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Performance appraisals and assessments are just one piece of the talent management puzzle. In order to build an empowered and skilled workforce, companies need do more than just audit employee achievements. Organizations should focus intensely on ongoing support and improvement. A common fallacy is of treating performance management as a yearly event. However, research shows that organizations with an ongoing focus on performance management have better business results.
A talented and skilled workforce is the lifeblood of every organization. The talent management market is currently valued at $5 billion, with a growth rate of approximately 17 percent. This investment in performance management is unsurprising, considering the top three challenges for organizations are:
Performance Planning is the most critical stage in defining a performance management system. It is not uncommon that there are slips at this stage and organisations land up measuring the wrong attributes. A top down approach that starts with organisational goals, broken down to department goals, then team goals and finally individual KRA's work well.
Just as planning individual KRA's is important, so is guiding each individual on how his performance will be assessed, his/her KRAs/KPIs, assessment methodology and frequency of assessment.
As mentioned earlier, performance appraisal should not be an annual event. The review frequency should be atleast quarterly if not less. There is emperical evidence to the fact that organisations where performance review is held quarterly or more frequently, 45% employees are more likely to have above-average financial performance and 64% are more likely to be effective at holding costs at or below level of competitors.
Contrary to common belief, performance appraisal is actually a development tool rather than being a system to decide increments and promotions. The latter can of course be a use of a PMS but not the primary purpose. Line managers and HR need to work in tandem after each review to train and develop the employee based on appraisal results. If followed meticulously, there would be a significant impact on organisational efficiency and effectiveness.