Typical Outcomes from Annual Appraisals

Most recent research suggests that annual staff reviews are generally perceived as a difficult and painful process by both managers and employees. As there are typically no objectives which are set in appraisal systems, there is no link to strategic or operational outcomes. If the CEO’s objective was to increase margins by 3%, employees may be aware of the CEO’s intent but they are usually not measured on this objective in their individual appraisal. Therefore, there is no linkage in the appraisal review and no linkage at a team or department level.
Annual Appraisals
Misdirected Bonuses
This situation has been illustrated many times where employees and managers have received favorable reviews and bonuses and yet the organisation has not achieved its goals. The organisation may be losing millions of dollars and yet still paying out bonuses to its managers and employees.

Too Painful, Emotionally Charged
High stress levels for both managers and employees also become a factor. They both know they will be judged on the outcome of the appraisal and the fallout is often destructive rather than constructive. The reasoning behind this is that there are rarely any pre-defined mesaures or objectives and the employee review is not based on any considered evaluation criteria. The employees’ remuneration and future are at stake and the goodwill of the managers future resources are also at stake. This leads to high stress in the case of both individuals and this is a poor emotional state in which to have a thorough discussion about employee performance.

Poor Understanding of Expectations
Where the appraisal system is poorly communicated, both the employee and manager enter these discussions with low confidence levels. This is due to a lack of “rules” as to how to go about the appraisal process and a lack of understanding of the expected outcomes. As this process is infrequent, it is viewed by the employee as an opportunity to discuss remuneration, promotion prospects and other issues related to the employee. This means the discussion is dominated by employee content rather than what the manager needs the employee to do for the next year. This leads to vague definition of performance goals and perpetuates the system of poorly defined and executed appraisals.

As an annual staff review is so infrequent, both managers and employees find it difficult to remember what actually happened during the year. Both typically come to the meeting ill prepared with little meaningful content to discuss. This makes the appraisal more difficult and frustrates both the employee and manager.

Bad Timing
More often than not, the annual appraisal is executed on the employees’ anniversary which does not coincide with any particular performance period. If appraisals are conducted annually on the anniversary date, it is only possible to align at best only 50% of your staff with future objectives, assuming there is an even distribution of start dates across the employee workforce. Given that most appraisal systems are not automated, there is poor reporting and therefore low visibility as to who did or did not achieve their objectives.

Subjective Manager Opinion
This means that an employees’ future is wholly dependent on their manager’s highly subjective opinion. The CEO or other executive management does not have clear vision as to who achieved their objectives and who did not. The outcome for the CEO is that they do not have the ability to see failure as it is occurring. Instead, they see failure after the fact and radical adjustments are then required to repair the situation. By using standalone appraisal systems, the outcome for the line manager is that they have additional pressure applied to them, to fix a problem which has become a major issue and which could have been otherwise identified and fixed in a very timely fashion.

Performance Not Aligned to Promotions
Given that annual appraisals are only conducted once yearly, most line managers only seriously think and plan once a year. The consequences are poor resource management, put-out-the-fire management and costly and reactive problem fixing on the fly. Given that most appraisal systems are manual and on paper, the data arising from an excellent performance typically does not find its way into the succession planning process. Employees are therefore often disillusioned to find that they have been passed over for further development or a promotion when they have performed strongly for several years.

Poor Development Opportunities
This is a primary cause for employees leaving the organisation. Most appraisal systems do not feature a competency assessment or an active development plan that both the employee and manager have mutually agreed to. Staff often get disillusioned and leave the organisation if they can see no personal development prospects or if personal development has not occurred in practice for the last several years, despite numerous promises.

No Consequence For Non-Participation
Given that most appraisal systems are manual, reporting is weak and therefore compliance reporting is not visible. This inevitably means that managers learn that they do not have to perform reviews and therefore they don’t because there is no negative consequence for them. Equally, employees learn that there is no consequence to not being reviewed, they lose faith in management and invariably look for somewhere else to work. Most manual appraisal systems suffer from sub 30% compliance and can get to this point after only 18 months of operation i.e. roughly one to one and a half performance terms.

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