When it's time to conduct performance appraisals, everyone begins to stress out. This is because most of the time, managers do not know how to provide constructive and motivating feedback.
Studies have shown that 65% of employees require regular feedback to feel motivated in their job to positively contribute to the company's success.
Conducting performance appraisals can be challenging. From setting clear goals to avoiding biases and maintaining fairness and consistency during the conversation, performance appraisals can test your leadership skills.
In this article, we discuss some of the best ways to facilitate a productive performance appraisal process that will help you to improve employee performance, and employee engagement, while also giving you five top tips on how you can handle the sometimes inevitable discussion of compensation that we often prefer to avoid.
Performance appraisals are one of the most beneficial things you can do as a manager to keep your company driving well towards success, but if done wrong, it can bring about unnecessary challenges and conflicts.
Read on to find out more!
What's in this post:
What is a performance appraisal?
First things first - What is a performance appraisal?
Performance appraisals can take place annually or quarterly, depending on how frequently a manager believes it is necessary to keep track of an employee's performance, and this is when the leader or manager sits down with an employee to track his or her progress within an organization.
A performance appraisal is also known as a performance review or employee evaluation that evaluates the skills of an employee, their achievements, how they have grown in the company, or what they have lacked and can improve on.
What is the purpose of a performance appraisal?
Performance appraisals are implemented to review an employee's job performance over a period of time. They are annual reviews that are conducted to help employees advance in their careers, improve their skills, and become overall better employees in terms of performance, productivity, and engagement.
These reviews highlight the areas of strengths and areas of improvement in each employee and allow managers to advise them on how they can achieve their objectives successfully. It is also an opportunity for managers to become better managers by asking for feedback about their performance as managers.
However, the two primary purposes of a performance appraisal are evaluative and developmental with the evaluative purpose informing employees on their performance standing, what they have done well, and what they are currently running behind on.
It gives managers an opportunity to have a better overview of what is going on behind the scenes of every employee's performance. Moreover, organizations often have a number of funds available to allocate towards incentives, like salary increases and bonuses. Performance appraisals play a role in deciding how these funds should be distributed through the evaluation process.
Performance appraisals also enable businesses to evaluate the contributions made by employees, towards the growth and success of the company thereby allowing them to appropriately reward their performing staff members. Additionally, performance appraisals provide an opportunity for managers to offer feedback and support growth both personally and professionally for their employees.
How can you facilitate a productive performance appraisal?
Facilitating a productive performance appraisal is easier than you may think. It does not have to be a stress-inducing or anxious time of year that results in conflict and tension between managers and employees. Instead, it should strengthen the relationship between managers and employees for better organizational performance, and in order for this to occur, it all boils down to the key steps that you as a manager take to turn a negative feedback experience into a positive one.
In contrast with traditional performance appraisals where the reviews are one-sided and often nerve-wracking, the modern performance appraisal approach is a two-way conversation that should foster a positive work culture, career development, and motivation to do better each time.
Also, keep in mind that performance appraisal systems and processes are there to allow you to provide valuable support to employees who are thriving as well as struggling.
So, how can you conduct one?
Create SMART goals that align with your company's objectives.
The best way to increase employee performance is to first develop goals that your employees look forward to achieving. The key to doing so is to set SMART goals. SMART as it Specific, Measurable, Achievable, Relevant, and Time-bound goals that will help you and your employees to get a clear overview of what has been going well, and what needs to be put into action.
Therefore, when co-creating SMART goals with your company's employees, (the keyword here is "co-creating"), remember to align them with the company's goals as well. Doing so will help employees stay in touch with what the company is working towards and help boost their performance to the organization's overall success.
Ask employees what they feel like they could improve on, and dive deeper into each point so that you can also get better insight into how you can support them. This also builds a strong sense of self-reflection in each employee. Once the goals are set, make sure that both you and the employee(s) agree that the objectives are realistic to achieve in the specific time frame, how they can track their progress, and if it is relevant to the tasks and projects your employees are currently working on.
This part of the performance review sets a stable groundwork for each session, allowing for a self-assessment of past performance and what comes next to better their future performance and career development.
Have regular check-ins
One of the reasons why performance appraisals can be challenging is due to the fact that they happen ever so rarely. As a result of the infrequency of performance appraisals, employees and managers tend to forget what they discussed in their previous appraisal process (usually a year ago), causing them to rely on memories, faint recounts, and emotions.
You can easily remove the stress and anxiety from performance reviews by having regular check-ins with your employees and taking each check-in as an opportunity to keep note of your employee's achievements.
Regular check-ins can happen weekly, or monthly. It can benefit you in keeping a closer and healthier relationship with your employees, getting more insights into what each employee achieved, or what they need further support in right when they need it rather than waiting a year before addressing any issues.
Another little tip for better performance appraisals? Give employees performance appraisals at the same time each year. By keeping this consistency, helps to establish a reliable routine that employees can rely on - allowing them to be better prepared for each session, have their achievements ready, and can even increase the chances of having meaningful conversations about their performance.
It also helps you to be better prepared for the process as well: measure employee performance close to the appraisal date and take useful notes for any performance feedback you want to deliver.
Collect data
Data is vital when it comes to performance appraisals. When discussing performance metrics, remember to take notes of KPIs achieved or lack thereof. This also gives you a good overview of work progress and a chance for you to pinpoint any areas that are lacking and ask employees what they can do better and how you can help support them to reach the desired KPIs.
For example, you can ask your employees how many calls they have completed, or how many articles have been written. Having numbers gives you a clearer overview of what was planned to be achieved and what was actually accomplished.
By collecting data for each individual performance, you and your employees can both look back on them during each performance appraisal and see how they have improved and perhaps identify the key spots that boosted their performance. More importantly, it can also help HR teams make better talent decisions in the future for new hires. The collected data can provide insight into who the top performers are, and what HR teams should be looking for in new candidates when hiring to improve their talent pool.
Identify Learning and Development (L&D) opportunities
As we know, knowledge is power, and with knowledge comes continuous learning. Not everyone can be good at everything, and everyone has room for improvement in one area or another. That is why professional development is important when it comes to expecting a positive outcome at work.
Statistics have revealed at 84% of employees in the best-performing organisations receive necessary training to improve on skills, compared to the 16% in the lower-performing organizations.
As you track and evaluate your employee's progress and outcomes, you can identify challenges. During the performance appraisal, the process of establishing SMART goals also helps to address any skill or knowledge gaps that can be bridged through training programs.
These training programs go hand-in-hand with action plans that are set during the initial stages of the performance evaluations, which shows employees your interest in helping them advance in their career and personal development.
Based on the strengths and weaknesses that have been identified throughout the performance appraisal, you can suggest training programs that cater exactly to what your employee needs to become more productive and successful in their tasks.
Training programs can be personalized to specific skills and areas of improvement of each employee and help them to receive personalized feedback that will propel them even further into peak employee performance.
On the other hand, throughout the different employee performance appraisals, you may identify areas in L&D that your company is lacking, and can therefore begin to implement them to better improve employee appraisals and employee productivity when there is more training available for better skill development.
According to the Harvard Business Review, a study conducted in 1988 (research was updated 20 years later and revealed similar results) found that work experience (job assignments, organizational relationships, and performance appraisals) accounts for approximately 70% of each employee's professional development learning relevant to career advancement, with approximately 15% each for formal training courses and life experiences outside of work.
Discuss challenges openly
"Continuous feedback is important in how we motivate and value contribution for our people. How else do we learn if we are not giving feedback on a regular basis?"- Jo Taylor, MD of Let's Talk Talent.
We definitely agree with that. Think about it - how are employees expected to improve if they are not aware of what they are doing wrong? Unless these performance issues are addressed right when they occur, feelings of resentment can develop if left unspoken for a long period of time.
With that being said, during performance appraisals, it can be difficult for employees to open up about any struggles they are currently facing at work. Therefore, it is important for you to set aside time during the performance appraisal period to openly discuss any issues that your employees are facing that are affecting their job performance.
During the appraisal process, be open, honest, and positive wherever it is possible. However, it is also important to avoid being overly positive. Make sure that any criticism and feedback are honest whilst offering optimism for positive change.
Listen
Listening to your employees is one of the most important parts when facilitating a productive employee performance appraisal, hence why it is listed as one single word.
During the assessment process, make sure to be as open as possible. Appreciate their good performance and dedicate time to listen to their ideas and opinions. This allows your employees to feel heard and feel as though their ideas matter. It will empower them to strengthen their thinking skills and feel more confident in speaking up in the workplace when given a safe and positive space to open up in.
While performance appraisals allow managers to inform employees where they performed well or poorly, you should also allow employees to share what they think they did well, not so well, and why.
Good managers provide feedback that is constructive and clear. Great managers on the other hand begin a performance appraisal by listening to their employees and utilizing this feedback opportunity to help them better algin their goals and values, discuss development needs, correct any misconceptions, or, even better, celebrate wins and outstanding performance, and give inspiration for the future.
5 Tips on how to approach the discussion of compensation
The discussion of compensation or salary increases is one that many managers can agree on - it is not pleasant. In fact, it can be so dreaded that some managers decide to dodge the topic altogether.
How can you tackle this conversation the best you can? We are here to give you the five best tips that will help you take on this discussion in a smooth-sailing manner.
- Being transparent about the company's budget
Transparency is important in any conversation that you have with your employees. This also applies strongly to salary increase discussions. If a salary increase is possible, but there is a business budget of 3% in hand, be sure to disclose that information in your one-on-one meeting with the employee.
Be open with them about why they may or may not get their desired increase at the moment, and make sure that you help them understand that you are doing the best you can as their manager. This will help your employees feel a sense of satisfaction since they know that they are getting the biggest pay raise that is possible.
- Offer bonuses instead of a salary increase
Offering regular bonus opportunities instead of a direct pay raise is one of the best strategic decision-making skills that can save your organization money in the long run. Bonuses should be based on performance, experience, and other considerations.
Regular bonuses can improve staff motivation as it is also a form of reward and recognition. Employees can feel more appreciated when receiving regular bonuses as a celebration for their outstanding performance, and it can also be an effective tool for rewarding workplace productivity and achievement.
For example, if you are currently unable to offer a pay raise, to a high-performing employee, you can offer overall compensation and benefits packages that include additional paid time off, a new workspace, or more remote working opportunities.
- Keep competitors in mind
In every business, it is never a bad idea to an eye on what your competitors are up to. In this case, it is being informed on what salaries they are offering to their employees, what percentage raise they are providing, and what their budget for an average salary increase is.
It can be that employees do their own research and see what other companies are offering and negotiate that number with you. This is why it is beneficial to do your own research beforehand and gather intelligence on these topics so it can help you compete for new hires and negotiate more effectively with your current employees.
- Establish clear and fair criteria
Establishing a guideline for determining a salary increase that is consistent for all employees can assist in eliminating the effect of personal biases that can get in the way, and guarantee that all members of your company's management who are in charge of determining pay increases use the same criteria to evaluate employees.
This also provides reassurance to employees that they are being treated fairly and effectively.
With that being said, it is best to avoid giving out ratings in relation to criteria because despite performance ratings being clear, it is not always a fair move as it can cause negative competition amongst employees. Instead, look towards their achievements, positive workplace behavior, and general job performance that has contributed to any success or growth in the company.
Additionally, during compensation negotiations with employees, explaining to them how the pay rise is determined can help them lessen the risk of perceived biased and protect your organization in the event of a potential disagreement.
- Be consistent with raises
Being consistent is just as important as being fair. When providing a higher raise to higher-paid employees, or letting your personal preferences towards certain employees influence your decision on who's performance assessment is better deserving of a raise can cause bad friction, conflict, and ongoing dissatisfaction among employees which can disrupt the organizational performance in the long run.
Therefore, be consistent when offering or rejecting a pay raise. Communicate it well, and provide open and honest explanations that also give employees a positive outlook on a future pay raise if a current one is not in the books. Even if an employee is performing poorly, remain consistent and fair with compensations by having a look at the employee's level of experience, and how long they have worked for the company.
Performance appraisals are not always an easy activity to have, but it doesn't have to be as strenuous as you may expect it to be. Retorio's AI Coaching platform understands the struggle of mundane tasks, which is why we implement AI-powered technology to streamline the task for you. When it comes to salary negotiation or employee training, Retorio's personalized training platform enables all your employees to take part in AI-powered simulations that train them to become their best selves and bridge skill gaps in no time.
What's more - Retorio also provides role-play training that allows managers to practice salary negotiation at their own pace, and in a psychologically safe space. Our training platform provides managers with all the necessary resources and scenarios needed to prepare them to have productive and positive discussions with employees with different responses and circumstances.
It is easy to access, accessible 24/7 anywhere in the world, and guarantees top results for you with personalized feedback along the way.
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