the art of appraisals in six simple steps
How to conduct appraisals?How to conduct appraisals?
One of the top issues rises to the top of your mind as a business owner is increments. Employees, naturally, are looking forward to it. You know that in order to retain your top employees, you must meet or exceed expectations – it’s a competitive world out there. However, several questions may crowd your mind, causing confusion on how to conduct appraisals. These questions may include:-
Which employee deserves a higher raise?
And what should that increment be?
Should it be the same for all?
Should it be an arbitrary sum or based on percentages?
What about employees who haven’t met expectations?
Does I sack them?
Or should I assign them further training?
What you need is a System of Appraisal. In a large organization, there are well established systems and processes to handle this efficiently and accurately. In your business, it all depends on you, the business owner!
So, how exactly do you go about carrying out appraisal? Is it based on gut feel or your personal experience with or knowledge of every employee? Or is there a scientific process to it? Have you worked with every employee closely enough to be able to evaluate their performance correctly?
Thankfully, it is not rocket science. In fact, there is a simple and methodical six-step process to carry out Appraisals.
Step 1:- Define Roles
This is the first and most fundamental requirement. Ensure that every employee’s role is clearly defined so that they are fully aware of what is expected of them. It helps them monitor their own performance and helps you identify occasions when they go beyond the call of duty.
ROLE DEFINITION EXAMPLES:
- For a SALES EXECUTIVE:
Primary Role : to increase sales of the company’s products in your territory and
achieve the sales targets set for you.
Secondary Role : to ensure that the company’s brand image remains strong and
salient by conducting yourself in the market with complete honesty
and integrity.
- For a PRODUCTION EXECUTIVE:
Primary Role : to ensure that the company’s products are produced to the highest
quality standards, in the shortest possible time, in the lowest possible cost.
Secondary Role : to follow the laid down Standard Operating Procedures (SOPs)
without any deviation and adhere to all safety standards.
- For a SERVICE EXECUTIVE:
Primary Role : to ensure that all service requests made by customers are resolved in the best possible manner, in the shortest possible time, at the lowest possible cost.
Secondary Role : to follow the laid down Standard Operating Procedures (SOPs) without any deviation and ensure that the company’s brand image remains strong and salient by conducting yourself courteously and with complete honesty and integrity.
Step 2:- Set Key Performance Indicators (KPIs)
Once the role is defined, the next step is to specify parameters for performance. Here are a few examples of how you can do this for different roles:
PERFORMANCE PARAMETER EXAMPLES:
- For a SALES EXECUTIVE:
This could include points such as, achievement of sales target, number of calls made per
month/week, percentage of conversion of calls of to sales, etc. - For a PRODUCTION EXECUTIVE:
It could include parameters such as average productivity, punctuality, number/
percentage of product returns/complaints of defects, raw material consumption, etc - For a SERVICE EXECUTIVE:
The items of evaluation could be customer rating, average time taken per service
request, service fulfilment without escalation etc.
The parameters mentioned above are more or less objective ones, which can be numerically measured. These KPIs also dovetail into the organisation’s KPIs and Business Plans.
Attributes
To achieve the expectations set in the KPIs an employee needs to exhibit certain attributes –
Skills, Talents and Behaviour. Each role may have a specific attribute. The organization, by
nature of its business, may also demand certain common attributes. These attributes are
subjective and will help both the employee and employer to align themselves.
- Ability to talk to CXOs (sales attribute)
- Ability to patiently explain solutions (service attribute)
- Communication skills (general attribute)
- Ability to lead a team (attribute related to roles that involve team management)
- Ability to take the initiative (general attribute)
Step 3:- Set Targets/Expectations
Once you have defined the KPIs, you need to assign targets/ expectations for each of them. You also need to set a weightage for each so that its relative importance is factored into the appraisal.
EXAMPLES OF TARGETS AND EXPECTATIONS:
Sales
KPI | Target | Weightage |
Revenue/month | 1 Cr | 70% |
Number of new customers added per month | 5 | 20% |
Number of new calls/day | 10 | 10% |
Production
KPI | Target | Weightage |
Productivity per employee/month | 2 Tonnes | 65% |
Absenteeism | 0 | 10% |
Machine Utilization | 85% | 25% |
Service
KPI | Target | Weightage |
Average TAT | 2 hours | 33% |
Average resolution time | 24 hours | 34% |
Average calls per person per day | 30 | 33% |
METRICS FOR ATTRIBUTES
You must rate employees on the subjective metrics on a broader scale, to allow for
differences of degree. For example you can have a scale from 1 to 10. And divide it into bands as follows:
1-3 [Very poor]
4-6 [Average]
7-9 [Excellent]
10 [Outstanding]
These ratings are, of course, based on your observations and knowledge of the employee.
However, for better accuracy and fairness, they must be counted in conjunction with ratings
by two others: the employees themselves and their managers (if applicable), which is the
next point of discussion.
Step 4:- Employee Self-Rating
The Employee fills the Achievement figures against the targets for each KPI. The employee also rates himself/ herself against the attributes. Once the achievement figures are filled, the percentage achievement is calculated and converted to a 10-point scale.
FOR EXAMPLE IN SALES:- PERFORMANCE EVALUATION:
KPI | Target | Weightage | Achievement | Achievement Percentage |
Rating on a 10-point Scale | Weighted Rating |
Revenue/month | 1 Cr | 70% | 75 Lakh | 75% | 7.5 | 5.25 |
Number of new customers added per month | 5 | 20% | 6 | 120% | 12 | 2.4 |
Number of new calls/day | 10 | 10% | 10 | 100% | 10 | 1 |
In this example, the employee gets an overall rating of 8.65
ATTRIBUTE EVALUATION
Attribute | Self-Rating | Manager Rating |
Ability to Talk to CXOs | 8 | |
Communication | 10 | |
Team work | 6 | |
Initiative | 8 |
Step 5:- Manager Rating
The manager verifies and ratifies the employee’s self-rating of his/her achievements against targets based on the data and reports available. He/she then adds his/her rating of the employee on the Attributes. It is advisable that the manager puts his/her rating in the presence of the employee and takes effort to explain the differences in ratings if there are any. The ratings of the manager is taken as final
Step 6:- Final Consolidated Appraisal
If there is a large variation between the employee’s self-appraisal and the manager’s
appraisal, investigate it by first speaking to the manager and then the employee. Often,
employees have exaggerated notions about their abilities but if there is real bias on part
of the manager, this will help you identify it.
At the end of these exercises you will have a list of all employees with their Performance
Rating and Attribute Rating. While the Performance Rating gives you an idea about
the actual present performance, the Attribute rating gives you an idea about the potential of the employee.
These ratings can then be used as a benchmark to give increments and/or promotions.
Conclusion
Following these Six Steps will help you establish a systematic, fair and robust appraisal system in your organization, which will make it simpler to fix increments fairly and equitably.
However, you must remember that this is only the first step towards the setting up of a more comprehensive Performance Management System, (PMS), which will actually drive employee performance to boost your bottom-line. This is when you will begin to see bigger and more positive business impact. So, while you go about establishing an Appraisal System
through these Six Steps, do give serious thought to taking it forward and setting up a full-fledged PMS
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