Traditionally, performance appraisals have been regarded as critical for managing careers and keeping employees in line with business objectives. The Labor government decision to change unfair dismissal rules and put in a new industrial relations regime means performance appraisal can establish a paper trail and protect the business.
Employers are required by law to give employees a warning (either verbal or written). Employers now have to provide an employee with a reasonable opportunity to respond and improve their conduct prior to termination of employment. This is where the appraisal becomes important. While appraisals are not usually the time to give warnings, they could provide companies with some back-up and make all the difference between a bigger payout or not.
One of the big problems is that most organisations are bad at appraisals. According to an Australian Human Resources Institute survey of more than 1,600 HR professionals, four out of five respondents said that performance management processes in their organisations were either ineffective or somewhat ineffective.
Appraisals need to link the employee’s day-to-day performance with the organisation’s wider goals. They need to highlight areas that need developing. They also need to recognise and reward employees for performance, address issues such as promotions, transfers and succession planning and identify problem areas that might need improving.
To get the most out of an appraisal, companies need to structure it properly. KPIs need to be identified first. After the interview, seek feedback from employees about the performance appraisal system and adjust where appropriate.
In the period leading up to the interview, the parties have to agree on KPIs. After the appraisal, the company needs to follow through on what has been discussed. When everyone has agreed on further measures, such as training, a transfer or mentoring, the managers need to ensure it is implemented.
Reviews should be done every six or 12 months but feedback and discussion needs to go all year to ensure people meet requirements. The way to engage employees into this process is to show them what they are going to get at the end of it and stick to what you promise them. The evidence suggests that most employees value encouragement and development opportunities over monetary rewards. The appraisal process needs to take that into account.
The owners of the business need to tell managers that the appraisal system is important. It’s part of their job. Managers should not be giving appraisals simply for the sake of it or because they were told to do it by HR.
Leon Gettler is a senior business journalist who writes for a range of leading newspapers and journals.
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