Advantages and Disadvantages of Performance Appraisals
Estimated reading time: 5 minutes
The end of the year is quickly approaching, which typically means an evaluation of how the organization performed during the prior twelve months.
This year-end review can help an organization fine-tune its practices and work to create momentum for the next twelve months.
Often this review includes conducting performance appraisals for employees.
Why Is It Important To Conduct Performance Appraisals?
Employees, as well as managers, often question why organizations do employee performance appraisals.
Anyone who has ever been on the receiving end of a performance appraisal could argue why they perceive it to be ineffective and a complete waste of time.
Employees often feel unjustly assessed, and managers often go through a forced annual process to comply with job expectations.
This doesn’t make it easy for either party.
So what exactly is a performance appraisal?
A performance appraisal is an evaluation of an employee’s job performance over a specific period of time.
It is the equivalent of a report card on an employee and how their manager assessed their performance over the prior year.
Anyone who has worked in more than one department or at more than one organization can attest to the fact that not all performance appraisal processes are the same.
The varying systems and processes are all over the map.
Unfortunately, some are done so poorly that they are not only designed to fail but also to create a negative experience for both the manager as well as the employee.
Why do organizations do performance appraisals?
There are many varying opinions on the subject of performance appraisals and why they are done.
Some organizations do performance appraisals because they feel obligated to do them – because everyone else does.
Other organizations do performance appraisals to make sure they have a piece of paper in the employee’s file – in case they ever need to take corrective action.
However successful organizations understand the importance of incorporating performance appraisals into their performance management process and strategy.
They use this tool to encourage, engage, and develop their talent pool.
There are without a doubt some disadvantages to conducting performance appraisals, however, there are also important advantages to going through the process.
Let’s explore both the advantages and disadvantages of conducting performance appraisals.
Advantages of Performance Appraisals
Documentation: A PA provides a document of employee performance over a specific period of time. It’s a piece of paper that can be placed in an employee file. This document can be used as a resource that tells the story of an en employee and is used when there is a change in leadership.
Structure: This process creates a structure where a manager can meet and discuss performance with an employee. A structured process forces the uncomfortable conversations that often need to happen and may not without the formalization of the process.
Feedback: Employees crave feedback, and this process allows a manager the opportunity to provide the employee with feedback about their performance and discuss how well the employee goals were accomplished. It also provides an opportunity to discuss employee development opportunities.
For instance, performance appraisals should identify areas of development for an employee so a manager can work to develop the employee for greater responsibility.
Clarify Expectations: Employees need to understand what is expected of them and the PA process allows for a manager to clarify expectations and discuss issues with their employees.
Annual Planning: It provides a structure for thinking through and planning the upcoming year and developing employee goals.
For instance, if a manager has departmental goals for the year, the performance appraisal time is a great time for developing employee goals that help a department reach its goals.
Motivation: The process should motivate employees by rewarding them with a merit increase and as part of a comprehensive compensation strategy.
For instance, employees who perform at higher levels should be rewarded with a higher percentage pay increase than employees who merely go through the motions.
Disadvantages of Performance Appraisals
Creates Negative Experience: If not done right, the performance appraisal can create a negative experience for both the employee as well as the manager. Proper training on processes and techniques can help with this.
For instance, an untrained manager may fulfill the duty of conducting a performance appraisal without investing the time and thought into helping to develop an employee. Or, a manager may only focus on the negative and not reinforce positive employee behaviors.
Time-Consuming: Performance appraisals are very time-consuming and can be overwhelming to managers with many employees. I’ve known managers who were responsible for doing an annual PA on hundreds of employees.
Natural Biases: Human assessments are subject to natural biases that result in rater errors. Managers need to understand these biases to eliminate them from the process.
For instance, similar-to-me bias is one in which managers favor employees with similar personalities and work habits.
Waste of Time: The entire process can be a waste of time if not done appropriately. Think about the time investment when the end result is negative. It is time wasted on all fronts.
Stressful Workplace: Performance appraisals can create stressful work environments for both employees and managers. Proper training can help to reduce the stress involved in the process.
A Performance Management System Can Help
Finally, performance appraisals are only as good as the performance management system it operates within.
Organizations that only do performance appraisals for the sake of doing them are wasting their time.
However, organizations that incorporate performance appraisals into a comprehensive performance management system and use them to implement business goals have an advantage in accomplishing their goals and ultimately their strategic plan.
If you are interested in learning more about performance appraisals, you might find the book Performance Appraisal Source Book: A Collection of Practical Samples
