Should Small Firms Scrap Performance Appraisals?

dreamstime_xs_16005003Performance appraisals are viewed by many small businesses as a necessary evil. Managers hate: the bureaucracy, the form filling, the sheer emotional awkwardness, and the fact that they don’t seem to change behaviour that much. And employees hate them for pretty much the same reason. One or two companies such as the SAS Institute and Glenroy Inc have taken the extreme measure of burning their employee appraisal forms as a public declaration of contempt for the process, such is the dissatisfaction with the appraisal process.

But, I wouldn’t go this far, as research by Kluger shows that appraisals do improve team performance on average, but since 30% of appraisals do actually decrease performance, most appraisal process should be considered a work in progress rather than the finished product.

So, what steps can you take to improve you performance appraisal process, and which don’t involve setting any paper alight? There are several less dramatic and terminal steps you can take to improve your appraisal process and these are are follows.

1. Have your appraisals occur more regularly, ideally monthly as research from Bersin by Deloitte shows that employers who adopt monthly performance reviews have 31% greater investment returns.

2. Appraisals should be more of a carrot than a stick. This study from globoforce shows that 90% of employees see positive feedback as more motivating then negative feedback. Also, research, such as this study from Michigan State University shows that carrots are more motivational than sticks. Get the message? Try addressing negative feedback in less of a critical, punitive manner, but more in a development manner by offering employees incentives such as a small bonus, pay rise etc.. if they can develop skills or competencies in a specific area.  Don’t scrap appraisals, but don’t use them to beat your staff up.

3. Appraisals should be a catalyst for personal and career growth. The globoforce study showed that 70% of employees want appraisals to help them with their personal and career growth, which seems a noble and reasonable ambition. So, make sure to have a free flowing discussion with your employee prior to the appraisal to understand and agree their personal development and career aspirations. Then use the appraisal process to help them develop skills which will help them reach their personal and career development goals. Employees will value the appraisals more, as not only will they focus around them meeting company performance goals, they will also be geared to helping the employee reach their personal development and career ambitions.

So, in conclusion, you shouldn’t scrap appraisals, but you certainly should give them a full service and MOT, so they are fit for purpose.

If you would like to download my One Page Appraisal Form for small business, please click here.

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