Chris Gayle (the West Indian swashbuckling batsman) is having appraisal discussions with his manager.
Gayle (CG): Sir, I scored 175 runs off 66 balls and our team won. I deserve a rating of A+.
Manager (M): You did what you have been hired for. Though what you did is good, it is not something new. In fact, I will say you are 'lacking innovation'.
CG: But sir, I played according to the situation and took 21 singles as well.
M: Exactly, your performance is not consistent. You played 15 dot balls as well. This means you failed to optimize resources.
CG: But sir….
M: Moreover, you don't come across as a team player. While you scored 175 alone, the rest of the team just made 77.
M: Yes, so overall I would rate you a C. Improve your consistency, innovation, resource utilization and team work for a better rating next year!!!!
While clearly this joke exaggerates the point, the fact remains that in many organisations employees approach the whole appraisal process with cynicism. Appraisals are seen as a necessary evil that they have to go through, come April-May every year.
In our experience, we have seen that organisations that have well designed appraisal mechanisms (though we have to admit that these are in the minority) end up creating a great work environment which motivates employees to give off their best.
What are the usual stumbling blocks for organisations to make appraisals a meaningful exercise? In our experience of working with organisations, some of the following factors seemed to be at work:
1.Designing the appraisal form: Most appraisal forms, in our experience, are too complex as they try to measure everything. Result is that the form itself intimidates employees. More importantly, we find that the HR Department does not always take the initiative to educate all employees about the appraisal process. In better governed organisations, HR holds an annual appraisal briefing for all department heads and senior employees to talk to them about handling the appraisal meetings, expectations on how the form has to be filled, how to have difficult conversations with underperforming employees, what each of the ratings mean and finally how the ratings are linked to the annual increments and bonuses. Appraisals are not only demanding for the employees being appraised but also for the persons doing the appraisal. A helping hand from HR goes a long way in making the whole process friendlier.
2.Lack of clearly defined KRAs and goals: This is problem area number one in most companies. Many organisations just go through the motions when it is goal setting time at the beginning of the year. A Departmental Head typically breaks down his own KRAs (Key Result Areas) and departmental budgets and just 'spreads' it across his various reporting staff. Not only is this process unscientific, but also lacks alignment to the larger organisational goals. Appraisal cannot just be a mathematical exercise of dividing goals across all, there has to be a briefing to all employees and a buy in has to be obtained for best results.
3.All functions may not have quantifiable goals: Some support functions like legal and compliance, for example, have to ensure that they keep companies out of trouble rather than chase any measurable goals. Appraisals in such cases can end up becoming rather subjective. How do organisations with well defined appraisal systems counter that? They break down the KRAs into two areas - one measurable, which deals with parameters such as filing of reports with regulators on time, preparing minutes of various board and committee meetings, etc. The other part of the KRA is designed with a view to recognize initiative and leadership of their area - for example, keeping senior management abreast of all legal and regulatory changes, scanning the market for recent case laws which have an impact on the organisation's business, designing systems and processes to ensure mitigation of risk for their company, etc.
4. Linkage of the appraisal process to variable pay: The variable pay component in many organisations is on the increase. This is being done with twin objectives-to reward the performers as well as to protect organisation bottom line in tough times. Thus, the appraisal process becomes the mechanism which is used to reward or deny a reward to employees. We have dealt with an organisation which has devised an excellent variable pay structure linked to goals for its sales staff. Additionally, the organisation pays out incentives on a quarterly basis as a result of which they have diffused the entire stress out of the annual exercise. Each salesperson knows that they will take home good monies in a strong quarter and conversely a bad quarter will impact their earnings. Hardly any employee in this organisation whines about favoritism or discrimination in the reward process.
5. Ultimately it's all about recognition: Organisations have become more complex over the years. People have multiple reporting lines, work in cross functional areas, drive special projects, etc. All these cannot be slotted into a fixed box from an employee evaluation perspective. It is important that the appraisal process has some built in flexibility to recognize work put in beyond the well defined boundaries. For example, if a salesperson has not acquired many new clients in a recessionary year but has put in efforts to retain existing clients, that is definitely worthy of recognition.
We have seen repeatedly that most employees crave for a sense of purpose over everything else in their jobs. A well defined appraisal methodology can help in reassuring employees that their contributions matter and that they are wanted.
(The author is co-founder and CEO of Mumbai-based Consumerge Wealth Managers which specialises in wealth management, HR consultancy and coaching. He has spent over 25 years in senior management and leadership roles.)