3 Ways That Modern Performance Appraisals Improve Employee Retention

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Constructive feedback and productive conversations happen when all of the information shared is accurate and unbiased. This is true for every type of business. Consider this: what if you were asked to critique (appraise) the last meal you had at a restaurant, good or bad? Think about it for a moment…

Odds are, something came into your mind pretty quickly, right? Now, do the same thing, but instead of a recent meal, think of a restaurant you visited this time last year. Perhaps something comes to mind again, but it’s likely a lot less clear.

What did you order? What was the best part of your experience? Was the seating comfortable? Was that steak overcooked or undercooked?

There’s a good chance that, if you were to write a review for an establishment you dined at many months ago, it would be inaccurate. Too much time has passed to remember all of that information in great detail.

…this is what happens when companies rely on annual performance appraisals as a way to assess their employee’s performance.

Modern performance appraisals, or Modern Performance Reviews (as we call them at Castle HR) are the BEST way to avoid recency bias. They are also a great way to ensure you have the right people in the right seats… because they’re conducted quarterly.

Quarterly conversations allow you to recall recent data and information accurately and confidently. It’ll be fresh in your mind and theirs, and talking points – good and bad – will resonate better.

Connecting with your team often also means that people will feel supported in their roles, and aligned with their team, leaders and company culture. When this happens, your employees will be more motivated and want to stay with you longer.

There are several ways that modern performance appraisals can benefit your business, but today we are going to share three ways that you can use them to increase employee retention. We’ll also discuss what specifically is wrong with the “old-school”, annual performance appraisal processes.

Why Some Performance Appraisal Processes are Bad

The old-school approach to performance appraisals is, traditionally, a stiff and awkward conversation that occurs annually. Annual performance appraisal processes are considered to be unfavourable, biased approaches for several reasons:

They are often used reactively. These appraisals are conducted to ‘catch up’ on what’s been going on, rather than being used as an opportunity for ongoing development and proactive discussions.

They can be nerve-wracking for employees. Yes, your team will often dread them. Performance appraisals have historically focused primarily on what employees are doing wrong, rather than as a positive tool for development.

They can be costly. If you only conduct appraisals once a year, you are likely missing opportunities to address issues early on. This could save you time and money in the long run by avoiding employee turnover, projects that drift off course, disengaged employees, etc.

They aren’t always linked to company or departmental objectives. In many companies, the goals and objectives are constantly shifting. Annual performance appraisals mean that, at best, you’re hoping that this is addressed by your management during informal meetings with their reports throughout the year.

They don’t always account for biases and accurately reflect an employee’s true performance. We already illustrated recency bias in our introduction, but there are several other biases associated with the old-school appraisal processes, too. And this goes both ways. An employee will likely be on their best behaviour when their annual performance appraisal is around the corner… because they know how recency bias works as well!

They provide little-to-no opportunities for employers to provide guidance. And/or, there are few opportunities for employers to reinforce good behaviour so that employees know they are on the right track. The right behaviours must be rewarded and reinforced just as much as the wrong ones are corrected. Otherwise, your employees won’t know if they truly are “doing great things for the company”… don’t make them guess, just be clear.

How Conducting Modern Performance Appraisals Can Increase Employee Retention

Keeping in mind the numerous flaws of annual appraisals, it is easy to understand why having quarterly reviews will prove beneficial for your business in many ways. This is especially true when it comes to retaining employees.

Here are three ways to use modern performance appraisals to increase employee retention:

1. They Identify and Nurture Top Performers

Regular conversations with your employees means you’ll be able better to monitor their wins, losses and personal development. This can not only help you delegate tasks to stronger performers, but also, help you promote from within and keep talented people at your company.

When employees know that their potential is being recognized and rewarded, they are more likely to stay.

2. They Set Clearer Expectations for Employees

Without direction, your employees won’t always know where to go, who to ask for help, and what to do. Quarterly performance appraisals allow for ample time for your managers and their reports to discuss expectations, roadblocks and next steps. This provides an opportunity for two-way communication and feedback, and also lets you address any issues before they escalate too far.

When employees understand what is expected of them, and also know that their manager has their back, they will be happier and more productive. This will also make them more inclined to stay.

3. They Provide Employees With a Sense of Development and Progress

This speaks for itself. When employees know where they are going (or where their leader feels they could go) and what steps must be taken for them to get there, they will feel supported, and motivated, and will be more likely to remain in their role while they pursue that growth path.

Collectively, these productive quarterly discussions will help foster a winning culture as your tenured employees perform, learn and grow. They will then assist in bringing the newer hires up to speed with the process.

How to Provide and Receive Better Feedback During Performance Appraisals

Conducting performance appraisals four times annually is the first step towards assuring your feedback is more impactful. But, that isn’t the only way to provide and receive better feedback.

  • Prepare an agenda (or equivalent structured document) to keep the conversation on track.
  • Intentionally allocate some time in the appraisal process to set joint goals that align with those of the organization.
  • Focus on forward-thinking statements; avoid bringing up past events irrelevant to an employee’s future progress and performance.
  • Do not use an accusatory tone; ideally, this should feel very little like a formal report card!
  • Use specific examples when providing feedback; draw on actual past discussions and goals, results, data, etc.
  • Allow ample time for your employees to ask questions and provide feedback themselves. And when they do, don’t forget…
  • …to listen with an open mind! It’s important to speak to your employees, but listening to their feedback is equally important.

Finally, remember that this conversation isn’t limited to four times a year! Maintaining an open door policy and actively checking in on employees throughout each quarter can help make sure they’re progressing towards their goals, and also that they’re getting the support they need to succeed.

What Needs to be Included in an Effective Performance Appraisal

In order to have an effective performance appraisal, you must focus on setting attainable, realistic future-oriented goals and objectives with your employee. Avoid the temptation to spend most of the time talking about previous shortcomings.

While providing honest feedback – and allowing your employee to do the same for you, too – is key, appraisals must be forward-thinking conversions above all else.

The first thing you must do is prepare your performance appraisal document. We recommend that you use a structured document that also allows for enough time for your employees to share feedback and ask clarifying questions.

Your document must pinpoint each duty related to their role and how they are doing versus what’s expected. And, having a structured document on file means that you can refer back to it each quarter. This makes it easier and provides more clarity when tracking progress towards goals and identifying areas where they have improved since the previous appraisal, or vice versa.

It is essential that you adequately prepare for each performance appraisal to make the most of both people’s time. That is why being organized is so important. It will help you prepare for each appraisal more efficiently and refresh your memory accurately with specific examples from prior appraisals to illustrate your points.

When providing constructive feedback, avoid using general statements like, “You should learn to communicate better,” as this is vague and gives the employee absolutely no guidance. Use the power of quarterly reviews to identify recent examples of exactly what happened and what specifically could have improved that situation.

For example, “I noticed in that project update that you sent me last month, that you didn’t explain the delays Jim’s team was experiencing would likely push timelines back until the bottom of your notes. It’s important to emphasize critical information like this so that I can intervene. I would recommend structuring your communications in the future with the most important detail up front.”

Last but certainly not least, remember to leave ample time for your employee to ask questions and provide their feedback, too. Asking for their thoughts about an idea or topic is a good way to foster a comfortable, productive conversation (that contributes to a motivated and transparent company culture).

Why We Love Modern Performance Appraisals/Reviews

The modern approach to performance appraisals gives employers the ability to closely monitor and address each employee’s progress.

This means that problems will be addressed earlier on, realistic goals will be set and closely monitored, management will continually be in the loop and employees will benefit from more consistent support.

The old-school, annual approach to appraisals left room for tremendous bias, error, and actually becomes more of a time (and money) waster in the long run. Along with this, old-school appraisals don’t support the employee in real-time… meaning they aren’t doing much to benefit employee retention efforts.

Employees with direction and regular feedback from management will feel better about the support they receive. This can help them achieve joint goals, exceed your expectations, and develop their professional skills. Simply put: they are more likely to want to stay with you, whether in their current role, or perhaps another, within your company.

An organized, quarterly performance appraisal process will spare employees from feeling stressed, confused and misunderstood. Instead, they will feel motivated to work hard for an employer that shows they are invested in their growth and career.

Need help with your modern performance appraisal/review strategy? We’ve helped hundreds of companies to modernize their approach.

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