Why Employee Appraisals are Crucial for Business Success

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Unfortunately, many companies still don’t get the full benefits from performance appraisals.

There are many benefits to employee appraisals, including motivating employees to better performance, resolving skill gaps and issues, and fostering a better company culture. These are especially important following the COVID-19 pandemic, where company culture and communication has taken a hit.

Want to understand the benefits of employee appraisals for performance management? Here are 9 reasons performance appraisals, also known as performance reviews, are important for HR departments to use in performance management strategies.

Motivating employees

According to one study,  40% of UK employees believe the feedback they receive is meaningless. The appraisal process is an opportunity for employers to praise and reward employees’ performance. Positive feedback can boost morale and enthusiasm, leading to more motivated workers and better performance.

Performance management is about checking in with people and helping them reach their potential. Performance appraisals show employees that the company is invested in their growth and development. When employees feel valued and appreciated in their appraisals, and that their feedback is fair and useful, they are more motivated and identify with the company.

Giving positive feedback in appraisals can create happier, healthier staff who are motivated to perform better.

Improving productivity

Frequent performance appraisals keep employees engaged and on-task. Checking in with employees makes it easier to communicate strategy and goals and give feedback on their work. These assessments make sure that employees know their role within the organisation’s strategy and keep everyone on track.

A peer appraisal or self assessment can also be useful for employee evaluation during appraisals, providing data about their past performance within the company. Some performance management strategies also use 360 degree or multisource feedback which can give a broader perspective on overall performance. They might use performance management software, which provides data-driven, unbiased information about employees’ performance. These data-driven insights can inform strategy to boost productivity.

Organisations often hold annual appraisals or half-yearly appraisals. However, it can be useful to have more frequent performance reviews so that employees receive continuous feedback on their performance.

Cultivating the company culture

Performance management can improve cohesion and trust within a team. Effective performance management requires frequent check-ins with employees, which performance appraisals can provide. One-to-one formal appraisals foster trust between employees and managers. They give employees an opportunity to give feedback and raise issues.

Performance review meetings foster a sense of belonging and satisfaction within an organisation. They are an opportunity for employees to voice their feelings and experiences, which makes them feel part of the wider business. Building confidence and cohesion through appraisals means that employees will be more willing to share ideas and innovations that can benefit the company. This helps teams work better together.

With 92% of HR managers saying that employee experience and relations are a key priority (up from 52% before the pandemic), it is more important than ever to create open dialogues and bridge the gap between employers and HR. Employee relationship management software can help with this by connecting people and democratising performance management processes.

Identifying high performers

In any company, some employees excel by going above and beyond. These are the high performers and performance management is a great opportunity to identify them.

One aspect of performance appraisals is evaluating when employees are ready for promotions or taking on greater responsibilities. They are a chance to discuss career progression and plan future objectives.

If an employee has potential but is not yet ready for promotion, performance appraisals can be a place to set goals and assess how they can develop the skills for promotion.

Identifying skill gaps and issues

Some employees under evaluation will not be performing as effectively. Performance evaluations can identify areas for improvement and skill gaps that need to be addressed. Staff appraisals are an opportunity to create action plans to deal with these skill gaps so businesses can ensure that employees get the training they need to improve their performance.

For example, a performance appraisal may be a good time to check in with new hires and assess whether they need further training or support in their role. Performance management software can be useful for keeping track of training and development courses that employees might need.

Improving employee retention

Employee retention is more important than ever, with high turnover rates following the COVID-19 pandemic and what has been called ‘The Great Resignation‘.

One of the benefits of performance management is improving talent retention. In appraisals, businesses can identify individuals who wish to progress within the company and take on new responsibilities.

In an appraisal, employees can share their ambitions for progression within the business. This can help workers feel that their professional development is valued by their employer, reinforcing a sense of appreciation and purpose within the company.

Responding to changing responsibilities 

Some employees will see their responsibilities changing because of market variation, disruption caused by COVID-19, or emerging technologies.  Performance management is important to discuss changing or new responsibilities with employees. Appraisals can be a place to identify strengths and areas for improvement.

Continuous performance management should take note of these changes and evaluate their impact on employees’ work. They might be a place to set goals relating to these new responsibilities or discuss further training.

Goal setting and management

When managers involve employees in setting goals, employees are 3.6x more likely to be engaged in their work, according to one Gallup poll.

Performance management is an opportunity to ensure that staff are on track to meet their goals. Appraisals are a place where managers and employees can jointly assess goal progress and renew goals. By collaboratively setting new goals in performance reviews, employees can rise to new challenges and enhance their performance. Some companies use performance appraisals to create personal development plans for employees.

A good performance management system will proactively engage employees in setting strategic goals and support them in achieving them.

Addressing employee concerns 

Performance reviews shouldn’t just be about evaluating employee performance. They are a two-way street where employees are able to raise concerns or questions about their work.

Appraisal interviews are a vital aspect of employee wellbeing because they give staff a chance to express their feelings and worries. Knowing that their thoughts and opinions are heard makes employees feel valued. Employers that conduct frequent performance appraisals and can develop trust with employees, meaning that issues can be raised and dealt with sooner, which contributes to staff wellbeing.

This is especially important for homeworking employees. Working from home can make communication harder and can raise new challenges for employees and companies, so it’s important that this is considered in the performance management strategy. Performance management software can help with this by keeping employees and managers connected no matter where they are.

What are the benefits of using software for performance appraisals?

It’s clear that performance appraisals are a vital part of an effective performance management strategy. Management software can help streamline and upgrade an organisation’s performance management.

xcd’s user-friendly management software helps human resources professionals with performance management. Flexible and configurable, this performance management system is easy to use and helps staff stay on track and in contact. This allows employees and managers to act more collaboratively without the need for HR engagement.

Using HR performance management software can improve efficiency for HR professionals, cutting admin time by up to 70%. By tracking employee performance, allowing for feedback, and providing a single platform for workplace queries and processes, performance management systems streamline HR processes. HR staff can also work more effectively thanks to automated reminders and alerts.

For example, by using xcd’s software as part of a performance management system, B. Braun Medical boosted productivity by 10%.

Want to find out more about how you can streamline your company’s performance management system? Learn more below: