People & Leadership

The benefits and pitfalls of performance appraisals

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So you think you need to appraise your employees? How do you do this effectively? What should you avoid? Here’s why you should carry out appraisals, the benefits and pitfalls and how to successfully set your goals.

Why do you need appraisals?

Appraisals are a two-way process looking back to analyse and celebrate past performance and looking forward to improve future performance. The overall objective of appraisals is to help employees maximise their job performance for the mutual benefit of both employee and company.

What are the benefits of an effective appraisal?

  • valuable feedback on an individual’s performance
  • the employee understanding exactly what is expected of him
  • recognition given for past efforts
  • identification of training and development needs
  • strengthening the relationship between employee and manager
  • problems identified and solutions found
  • understanding an employee’s plans and aspirations for the future
  • opportunity to recognise future potential.

What are the pitfalls to avoid?

  • There should never be any surprises as any poor performance should have been addressed when it happened.
  • Keep pay review discussions separate from an appraisal to avoid the focus being on pay rather than performance.
  • Criticism can be seen as negative and demotivating so should always be delivered constructively.
  • Be mindful of personal likes and dislikes to avoid colouring outcomes of appraisal interviews.

It is vital for the overall success of a company in achieving its goals and strategies to agree, align and track goals for each employee. An ideal time to set these goals is during the appraisal process.

Collaboration between employee and manager is an essential ingredient in the goal-setting process to ensure employees understand how their role fits into the “big picture”. Don’t make the mistake of setting too many goals as employees can easily lose track of what is important and tend to focus their attention on the goals that are easier to accomplish or they prefer to do rather than those with the highest priority for the business.

How to set your goals?

A frequently-used framework for writing both short-term and long-term goals is S-M-A-R-T. We prefer to use a slightly different framework – S-M-M-A-R-T. What does this stand for?

  • Specific: goals should be defined so employees know exactly what is expected of them and how the manager will measure their progress towards the completion of that goal.
  • Measurable: detail how progress is going to be tracked and measured.
  • Motivational: make sure the employee finds the goal motivating and understands what its achievement will mean to him, his colleagues and the company as a whole.
  • Attainable: stretching an individual is good but if it’s too difficult they very quickly become demotivated and there’s little benefit in making it too easy.
  • Relevant: explain how each goal fits into the overall company strategy.
  • Time-bound: detail a mutually agreed reasonable timescale for successful achievement of the goal.

Agreeing goals is just the start of the process. Follow up with regular meetings to measure and track progress and to provide support and direction where required.