Why are Staff Appraisals important for Small Businesses?

December 18th, 2017

appraisal hand shake

Ensuring that your employees are engaged, motivated and therefore retained is important for any business. Whilst conducting a staff appraisal may appear an initially daunting or confusing task, here we’ve put together some top tips to help guide you through the process.

What is a Staff Appraisal?

As the process of evaluating employee performance, an appraisal provides a business with the opportunity to:

  • understand the abilities of individual employees
  • identify if there are requirements for further training or development
  • review workloads and volumes
  • look back at what has been achieved
  • agree objectives against company targets
  • set agreed actions for the next period

Despite their importance, there is a growing trend to ditch the appraisal in favour of more regular catch-ups with employees. Whilst regular two-way communication with employees is essential, there is evidence that annual reviews are by far the best process of cementing longer term goals.

Staff appraisals are often referred to as performance appraisals, performance reviews or annual reviews. Regardless of what term is used, they refer to the same thing – the management tool which aims to ensure employees’ performance contributes to overall business objectives.

Do Small Businesses Need to Conduct Staff Appraisals?

Irrespective of organisation size there is no legal obligation on employers to introduce staff appraisals. However, conversations regarding employee performance should form an integral part of regular meetings with line managers.

If performance is measured quantitatively or using key performance indicators (KPIs), employees should be informed of their progress against targets on a regular basis. Whether set targets are used or not, however, a staff appraisal process limited to a single conversation between manager and employee on an annual basis will have very little impact.

Why are they important?

Staff appraisals provide an ideal forum for discussing positive points, concerns or issues with an employee and then agreeing aims and targets for the forthcoming review period. It is an opportunity to be clear on individual performance and achievements, which can in turn aid as a motivational tool.

The process should consist of a two-way conversation, with the employee feeling comfortable about making suggestions which could impact the overall performance of the business.

This formalised annual discussion is also the best place to discuss matters such as salaries, bonuses, absences and general observations about the employee’s work.

How to conduct a staff appraisal?

When introducing an appraisal scheme, it is important that it fits the needs of the business. The main factors to consider are how often the appraisals need to be carried out, who will carry them out and what will be discussed and included in the appraisal form.

Make sure that you gain buy-in from those responsible for conducting appraisals and that they have the relevant knowledge to conduct them in the first place.

The best way to hold an appraisal is to schedule a meeting with the employee, setting aside sufficient time where there will be no interruptions.

Be careful not to spring any surprises on the employee during the meeting. If you have concerns about the employee’s conduct or capability, do not store it up and use the appraisal meeting as a way of offloading your concerns. Where you aren’t happy with performance, bring it up with the employee as and when concerns arise.

Discuss reasonable targets and objectives for future performance and output, and where appropriate, suggest training opportunities to help employees get where you want them, and where they want to be themselves.

Appraisals should always be documented and shared with the employee afterwards, clearly outlining any resulting actions and who is responsible for them.  Documentation will also need to be kept on any employee records that you maintain.

Arguably the most important factor for an employer to remember about appraisals is to follow up on actions that are agreed during the meeting. If this doesn’t happen employees will quickly lose respect in the process, feeling their efforts were arbitrary and that the employer doesn’t take their role in employee development seriously.

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