Lost opportunities, demotivated workforce, silent surrender to mediocrity – all outcomes of ineffective performance management in an organization. And that too in an annual ritual that has often projected itself to be an ideal way of assessing contribution and in many cases, determine the reward associated with that contribution.

The annual performance appraisal has outlived its utility in more ways than one. With many options available to workforce today, many employees adopt a line of least resistance and simply walk out of the organization if they feel their efforts and contributions have not been adequately recognized and rewarded. This is a costly failure from organization’s perspective and it only saps the energy with its negative vibration that reverberates through out the organization. Can the appraisal exercise be made more objective and meaningful? Can it be converted into a dialogue where both – individual goal and organization goal meet on a common platform? Can it be turned into a learning experience for both – employee and the organization – to become more sensitive to expected deliveries and behavior?

Building talent has become the most critical success factor for any business today. This starts with the right strategy on hiring, induction and subsequent development to creating an organization ambience that retains high quality talent. The real test of all these investment is visible only when individual performance contributes directly to organization strategy and where sum total of individual contribution makes a tangible impact on overall organization health. This is the power of well executed performance appraisal process and many organizations have embarked on high growth trajectory following this path.

In this stock-taking event, organizations that have shown courage of conviction and strength of their process in sharply differentiating performers and their reward have in long run, managed to create an environment of high performing work culture

Measuring employee performance has undergone significant change from the annual performance appraisal to an on-going performance management process. In many organizations, managers and employees meet once a year for the annual performance appraisal to look back at the previous year and to evaluate what was accomplished. This does not work anymore. One cannot drive far and fast looking in the rear-view mirror all the time. With the changing times, more progressive organizations have realized that only looking back does little to improve performance and there has been a shift away from performance appraisals to a more comprehensive approach called performance management which is not only about assessment but also about nurturing high performance.

Constructive feedback given to the employees in timely and at frequent intervals has been proved to motivate them to higher level of performing as compared to the limited efficacy of the annual cycle. According to a recent research “….organisations that rigorously provide feedback to their employees have workforces that are between 15 and 20 per cent more engaged…”. This has led many organizations to practicing mid-term or quarterly reviews to provide feedback to employees on completion of every assignment, project or work allocation. Here technology is playing a key role with online feedback that helps collate individual assignment feedbacks as and when they occur rather than waiting for summation at the year end. This helps reduce the “halo” effect and also takes into consideration contribution made over a period of time rather than assessing ones that have occurred most recently or near the time of assessment.

It is imperative to understand that effective performance appraisal process goes beyond simple assessment. It involves identification of strengths and identification of right job content for individual employees which will be more challenging and rewarding. It also involves identifying training and development needs of the employee and facilitating their integration into the overall organizations. Only when the performance assessment encompasses a larger spectrum of offerings would the organization be able to secure better commitment from the employees. It is only a natural spin off when this input provides better clarity to the organization to optimally utilize its manpower for more challenging work and also deciding on higher roles with the orzanisation.

As organizations become more about working in teams, across boundaries and functions, other important facets of getting feedback have come into play. Self appraisal, peer appraisal, team appraisal, 360-degree or full circle appraisal have started seeing increased application. All these are steps in the right direction provided they are custom-made to suit organizational culture and senior management style. It would be futile to have a 360-degree feedback in an organization that is highly hierarchical and authoritarian in its style of management. Compliance would score better in such an environment than individual creativity and whether the feedback comes from peers or juniors it will be dyed in the organization’s basic colour.

Often appraisal exercise is degraded to 'tick the box' exercises that cause a great deal of anxiety. At times, these assessment once completed, are not looked at again till the next year. It becomes at best a ‘snapshot’ view, usually based on a supervisor's most recent recollections of what has been accomplished or otherwise by the employee. Difficult feedback gets postponed or sugar-coated, or even worse, lied about on the appraisal form which creates conflict when it comes to merit based rewards and pay for performance. Some managers are hesitant to put down on paper when and employee’s performance is under par specially if that decision leads to lesser pay or delayed promotion, for fear of being challenged.

The purpose of the appraisal is to give feedback and offer input to help the employees volunteer to improve on the job. It is an opportunity to align expectations and send clear signal of employees’ worth and organizations’ commitment towards investing in the employee. It is not a synonym for organizational punitive process. To be effective, an appraisal process should be a positive and helpful experience for the employee, especially when combined with the individual development plan.

Many managers sit on judgment about an individual employee during the appraisal process. Playing god may give a sense of power and control to these managers but in return they trade off employee commitment and regret it much later when the organization does not become a beacon for attracting and retaining high performing talent.