I’m taking a closer look at the performance appraisal process because so many organizations are finding that the traditional approach simply doesn’t give them any value. But measuring and discussing performance with employees remains one of the surest pathways to greater organizations success. In this article, I’m going to lay out the why and what of the performance appraisal process in order to help you get a better idea of just how vital it is in your overall performance management system.

Why. It’s worth reminding yourself throughout the performance appraisal process why it’s being done in the first place. The following are three very good reasons for doing them:

• Communication. Figuring out if an employee’s performance is helping the organization as much as you want it to necessarily entails communication between the manager and the employee. Think of the performance appraisal process as a form of communication focused on performance. Also realize that communication is a two-way street. This means that your performance appraisal process is incomplete or less effective without real dialog between employees and managers. It also means that part of the process has to include the employee having the freedom and security to speak to issues that may be inhibiting performance, which might include lack of clarity from managers around performance standards and priorities. Other hurdles may include lack of training or equipment needed to do a job well.
• Decision-Making. Management has to make decisions about employees all the time. These can range from compensation and bonuses to promotions and terminations. You have to have good information in order to make the best decisions possible about your workforce, and the performance appraisal process is one that can be designed and executed to provide that kind of good information. As mentioned in a previous article, the second phase of the process, the one where standards and measurement tools are created, is critical to making sure the performance appraisal you use is as effective as it can be, including identifying problem areas where decisions are needed.
• Development. If your performance appraisal process doesn’t lead to employee development, then it clearly needs some re-tooling or a major overhaul. The process should result in an employee having a clear understanding of where their performance is relative to the organization’s needs, as well as motivate them to want to get there if they aren’t already. This is where the past and present distinction comes in. It’s true that a performance appraisal is focused on past performance, but it must also point to the future in terms of revealing what an employee must do to improve. If the process simply overloads employees with negative information, they will likely not be motivated to improve. It’s important to achieve a balance between the positive and negative in order to leave room for positive, future-oriented motivation at the conclusion.

How. When it comes to how you will measure performance, you have to decide what you will focus on, since you can’t measure everything that happens in a year or any given period of time under review. Three common choices here include the following:

• Traits. There’s often an implicit assumption in organizations that certain physical or psychological traits lead to better performance. It seems very logical, but be wary of this approach. There are very few physical traits that can be directly linked to job performance unless there are specific physical actions that must be performed in the job. But the same even holds true for many personality traits. In fact, trying to link specific personality traits to job performance is so difficult that it’s probably better to not even try to make those linkages. You’d be surprised, however, how many organizations still try to do this.
• Behaviors. Observed behaviors seem like they should be a more reliable source of performance information than various physical or psychological traits because you’re paying attention to the things an employee actually does. If you use this approach, the key is making sure that there is clear link between each behavior used and the actual job. If that link is weak, then the validity and reliability of the measurement process will be questioned.
• Outcomes. A final choice is to hone in on the outcomes or results of employee performance. This approach entails making sure that employees know beforehand what results they’re supposed to be achieving. It’s also important to recognize that factors besides the individual’s performance or things outside their immediate control can affect the results obtained. Still, it’s probably the overall best choice in terms of figuring out what to measure in a performance appraisal because it’s easier to fashion measurement tools that are reliable, valid, acceptable and feasible.

The performance appraisal process can add value to your organization, motivating employees to perform to the best of their ability and help the company achieve success, but only when the process is well-planned and executed. While this article focused on the why and what of performance appraisals, it’s also important to consider the how and who of the process, which will be the subject of a future article.

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