HR Magazine: Is it time to give up on performance appraisals?

Our summary: Annual performance reviews have a reputation of being ‘useless’ and ‘unnecessary’ – but almost all companies still use them. This is because when done right, performance management increases employee engagement, lowers retention costs and encourages successful staff development. It also pushes managers to be better at their jobs. The article also notes the growing relevance of new technology in HR management, particularly web-based systems, while emphasizing the importance of bespoke appraisal methods.

FairSetup thoughts: By encouraging more regular performance evaluations, FairSetup helps companies improve their culture while promoting fruitful communication between employees and managers. This is an alternative approach to traditional performance management, as it sets up regular feedback loops and collects data over time, ensuring that no employee contribution is lost. This makes the retention process more cost-effective, and increases employee satisfaction.

By GABRIELLA JOZWIAK
Published: October 22, 2012

A recent US poll of 2,677 people (1,800 employees, 645 HR managers, and 232 CEOs) by San Francisco-based rewards-and-recognition consulting firm Achievers revealed 98% of staff find annual performance reviews unnecessary. Remember – among the 2,677 respondents, a quarter were HR professionals.

Edward Lawler, professor of business at University of Southern California, reacted by declaring: “Performance appraisals are dead.” But he also unveiled research showing 93% of companies use annual appraisals, and only 6% have considered dropping them.

HR departments have invested large amounts in appraisal processes – one reason why they may be reluctant to shed them. But HRDs argue that money was well spent. The processes are good – the managers are the problem. “One of the skills that is often not developed is understanding what an appraisal is and why it is relevant to the whole organisation’s success,” states Charles Elvin, chief executive of the ILM. “Being able to appraise is a fundamental management skill.

The economic argument for a robust appraisal system linked to the organization’s wider strategic objectives is strong. Good performance management can provide successful staff development, ensuring internal promotions and lower recruitment costs. According to ILM, only 55% of managerial vacancies are filled internally.

The appraisal process takes time and must be built into budgets. CIPD research suggests recruitment costs for a senior manager can top £8,000. With a workforce of 100,000, spending three hours on each appraisal at £10 per hour amounts to £3 million. External factors mean organizations wanting to increase their turnover have a greater challenge. The IMF downgraded its UK 2012 forecast in July to a GDP rise of just 0.2%.

“That says raising the productivity of employees is key,” says Deborah Allday, senior partner at Hay Group.

Read the whole article at hrmagazine.co.uk 

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