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Appraising the performance appraisal

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Performance evaluations have been a significant element of measuring progress of employees in most organisations. But are they as credible now as they were in the past?

Akankasha Dewan speaks to HR leaders to discuss how appraisals have evolved and what can be done to improve their effectiveness.

Every workplace has its idiosyncratic seasonal events, and HR is perhaps most visible during the annual performance appraisal. Why? Not merely because performance appraisals are simply paramount to the effectiveness of organisations, but mainly because performance appraisals are one of the most frequently criticised talent management practices today.

The impossibility of doing away with performance evaluations

A comprehensive performance appraisal involves gathering information about how well individuals perform their jobs, what their skills and knowledge are and their responsibilities and performance goals for the future.

Needless to say, such types of data are fundamental to the effective management of the talent of any organisation.

According to a 2009 study by the Chartered Institute of Personnel and Development, 87% of employers use some form of individual annual appraisals, 27% do them twice a year and 10% more often than that. Some use them when projects come to an end.

“Employee appraisals or performance evaluations are important as they provide a structured process which can be part of an annual process to discuss employees’ strengths and development,” says Eunice Kong, regional human resources director for Southeast Asia, Australia and New Zealand, at Evonik.

For Tricia Duran, HR director, Unilever Asia, the value of performance evaluations also lies in their ability to achieve business targets and boost growth for companies.

These conversations ensure that employees grow from strength to strength, and if done well, remain energised and fulfilled.
- Tricia Duran, HR director, Unilever Asia

“Unilever has a vision to double our business while halving our environmental impact and increasing our social impact. As such, we need purpose-driven leaders across all levels of our organisation,” she says.

“This will require us not only to hire the best in the market, but also to accelerate their development ahead of the business growth to ensure our vision is met.”

She adds it is precisely in the development of these purpose-driven employees that performance appraisals play a key role.

“Our performance management system is the primary channel through which we ensure our employees have visibility of how their contribution impacts the business goals. It also serves as our key starting point for individual development planning, identifying key areas of strengths and agreeing on priorities for development.

“These conversations ensure that employees grow from strength to strength, and if done well, remain energised and fulfilled.”

She explains rewards in her company are fully aligned to performance and every employee is assessed not just on what was delivered, but also on the standards of leadership in which it was delivered against.

The inherent flaws in performance evaluations

Despite such impressive advantages of an employee appraisal system, there has been a tsunami of interest among HR managers in recent years to revamp, redesign or eliminate the performance appraisal process.

The Deloitte 2013 Human Capital Trends research discovered that a third of all global organisations wanted to revamp their performance management process in the next year and two-thirds within the next three years.

In fact, the research showed that fewer than 30% of all organisations feel their existing process drives any level of performance or engagement at all. Rather, it simply helps evaluate people for compensation and promotion.

The reality is the traditional performance appraisal as practised in the majority of organisations today is fundamentally flawed and incongruent with the current values-based, vision-driven and collaborative work environments.

When we spoke about staff appraisals – they were very simple in the past. There was a single manager and employee. The relation would simply be: ‘I rate my staff and that’s it’.
- Arthur Lam, director of organisation development for SEA, HK, TW, ANZ and KR at Sanofi

“Performance evaluations have not changed and are still important, but as compared to the past, they have gotten more complex,” says Arthur Lam, director of organisation development for SEA, HK, TW, ANZ and KR at Sanofi.

He adds two factors have contributed to this increase in complexity.

Firstly, an increase in employees’ breadth of work which leads to secondly, complex matrix reporting lines.

“In the past you had specialised roles. You had four people each doing individual roles. Now you have a single person doing four different things,” he says.

“Essentially, now you have a flat hierarchy in organisations, instead of having multiple hierarchies down the line.

“So when we spoke about performance reviews – they were very simple in the past. There was only a single manager and employee. The relation would simply be: ‘I rate my staff and that’s it’.

“But during performance reviews today, managers have to ask other functional managers as well for their opinions on how the employee in question is performing.”

Echoing Lam, Kong also spots differences between how performance appraisals were viewed and conducted in the past versus how they function today.

She adds a key contributor affecting the evolution of performance evaluations lies within what the employees themselves want out of such processes.

“Expectations of employees have changed over the years,” she says.

“In the past, employees mainly expected to be rewarded based on their performance. Today, employees also expect to jointly develop their career path so they know which career steps to take next. Employees want to know if a company is willing to provide professional growth and advancement opportunities.”

The effect of such increased complexity is precisely why the effectiveness of performance reviews today has come under fire.

The importance of having the right appraisal structure

To make things worse, compelling new research is emerging every day showing performance reviews don’t improve performance, but may actually cause a decline in performance.

The criticisms of performance reviews range from them being an enormous waste of time to them having a destructive impact on the relationship between managers and their subordinates.

Recent research from Rice University cited a variety of problems that annual reviews inherently present, including a fear of providing negative feedback.

According to the paper, managers are legitimately concerned about demotivating or disengaging employees when they rate employees poorly.

As a consequence, providing ratings that are clustered at the high end of the rating scale is quite common across organisations.

“Organisations by nature are large social environments, and we cannot forget that context when making use of performance-rating data,” said Jisoo Ock, lead author and Rice doctoral candidate in psychology.

The criticisms of performance reviews range from them being an enormous waste of time to them having a destructive impact on the relationship between managers and their subordinates.

Lam admits to seeing such fear of demotivating employees while providing negative feedback.

“This (fear) is quite common across organisations in general, and Sanofi isn’t an exception.

“It is always very easy focusing on the strengths of the person. But when it comes to talking about the weaknesses of the person, things get awkward.”

Duran warns, however, about the need to include both strengths and weaknesses in a good coaching conversation, highlighting it becomes ineffective with only one of them.

“A good performance discussion is always balanced – strengths vs areas for improvement: what was delivered vs how it was delivered, company expectations vs personal wishes, etc,” she says.

“With this, the conversation becomes factual and objective, yet personal and tailored to the employees needs, hence, resulting in bringing out the best in each individual.”

Training managers to conduct performance evaluations more effectively

To get past the awkwardness involved in providing staff criticism, Lam suggests employing positive words during the appraisal process even while pointing out areas of weaknesses in staff.

“Rather than using the word ‘weaknesses’ we use the words ‘areas of development’ – that helps in motivating employees better. Weakness is quite a negative term. Everybody needs to be developed, it just depends on which areas they need to be developed.”

He observes, however, that more can be done to educate managers about the usage of such methods to enhance the effectiveness of performance reviews.

“The critical conversation is something which managers aren’t really well versed in. There is a variation of competency levels regarding this across Sanofi.”

Lam’s observation raises an interesting point regarding the importance of effective managerial skills in conducting such performance reviews.

If managers themselves aren’t sure what the metrics of an employee evaluation process are, how will they evaluate the employee in the first place?

Such training has, in fact, become essential today, considering bosses currently clearly aren’t living up to what is required of them in an appraisal session.

Rather than using the word ‘weaknesses’ we use the words ‘areas of development’ – that helps in motivating employees better.
- Arthur Lam, director of organisation development for SEA, HK, TW, ANZ and KR at Sanofi

The Cornerstone OnDemand/Harris 2012 US employee report (employee performance management study) found less than half (45%) of employees said the feedback they received was a fair and accurate representation of their performance.

In addition, only a quarter (25%) indicated they were given specific examples of their work to support the feedback they received.

“We take it for granted that most managers know how to do performance evaluations. But we are not truly aware who lacks those competencies. And once you have inconsistency, it creates a ripple effect,” Lam says.

“People start saying, ‘the other team manager is rating everybody highly, and you’re being strict’. Employees will start comparing their evaluations with each other and this will lead to a very uncomfortable and dissatisfied group of professionals.”

To avoid this, he adds that standardisation should be done across functions to ensure managers are rating employees in a fair and consistent manner.

“Various leaders of the same level should sit down together and present their appraisals and share the ways they have rated them so other managers can have a look at their process and agree and/or disagree,” he advises.

“This is where training of these managers comes in place. You train them better so they will train them better.”

Measuring the effectiveness of employee appraisals

Kong similarly identifies a need to step up training processes of managers who are conducting employee appraisals.

“The effectiveness of managers conducting performance evaluations can be improved by creating an open and respectful atmosphere based on mutual trust,” she says.

“Managers should be trained to be better mentors and coaches, to build their employee’s motivation while at the same time, enable them to identify their own development needs and to openly share these with their managers. An increased frequency of reviews helps to closely follow-up on the employee’s individual development plan.”

Managers should be trained to be better mentors and coaches, to build their employee’s motivation while enabling them to identify their own development needs.
- Eunice Kong, regional HR director for Southeast Asia, Australia and New Zealand, at Evonik

Duran shares a few policies Unilever has adopted to ensure managers have the right skills to lead and conduct performance appraisals in the most optimal way possible.

“To be an effective line manager, we provide ‘licence to operate’ programmes composed of training and communications guidelines that aim to ensure that every line manager has at least a working knowledge around how to conduct performance management programmes.

“These are not only meant to help them build and practise their skills, but also increase their confidence and inspirational leadership to their teams.”

She adds the company measures how well their staff’s performance evaluations work by analysing how organisational growth figures are impacted after the appraisal process.

“In Unilever, the only measure of the effectiveness of our performance management programme is if it delivers the individual and collective results required by the business, and at the same time, enables us to retain, grow and energise our key talent.

“To date, Unilever results are on track towards our growth ambition, our attrition is below the industry benchmark and engagement scores are at par with global benchmarks. So you can conclude that our performance management system is effective.”

Having an end goal in mind

Lam highlights another good way of measuring the effectiveness of performance evaluations is to always envision the ultimate aim of conducting these appraisals.

“Many people take performance evaluations and appraisals as backward-looking sessions. They should also be able to point out the direction ahead and areas of improvement.

“It is not just about me knowing what the employee has done, but about me having the skills of asking the right questions – and giving the right feedback at the right time and really motivating the employees in what they should do in the following year.”

He adds it is difficult to generalise whether managers actually do have these skills because “everything is a work in progress. Every single manager or leader in an organisation has different levels of competency”.

In my view, the end-point of performance evaluations should be that you have a highly motivated employee who is headed towards the right direction.
- Arthur Lam, director of organisation development for SEA, HK, TW, ANZ and KR at Sanofi

Therefore, keeping in mind the essential goal of the process helps significantly in knowing whether companies really are providing effective feedback via staff appraisals.

“In my view, the end-point of performance evaluations should be that you have a highly motivated employee who is headed towards the right direction.

“It should be a summary for what they have done in the year, the strengths and areas of development based on the observation of the manager, and their future role and what they ought to be doing.”

Kong agrees with such a view of employee appraisals, but also suggests employers can be aided by the right technology to make the process more smoother.

“Technology provides a means for managers to create more transparency in the performance management. With technology, managers can better document and track their employee’s performance progression over the years, thus strengthening their performance,” she says.

Image: Shutterstock

Don’t miss Employee Benefits Asia, Asia’s leading C&B conference. In Hong Kong,
Kuala Lumpur and Singapore in May – Register now

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