In today’s environment highlighted by the globalization of markets and challenging economic circumstances, it’s more indispensable than never to assess each employee’s performance on the job within an organization in order to detect and strengthen talent—one of the key assets of organizations—and to increase productivity within companies.
Currently companies tend to adopting organizational structures characterized by little or no hierarchies that intervene in decision making and make a distinction between employees and their managers. This model is known as “flat or horizontal” and favors participation of all stakeholders through a decentralized decision making process. The other kind is “hierarchical”, a popular structure among large organizations that features multiple levels between managers and employees.
Regardless of the organizational model a company chooses, employee performance improvement, and consequently business productivity, is one of the most important challenges companies face every day. That’s why they must have methodologies and tools in place that make sure performance management is a strategic element within their HR policies.
What are the issues to consider for implementing an effective performance appraisal process? Firstly, it will be essential to find a system that lets you design and manage procedures in line with different existing methods. There are several models like self-assessment, based on an employee’s appraisal of his or her own performance, the 180 degree review which involves managers, peers and even clients and providers as stakeholders in the process; and the so-called 360 degree feedback performance review which in contrast to the previous one also included subordinates.
Likewise to evaluate jobs within the organization objectively, it’s necessary to define the objectives employees within a given position must meet, and the competencies they must command. In principle, the definition of objectives is relatively simple, as quantitative elements like for instance, the targets a salesman should reach, the number of leads a marketing professional should attract and so on. However, when evaluating competencies, it is rather more difficult as this addresses more subjective issues like interpersonal communication, empathy, self-control, innovation, etc.
In short, a performance appraisal system evaluates these objectives and expectations designed to integrate each role with the organizational strategy. For this to be successful, it must meet several requirements. It is vital these are integrated within the corporate culture of the organization, i.e. employees must have these well assimilated and interiorized. Secondly, this must be linked to a “reward” system (salary bonus, training, etc), and lastly it must be automated, something rather complicated if there are no suitable technology tools. Any performance review process must be supported by an integrated technology solution that allows optimization of the performance appraisal results for each person, by identifying strong and weak points and providing relevant information for other HR areas like recruitment, training, career planning, etc.
Apart from the adopted organizational structure type –hierarchical or flat–and the appraisal method used – self-assessment, 180º or 360º review—the process design and the implementation of technology tools that enable employee appraisals and consequently improve productivity within organizations, offer the following advantages:
- Talent management: makes it easier for companies to spot and reward employees showing greater capacity, attitudes, motivation, knowledge, etc, and develop career paths to make the most of their potential, as well as detect those who are less productive or committed to their organizations.
- Encourage professional development: these appraisal processes boost employee performance directly affecting professional growth and motivation upon adding more job-related responsibilities or competencies.
- Optimize the compensation system in organizations: with the purpose of measuring employee performance and setting up suitable compensation plans for each one of them based on their objectives and competencies, avoiding compensation imbalances, a regular source of discontent within organizations.
- Analyze how an employee’s performance has evolved over time, to analyze the impact on the employee of the defined actions plans ensuing from previous appraisals; courses taken, promotions, managerial changes, etc., gaining a global overview of everything that may influence employee performance.
- Detect gaps in knowledge or competencies for a given work group, undertaking a complete analysis of the group under review, beyond individual analysis per employee which may lead to the definition of training needs or personal recruitment requirements.
- Measure how employees fit within an internal succession plan, by enabling an employee review process of the competencies and knowledge for the defined target job in a succession plan to find out whether the employee fits the job and what to improve to comply with the succession plan.
- Detect trends in the performance review results by work groups, in such a way that it is possible to directly link to HR indicators for analyzing employee satisfaction, absenteeism levels, the numbers of voluntary leavers, etc.