic feedback that compares an employee’s performance
against their goals. It has to be honest, realistic, and, most importantly, constructive. This means
that the analysis should take into account the overall organizational context and the changes that
may have taken place. Managers must give suggestions and actionable advice on how the
employee can correct the course if the situation demands it.

One of the reasons people don’t look forward to performance appraisals is that it’s not rooted in
the present but is seen as a reflection of the past. One of the objectives of performance appraisal
has to be to give feedback that can lead to action. When the employees don’t know that their
actions need to be changed, and are informed of it months later, the exercise becomes ineffective
at best and punitive at worst. For the process to be relevant, it has to be regular. You can learn
about the benefits of continuous performance management activities here.

4. Develop talent

As HR managers know, it’s easier – and cheaper – to retain talent than to hire them. Talent stays
where it sees a path forward. Therefore, a key performance review objective should be to groom
in-house talent for the future. Instead of a one-off broad event, talent development must be a
periodic affair, tailored to the specific demands of the employees. That begins with identifying
both top performers and those employees who can excel with some guidance.

Managers and supervisors should identify key personnel that, with the right kind of personalized
development, can go from good to great. This needs to be deeper than a broad-based corporate
training plan. In detailed consultation with the top performers, managers should develop a
growth plan that the employees can identify with. When they realize that the firm is interested in
their growth, they will feel secure and have fewer incentives to leave. Ultimately, talent
development is organizational development.

5. Identify weak links

In a knowledge-based economy where rapid change and adaptability are the keys to success, a
sustained weak link can spell doom. What may be limited to a specific team could overtime
become a hindrance to business growth at a larger level. But identifying those weak performers
should be with the intent of coaching and managing their talent to get the best out of them. For
that to succeed, an honest review of their performance, backed by data, is necessary.
Managers should spend time with those individuals and take them through their performance and
share their suggestions with them. Then, they should listen to the employees to hear their
version. Maybe all it needs is a slight change in their work environment or up-skilling. The intent
is not to be punitive but to give them honest feedback, a constructive remedial plan, and a
timeline for demonstrable change.

Final Thoughts: An effective appraisal system

If those are the objectives of performance appraisal, what would an effective appraisal system
look like? What would be its defining characteristics? For it to be effective, functional, and a
growth driver for the company, HR managers and supervisors should keep the following points
in mind.

The HR team should think and act like career coaches who are in sync with the strategic
objectives of the firm
An effective appraisal system is based on a clear set of objectives. Without it, everything else is
academic
There should be both pre-and post-appraisal communication to assess the change
The process should be transparent and merit-based
All metrics should be backed by data and without personal bias
High performers should be recognized with inspiring rewards
Training needs to be customized to individual needs
The system should facilitate mentorship with clear growth plans
Planning for the future is pointless if you don’t have an understanding of the past. As Tim Ferriss
says, “I have found “past year reviews” more informed, valuable, and actionable than half-
blindly looking forward with broad resolutions.” An effective performance appraisal system
thoroughly analyzes the past, finds both strengths and weaknesses, works in the interest of both
the organization and its employees, and importantly, institutionalizes growth. It will take some
effort to put it in place but once it’s done, it will benefit everyone concerned.