How to Create an Effective Performance Appraisal Process

The benefits of creating an effective performance appraisal process

Creating an effective performance appraisal process has many potential benefits. By providing regular feedback on an employees performance you can increase employee’s performance, productivity and engagement, reduce risk and retain talent. Whilst there are different names and types of performance appraisals they all share the same goal. However, if you are to maximise your return, it is really important to ensure that the culture change aspects of the performance appraisal process are completed. This process can take a while as you try to create new management and cultural behavioural changes in your organisation. Thirty years of research by leadership guru Dr. John Kotter have proven that 70% of all major change efforts in organisations fail. Why do they fail? Because organisations often do not take the holistic approach required to see the change through.

The key is clear communication of expectations linked to consequences if the expectations are not met. Also, we need to remember that the performance appraisal cycle is an annual process that will likely take 2-3 years to embed well within your organisation.

5 steps you need to take to create an effective performance appraisal

If you want to create an effective performance review process or reinvigorate an existing one, follow these steps below:

1. Managers and staff need to understand WHY the performance review process is so important and how this aligns to the strategy

Objectives setting and performance appraisals should be about connecting people, processes, and business outcomes. However, too many people see appraisal as a ‘tick-box’ exercise of the employee’s performance or performance ratings to comply with once or twice a year rather than an ongoing enabler of engagement and business results. Managers can, therefore, have a direct impact on business outcomes depending on how engaged they are with the performance management process. A performance appraisal system without the buy-in and understanding of purpose from people managers will simply move the ‘tick-box’ activity online!

2. Set clear expectations around how people management activities drive the process

Do you have a clear annual calendar for people management activities with dates and quantities? In other words, could or have you set a SMART objective around performance management activities and expectations? What you want is to create new habits. This should include expectations around 1 to 1’s and development activities as well as conducting performance appraisals.

Annual reviews, employee performance reviews, or performance appraisals are conducted annually or twice a year, but they are not frequent enough to become a habit. But by having a frequent conversation, providing feedback and setting job objectives, you can keep your eye on the ball. An example of such an objective might be: ‘90% of my team need to have a minimum of 4 objectives agreed and documented by X date, and to have had at least 6 1 to 1’s over the course of the year.‘ Your own personal objectives could include ‘to have completed 90% of my team’s appraisal by X date.’

3. Consider tactical and aligned training

Training is most effective when it is timely, allowing people to put the skills they have learned directly into practice. Evidence shows that this is most likely to result in long-term retention of learning. This is where our expertise at Actus helps; we believe in wrapping behavioural skills around the appraisal system training and recommend a ‘just in time’ approach. At the start of the year, put in some support setting and reviewing objectives and then just before the performance appraisal, how to prepare for and have a good quality performance appraisal. By using a ‘just in time’ approach to training, you will get a much stronger skill transfer and of course, you are re-iterating (selling!) the behavioural expectations and consequences which is part of continuing the culture change and enabling a link to the company values

4. Review individual employee performance against expectations and enforce consequences

This is where most change efforts fail, for understandable reasons. If you look at Kotter’s 8 step model of change, communicating the change is only step 4, yet that is where most businesses stop. There are many natural responses to change: denial, resistance, and exploration. Communication on its own does not ensure that everybody changes. With the roll-out of a performance management process or new system, you need to assist employees and communicate the positive ‘Why’ as in point 1, follow this up with overcoming resistance and objections through training and providing clarity of what is expected, and then it is vital to continue to communicate the expectations and enforce consequences.

In the first year of a performance appraisal launch or new system roll-out, we recommend positive consequences shouted widely. E.g. Manager X has completed all of his appraisals ahead of the deadline or Department Y are the top performers in terms of performance appraisal completion. This helps to motivate employees and drive employee productivity, underpinned with a positive attitude, however, steer clear of naming and shaming in early years; a quiet tap on the shoulder, constructive feedback or escalation via their line manager is more effective for most managers. In later years this may change.

5. Embed it into business as usual

Keep going! This means you need to keep on communicating, embedding the monitoring of performance evaluations against expectations into quarterly reports, and following up on non-completion. Ensure key people have accountability for adding or training new starters and that is part of their job role. Ideally, incorporate the completion rates into a company balanced scorecard or graphic rating scale and aim to keep the visibility and buy-in on the radar of senior management rather than purely HR’s responsibility.

Next Steps

Simplifying your performance appraisal management processes

So hopefully now you have a clearer idea of how to create an effective performance review process within your organisation and the necessary steps to make sure performance appraisals work effectively. If you want to understand more about the specifics of creating a robust performance review process, then get in touch with a member of the Actus Team or visit our product page for more information.

Performance Management Software

Using paper-based employee performance appraisals offers a traditional approach to reviewing and setting performance goals alongside evaluating job performance. However, this method can be time-consuming and often lacks the comprehensive reporting needed to add real value. Poor quality conversations and evaluations can lead to disengagement, resulting in talent loss and high attrition rates. With significant time and money spent on recruitment rather than retention.

Online performance management software can streamline this process. Providing efficient, consistent, and insightful performance appraisals that help retain top talent. Fostering a more engaged workforce and ultimately job satisfaction.

Actus Performance Management Software

Actus Performance Management empowers both employees and managers to proactively schedule meaningful performance conversations exactly when they’re needed. Our Performance Management Software is designed by Chartered Psychologist Lucinda Carney. After years of experiencing first-hand the challenges of making Performance Management meaningful, she decided to set up Actus offering software that would overcome these challenges Supported by training and organisational development services to provide a comprehensive solution for culture change. Actus performance appraisal software adapts to your unique questions and processes, not the other way around. This flexibility ensures that your specific needs are met. For HR teams Actus can remove the administrative burden with real time reporting and performance evaluation analytics.