Updated: Dec 8, 2022
According to the Global Human Capital Trends 2014 report, only 8 percent of companies surveyed worldwide believe their performance appraisal systems are effective enough to spend time on.
It's important that HR professionals develop systems that are transparent, fair, easy to understand and have the features described in this article.
The HR department plays an important role in organizations, regardless of size or type of business.
Human Resources strategically helps organizations gain competitive advantage by implementing several key programs.
The strategic HR functions are diverse and have a direct impact on the company's performance in terms of revenue and profit.
HR functions could be continued endlessly, but we can highlight a few;
Job analysis and workforce planning.
Talent acquisition and branding.
Recruitment, selection and onboarding of new employees.
Employee discipline and investigations.
Employee retention and engagement programs. Retention of top talent.
Training and development of new and existing employees to improve skills and abilities and adapt new procedures for greater efficiency,
Compensation, benefits and benchmarking to remain competitive.
International HR functions if the company is a multinational,
Succession management and career development,
and last but not least.
The corporate culture in which employees feel comfortable and enthusiastic about working to increase productivity and sales is directly related to a set of well-established policies and procedures and their fair implementation for all, without fear of retaliation of any kind.
The HR Department has the responsibility to enforce the rules for all in every aspect of the workplace. Employees who observe unequal treatment, favoritism, and retaliation will eventually either leave the company or become dissatisfied and unproductive.
The loss of motivation and disengagement will therefore lead to a reduction in the quality of services and products, and eventually have a negative impact on finances and all other aspects of the business.
One of the most strategic roles of human resource professionals in organizations is to build qualified and committed personnel to maintain the company's competitive advantage, because the most important asset of any company is its employees as they make a difference and create value to achieve the desired profits.
Human resource managers should play an important role in the company hierarchy and be represented in the executive suite to create and maintain a productive and engaging work environment.
HR’s Role in Performance Management
Performance management systems have been used for decades to assess employee performance. HR uses this information for each employee to set compensation and bonuses, provide training and development, and sometimes have crucial conversations that can ultimately lead to the termination of underperforming employees.
Performance management is defined as what's expected of employees.
It's especially important for a company to retain its top performers who contribute the most to the company's bottom line.
Performance appraisals are critical for rewarding top performers and for their career development and promotion, as these two factors are most important for them to stay with the company and advance their careers.
Therefore, performance management systems must be developed, monitored, and improved by the HR as they directly impact the overall productivity of an organization.
An effective performance management system has certain characteristics that are difficult to ignore:
First, a goal-setting process should be conducted, usually at the beginning of the year.
The manager and the employee should meet to discuss specific goals and determine what the employee will focus on during the year. At a SMART (Specific, Measurable, Attainable, Relevant, Time-bound) goal-setting meeting, the previous year's goals and the percentage of goal achievement, as well as the new goals, are discussed.
It's important that the goals established are clear and understandable to all involved and that protocols are spoken to monitor progress. Employee goals should be refined and aligned with company goals. In addition, standards for good performance should be established and clearly communicated to all employees.
A good performance appraisal system also includes peer evaluations, known as 360-degree appraisals, so that the manager can view and evaluate the employee's performance from multiple perspectives.
Next, rather than waiting to do mid-year or end-of-year appraisals, supervisors should provide frequent, brief feedback and discuss progress toward goals.
Performance appraisals should identify what training and development employees need to participate in to improve their skills.
There could be a mid-year meeting where the supervisor and employee discuss progress toward the goals set and provide feedback on performance, tracking, follow-up, and modification of goals if necessary.
If the supervisor and employee meet regularly to monitor progress, a semi-annual review may not be necessary.
The third and final step is the end-of-year performance review.
The supervisor reviews performance and usually rates it against the standards or competencies clearly identified in the performance evaluation instruments.
Employees should be given the opportunity and time to present data to show and explain why they're successful and how they feel about their own performance.
It's not easy for both managers and employees to give or receive specific feedback during the performance appraisal process, especially if it's negative.
Therefore, it's important that managers are well trained in providing meaningful, constructive criticism, criticizing the behavior, process or the outcome not the person, and describing and modeling the expected behavior.
Leaders should understand performance evaluation systems well enough to distinguish what constitutes poor, mediocre, and good performance according to the rubric described for each competency.
In addition, leaders shouldn't be afraid of unions, be transparent and knowledgeable, and stand by the ratings they give to all employees.
Performance management (PM) system should be tied to compensation.
A fair and strong performance appraisal system tied to compensation motivates workers to reach their highest potential and helps them look for ways to be more productive.
When employees know that appraisals are fair to all and that only the best will be promoted, the system works best for everyone.
A well-established performance management system includes structured training programs for all employees to improve their knowledge, skills and competencies identified in the system.
Many organizations not only engage their HR departments to develop their own internal training to support the acquisition of knowledge and skills needed to deliver expected performance, but also partner with external training organizations to provide a wide range of events aimed at staying current and following best practices.
As mentioned earlier, conversations about performance appraisals aren't easy for both managers and employees.
Therefore, performance appraisal processes may well become a compliance issue if HR doesn't intervene and regularly monitor implementation.