5 Reasons Why Appraising Employees Performance is Key to Business Success

Last updated on June 24th, 2014 at 01:34 pm

If you think a performance appraisal program is not essential to the success of your business, you are absolutely wrong. It’s not just a fun extra or something to implement if you get around to it, it can actually have a very direct impact on your profitability. Here are five reasons you need to start appraising employee performances if you haven’t already.

1. It improves employee morale.

No employee wants to work someplace where they feel unseen and unappreciated. One of the best things you can do for your business is create a space to let employees know their work is being noticed. An employee who works hard and is commended will be motivated to work even harder, while an employee who slacks off and is called out for that will realise they are being watched and will work harder to avoid negative consequences.

2. It identifies areas of training need.

Performance appraisal highlights areas where improvement is needed, not just for individuals, but for entire groups. If your employees all seem to be struggling in the same area, it creates a good opportunity for some additional training. Rather than just dealing with the failings of a single individual, you can find patterns across the entire workforce and deal with them more efficiently.

3. It discovers hidden talent.

Sometimes the qualities you’ve needed for leadership and management are sitting right under your nose, but without a performance appraisal, it’s hard to know. Consistent performance appraisal shows which employees rise to the top time and time again, indicating they could be someone you want to keep around for a while or move up a step. Rather than hiring outside leadership for your company, you can promote from within, thanks to the employee knowledge you get from these appraisals.

4. It makes layoff decisions safer.

If your business must lay off some of its employees, it will be to the business’ benefit to have a performance appraisal program in place. Some businesses choose to lay off based on other factors, such as seniority, and while that has its benefits, it is more business-savvy to base it on performance. If a sub-par worker manages to stick around for a certain length of time, you don’t want them to be able to push out younger, better workers. Basing your decisions on their performance appraisals ensures you keep the harder workers and make your business stronger.

5. It helps managers manage better.

When managers know where the employees under their leadership struggle and where they succeed, they know where to focus. Without any sort of performance indicator, it is harder for managers to have a clear direction of where employee performance and progression should go. It may make it easier for poor workers to continue without anyone being fully aware. Giving managers information on who is succeeding and who is failing gives them a chance to improve their leadership skills in that area.

These are just five of the ways a performance appraisal program could improve your business’ growth and performance. Start planning today to incorporate one into your company so you can see these changes and more implemented in your workplace.

Alan Thompson

Alan is a marketing professional who works with a range of international businesses from HR consultants to business specialists who provide solutions for employee engagement & satisfaction through job evaluations and total rewards. Alan’s interests lie in blogging, digital marketing, human resources and business process outsourcing. When he’s not blogging you’ll find Alan by or in the sea surrounding Cornwall.

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