Organizations have traditionally been conducting performance appraisals or performance reviews for their employees once in a year (or more). A performance appraisal program is important to employees’ professional development, and to contribute to the company’s or firm’s bottom line. No employer, whether small or big, a nonprofit organization, a government institution or a private or public company, should be exempt from having a formal performance appraisal program.

Common outcomes of an effective performance appraisal process are employees’ learning about themselves, employees’ knowledge about how they are doing, employees’ learning about ‘what management values’ (Beer, 1981). According to Stephan and Dorfman (1989) outcomes of effective performance appraisal are improvement in the accuracy of employee performance and establishing relationship between performance on tasks and a clear potential for reward. Dobbins, Cardy and Platz-Vieno (1990) told five outcomes i.e. use of evaluations asfeedback to improve performance, reduced employee turnover, increased motivation, existence of feelings of equity among employees, linkage between performance and rewards.

Benefits that could be derived from having a performance appraisal program include enhanced communications, an opportunity to effectively address performance problems, and improved employee morale. One of the main objectives of the performance appraisal is to ensure that employees perform well to achieve the organizations’ objectives. Effective performance reviews produce outcomes that benefit your staff and your business. Agreeing on outcomes, setting goals, and following up on staff feedback will show your staff you are committed to meeting their needs. 

The following outcomes would enable an organization to benefit from the overall performance management exercise:

1. The rating distribution – this will help the management to reward good performers and recognize their efforts, whereas it serves as a warning to poor performers to improve their performance.
2. The final rating for employees is an outcome of the performance appraisal.  This can help to detail out the compensation of the employees.
3. An employee’s competency gaps can be identified and areas of improvement in the performance can be suggested.  Managers can take the necessary steps to help the employees improve on those areas. This will lead to growth of employees as well as organizational growth.
4. Identification of high potential employees. This can help in succession planning of an organization.  High potential employees can be nurtured and can tuned towards leadership path.
5. The necessary training requirements of employees can be an outcome of the performance appraisals.  This can be a very valuable input to the training department, who can plan their training calendar based on that.

A good performance review process is ongoing. Use your performance review processes to build stronger, more open relationships between your managers and team members. Emphasize the importance of ongoing appraisals, and ensure you and your team continue to identify development needs and measure theirsuccess.

To summarize, outcome from performance appraisals should help in Compensation management, Succession Planning and planning the training needs for an employee. Your investment in your staff can earn your business a lasting, loyal and expert team.

Flexible performance management software provides good support for the above.  Its analytical capabilities help in succession planning and training needs.

For instance providing 9 quadrant reports which will help organizations to find out their star employees and high potential employees is one feature that we would like to mention  here.  Organizations can concentrate on them and nurture them as leaders.