Article: How to conduct an effective performance appraisal?

Compensation & Benefits

How to conduct an effective performance appraisal?

As managers try and collate data and feedback to piece together an assessment, the result is often an unplanned, ambiguous, and unsatisfactory discussion layered with multiple ‘unconscious biases’.
How to conduct an effective performance appraisal?

An effective performance appraisal system stresses that each member of the team must be aware of what their goals are, what the company’s goals are, and how their individual goals tie in with the company’s goals.

As we close the financial year 2022, the onset of new year marks the time that all employees await, and some dread annual appraisal. The two words – “performance review”, often evoke mixed feelings from managers and employees alike. Some get excited, while others become intimidated. But most managers feel stressed because giving constructive performance feedback is not an easy task. You have to walk the fine line between coaching and criticising and it is easy to slip into the wrong territory.  

While the purpose of this annual evaluation is to identify areas of strength and improvement, share constructive feedback, and develop strategies to address any identified gaps, the evaluation often ends up being a last-minute exercise that doesn’t necessarily deliver on its promise of a meaningful and growth-focused conversation.

There’s a thin line between being helpful and supportive and being overtly critical and biased.  As managers try and collate data and feedback to piece together an assessment, the result is often an unplanned, ambiguous, and unsatisfactory discussion layered with multiple ‘unconscious biases’. 

As humans, we are all biased in one way or the other. Our brain often jumps to assumptions and conclusions without us truly being aware of them.

Let us look at some of the common biases which act as a barrier in the fair performance appraisal process: 

Recency bias: By definition, recency bias is the tendency to focus only on the most recent time period instead of the whole year. This is a common bias among managers and leaders who are unprepared for the evaluation and are assessing the whole year’s performance days or hours before the review. One needs to understand that an employee’s recent performance may be a result of a positive or negative external event, and it cannot be used as an accurate measure of their value as an employee.

Convenience bias: The convenience bias demonstrates itself in our inclination towards moderating feedback i.e., neither too good nor too bad. Of course, the middle path, in a lot of ways, is a convenient one to hold as it is least likely to cause any friction and confrontation. However, it is highly likely to reduce the objectivity of the data, and subsequently the performance review. Another form of this bias is when managers promote and give good ratings on a rotation basis rather than on merit, in order to keep every employee happy.

Tenure bias: The bias where you give increments and promotions to employees who have been with the organisation for a longer period of time and hence, have proven their loyalty towards the organisation is Tenure Bias. But something that all managers need to ponder over, and think about is if tenure means merit. Or does tenure means deserving? Even in today’s time and age, many organisations have a performance appraisal system where employees get automatically promoted and increments after 2 or 3 years. But is it fair?

Gender bias: Gender plays a very vital role in all parts of our life and our social conditioning and values often become barriers in all parts of the employee lifecycle from the perspective of gender. This bias also plays a major part in our evaluation as we rate employees. Oftentimes, women bear the brunt of negative or mediocre performance evaluations owing to maternity breaks or sabbaticals to manage their personal life stages.

Retention bias: Oftentimes, managers fear that if they do not give good ratings or “meet expectations” in the performance review, the employees will resign and leave for better opportunities, thereby leading to loss of manpower for their team and increased burden for others. And it is this fear that makes them take biased decisions and keep the employee happy. 

Idiosyncratic rater bias: Idiosyncratic rater bias occurs when managers evaluate skills they're not good at highly. And similarly, they rate others lower for skills they’re great at. In other words, managers weigh their performance evaluations toward their own personal eccentricities. For example, if there is a manager who is very good at project management but knows very little about computer programming, the manager unknowingly gives a higher rating to those who are good at computer programming and lower marks to those who are good at project management or other skills which are similar to their own.

Since many of these biases occur without our conscious knowledge, we have to try harder to avoid them. This includes examining one’s own actions, perceptions, and judgments. The best way to address them is to ensure feedback (both positive and developmental) is recorded and communicated throughout the year and not just at the last moment.

This is necessary to keep the goal of boosting organisational performance and building a culture of learning and growth, in sight and avoid biases. This is possible only when we make conversations more authentic and transparent throughout the year. 

The way in which managers and leaders communicate performance evaluations to employees impacts the ability to motivate improvements and development. It is very important to ensure that the employees take the evaluation positively rather than as a personal remark. 

Involve employees: Effective communication is a 2-way process and involving the employee in the evaluation ensures that the conversation does not move towards negativity. Before sharing your assessments on each criterion, you can ask the employee, "How would you rate yourself on this factor?" You can also ask, toward the end, "What can I do to better help you perform your job?" or “Are you in agreement with what I am saying?”.

Address each specific area: Don't just provide a general appraisal such as, "You are doing a pretty good job, but need to work on a few things," or, "Things aren't going well and you need to pick it up." The employee needs to understand what specifically he has done well and what weaknesses he needs to work on. Make sure that you cover and discuss each and every part of their KRA to ensure holistic feedback.

Provide direction: As a leader, your evaluation should not leave an employee feeling battered in weak areas. As you point out weaknesses, discuss specific steps to improve. The close of your evaluation impacts the employee's reaction to it going forward. If an employee is working toward a promotion, you can discuss the training and coaching steps necessary for her to get there.

Great managers use their influence to help employees do their jobs. And the only way for managers to know what help employees need is by simply asking them. Make a point to communicate with employees regularly to understand their perspective and use your influence to help them. That is what an effective performance appraisal process is.

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Topics: Compensation & Benefits, #appraisalseason, #RethinkPerformance

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