Performance management is a key component in managing any business. It allows a company to measure how well it has travelled along its planned pathway, to check whether resources are being utilised effectively and what risks must be dealt with. It also motivates personnel to keep focussed on desired goals and helps identify training needs.
According to a definition by the Organisation for Economic Co-operation and Development (OECD) performance appraisal is an “Assessment against a set of predetermined criteria of the economy, efficiency and effectiveness with which an organisation or an individual carries out a particular activity or range of activities. Organisations or individuals may set regular targets on particular aspects of their performance – financial returns, efficiency, quality of services supplied, etc. – against which their performance is monitored and evaluated.”
It involves a structured process for both evaluating an employee’s past performance and setting future targets/timetables for reaching them. A broader variant of appraisal is called “upward” or “360 degrees” feedback in which the employee is also given the opportunity to comment on the performance of the person to whom they report.
Appraisal (PA) is most effective if it avoids a number of common pitfalls. These are the:
* Linking of appraisal too directly and rigidly to pay reviews or promotion.
* Encouragement of risk avoidance
* Stifling of innovation
* Promotion of a “blame culture”.
* Oversensitivity to an individual’s cultural and personal circumstances
* infringement of anti-discrimination laws and company policies.
There is now a wide body of knowledge about how to introduce and conduct PA processes. This points to the importance of not just regarding PA as a tool for merit based reward systems, but also as a way of motivating staff in all aspects of their working lives and gaining insights – via employee feedback – for the general benefit of the company. Appraisals show employees that their company cares about their problems, aspirations and views. Done well, appraisals boost employees’ confidence and help them focus on their individual and shared objectives.
Companies seeking to gain the most from PA should therefore do so by:
- Ensuring that the appraisal system is approved by all the key players
- management, trade union representatives, works council members and any relevant external bodies.
- Removing details such as an individual’s gender, age and date of birth from all documentation.
- Training all managers and supervisors in how to conduct appraisals.
- Giving the employee sufficient feedback on a regular basis so that any negative points raised in the appraisal do not come as a total surprise.
- Asking the employee to complete a self-assessment questionnaire prior to the appraisal meeting.
- Putting the employee at ease from the outset of the PA meeting and setting out a framework for discussion.
- Being attentive to the employee and listening as well as talking.
- Taking great care to select performance criteria in an appropriate way – primarily based on those factors that the individual was informed about at the outset, at their last appraisal, formal memos or through their job description.
- Being open and consistent about the relative weight being placed on each performance criterion.
- Not giving too much weight to recent events, problems and achievements.
- Not allowing the appraisal process to be used by managers to vent their own private frustrations with subordinates.
- Not establishing too rigid a relationship between appraisal and reward.
- Distinguishing between hard (clearly measurable) performance data and soft (subjective, value-based) performance data and interpreting soft data with greater care.
- Reviewing all performance aspects – such as skills, aptitudes, learning abilities, goals, intentions, aspirations, attitudes, behaviours and different actor’s perceptions of knowledge, skills, or behaviour.
- Having carefully prepared interview schedules containing the precise wording of potentially sensitive questions and feedback statements.
- Not being disproportionately positive or negative – unless the situation wholly merits the approach.
- Balancing criticisms with constructive comments and suggestions.
- Ensuring that individuals are handled in a fair and consistent manner and that appropriate performance rectification actions – such as training, retraining or redeployment – are offered in a non-discriminatory way.
- Exploring alternative working methods for under-performing employees – including teleworking, mentoring and virtual (multiskilled) work teams.
- Taking fully into account any disability that may affect the employee’s capacity to perform their job and making any reasonable adjustments to their working environment – including the provision of technical or human aids.
- Operating within clear guidelines about how to deal with employees who consistently perform to an inadequate level – including procedures to avoid constructive or unfair dismissal.
- Not confusing the normal appraisal process with disciplinary or dismissal procedures. If formal action is required due to performance problems the employee should be given clear notice of an initial consultation meeting. Only where the employee’s conduct has been seriously in error or they totally refuse to cooperate in any necessary changes should immediate dismissal be considered.
- Setting clear goals ahead of the next appraisal and agreeing ways to achieve them.
- Writing a PA report immediately after the meeting and giving a copy to the employee concerned.
- Documenting other key points arising from the appraisal meeting and communicating these to the HR department and line management.
- Operating an appeals procedure for employees who feel that any part of the appraisal process has been unfair.
PA itself has a long and colourful history – being used extensively from the emergence of industrialisation to ensure that individuals and work groups were motivated to complete tasks to a required standard and in a timely manner. Today much of the evidence for the effectiveness of performance management systems originate from the USA and Japan. However, research carried out between 2004 and 2008 by the Institute for Employment Studies and the Work Foundation found that in the UK companies that focus broadly on all aspects of human capital improvement significantly increase their profit/employee, operating profit per employee and “the probability of achieving sales from new technology”.
Current Practices and trends
In many European countries formal performance appraisal (PA) systems remain in their infancy, although there is a widespread use of performance-related bonus arrangements. In Germany only 7% of workers in small firms with less than 5 employees are subject to PA, in contrast with over 50% in firms with more than 2,000 employees. In France and the UK workers on fixed-term contracts are less subject to PA. In France full-time workers are more often appraised than part-timers and in Germany men are more frequently appraised than women.
Use of PA also varies substantially by industry sector and job type. In Germany it is most commonly practised in financial service companies and least common in construction and agriculture. Whereas in eastern European states such as Serbia and Macedonia PA systems are almost wholly confined to public administration. In Ireland PA is mainly used by multinational companies – which normally have a high level of discretion on PA and pay policies.
Belgian PA is applied to both manual and non-manual workers in the Flanders region, but is largely confined to executive level employees in the French-speaking Walloon region. Finland is the country where manual workers are most frequently subject to PA, although it is rapidly growing in popularity for all levels of employee in Portugal – thanks to its inclusion in several collective agreements. On the whole, however, PA is not favoured by most trade unions and in France it remains under fire from the CGT union – although the more moderate CFDT and FO unions are more conciliatory about such approaches.
Generally self-evaluation methods are less common in Europe than in the USA and few companies use peers or customers as inputs to the appraisal process. PA is generally linked in some way to pay reviews or promotional decisions, although in Sweden – which has the highest incidence of PA in Europe – the link is particularly weak. In Hungary PA is linked more to pay determination than training and development, whilst in Romania strong cultural sensitivities to negative feedback severely limit the use of PA as a performance management tool. In fact, where they do take place 60% of PA meetings are conducted by an employee’s direct manager and only 23% by their departmental manager.
In the Russian Federation there remains a reluctance to place too much weight on individual accountability and therefore employees are evaluated more on team and company performance than their separate contribution to goal achievement.
Generally, appraisals are primarily the responsibility of an individual’s immediate supervisor or manager. Most appraisals are conducted just once a year, especially for those well established in their posts. But they are sometimes conducted on a more frequent basis – such as during an employee’s first year in post, or if they have been performing poorly.
Studies indicate that PA has a beneficial impact on company performance. In France firms with such practices have a higher level of productivity than those without PA.
The biggest legal pitfalls when establishing and conducting PA reviews have been found to fall into three distinct categories:
Before a performance appraisal system can be introduced in France it must be approved by the company’s new, combined works council/health and safety entity. Systems that automatically translate appraisal scores into disciplinary, dismissal or remuneration outcomes are unlawful (HP case 2013). There must always be an element of discretion in the interpretation of appraisal scores. Worker representatives also generally insist on there being a fair appeals process in place so that decisions can be reviewed independently.
In Germany too appraisal systems must be approved by works councils and if no agreement can be concluded an independent conciliator must be appointed to achieve consensus between the parties. This all too often leads to a system that is ineffective and with little teeth to deal with poor performance.
Managers and supervisors carrying out performance appraisal should take particular care not discrimination on any unlawful grounds – either on a direct or an indirect basis
Comments made by those conducting PA meetings may be unjustified or communicated in an insensitive way – thus leading to an employee absenting themselves and claiming they have been victimised. Employers have a duty to act in a reasonable manner and to sustain an atmosphere of trust and confidence. This may be undermined by a poorly managed PA review.
Employees have “subject access” rights to obtain copies of written or otherwise recorded opinions and observations by those conducting their PA reviews. The fact that a personnel file is “confidential” does not provide any protection from such requests and a careless note indicating racial or sexual bias or a subjective adverse view can form a firm basis for an employee to make a claim against their employer. This risk is only growing with the advent of the GDPR in May 2018, increased corporate penalties and the heightened awareness amongst employees and their representatives that has followed.
A well-designed and executed PA system can generate huge benefits for any enterprise. All too often, however, appraisals are applied in a narrow and inflexible way and frequently exclude large sections of the workforce.
Europe has been slow to reap the advantages of PA as a wide-ranging approach to improve staff retention and motivation. There is also an absence of hard data from across Europe to show how each facet of a PA system can impact on a company’s bottom line. Cultural and legal barriers also sometimes exist to prevent managers giving negative feedback to employees.
There is clearly a need to improve training and to establish “best practice” model PA policies and procedures so that all employers can take advantage of this approach and use it to drive their business plans.
Copyright: FedEE CSL 2018