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Impact of performance appraisal on the bottom line


I am currently reviewing our performance appraisal process and am seeking any data available on the impact of good performance appraisal on the bottom line. Issues such as recruitment, retention, motivation and profitability. My board is very focussed on the bottom line and I would like to be able to back up my proposals with some reliable data which will persuade them to invest in my proposals.

Also what views do people have on the link between performance appraisal and reward. I have heard vastly different views expressed as to the benefits and disbenefits of an overt link. Does it motivate and thereby improve performance or does it lead to problems being hidden at the appraisal for fear of financial penalty.

My company offers professional services.
Mary Ann Reynolds

3 Responses

  1. Bottom Line Appraisals
    We have recently reviewed and enhanced our own performance development review, and addressed the issue of linking rewards to the review.

    My experience in my current organisation and many previous ones is that you need to start with the question “What do we want from this process?”.

    Are you apprasing because you have always done so, or because you feel you should? Are you apprasing just to review past performance or are you also looking to the future? What is the management culture like? What about employee perceptions? Recent events and experiences in the organisation will have a part to play.

    We have steered away from linking overtly the reviews to rewards for several reasons. Firstly, it’s a minefield! Our organisational culture, because of what happened within the business several years ago, has resulted in an employee culture suspicious to a degree in appraising and measuring.

    We are addressing this by emphasising the capability of the review process to highlight individual areas for improvement, not just with the job holder, but also with the line manager, and to promote an on-going dialogue. The outcome is therefore an individual training development plan for each employee, an action plan on how the manager can support employee development, and a notional contract between both parties requiring signatures.

    To support all this is activie delivery of training and development (formal, informal, on the job, coaching etc) and also an ongoing programme to further develop the skills and more importantly the attitudes/behaviour of managers to this and other key management responsibilities.


  2. Bottom Line Appraisals (cont’d)
    It’s a slow process but we are beginning to see the fruits of our labours in behaviours that are beginning to directly address performance issues. We are at the point now where over the next 6 months we will be able to attribute direct ROI figures for our TD efforts, and as these efforts are delivered as a result of our review process, it is reasonable to assign all or a portion of bottom line improvements to the time/costs of administering the review process.

    We have a profit-related pay/bonus system which recently payed out the maximum allowed under the scheme to all employees. It is becoming apparent to us that our PRP plus other recent initiatives on terms & conditions coupled with our developing review process will provide the necessary linkage between reviews, TD and rewards without the need to overtly link rewards to our review process. Besides, this type of linkage can develop the view in the workforce that you might only be recognised for performance once per year (or whatever the review period is) instead of allowing managers to reward employees at a more appropriate time (such as close to the event in question, thereby reinforcing the behaviours that lead to that enhanced performance)

    A bit rambling perhaps, but it is a subject dear to our hearts and we’re experiencing its trials & tribulations every day!


  3. Arian Associates Ltd
    Appraisals are fairly old hat these days.
    The current fashion is to not use appraisals because they are seen as being intimidating.
    The modern outlook is to have Personal Development Reviews – to identify how individuals can be improved in the coming year rather than kick them for their performance last year.


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