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Performance Appraisals: Ultimate Link Between Employee Performance and Financial Success

Gregory T Jerralds asked:

Today’s businesses are under a great deal of pressure to perform. With increasing customer expectations, global competition, and costs of goods and services, many companies struggle to meet profit forecasts. As a result, companies are beginning to discover the powerful link that exists between employee performance and financial success. Many companies are relying more heavily on human capital to address consumer demands while lowering operating costs, and improving financial position.


Deploying employee performance appraisal programs that lead to measurable improvements in employee performance can provide the human capital leverage companies need to overcome many of today’s business obstacles. Companies must develop and execute initiatives that create a strong linkage between its HR department, management team and employees.


A large number of companies use formal performance appraisals to measure, recognize and reward employee performance. How frequently an appraisal is administered has little influence over whether desired outcomes in employee performance and behavior are achieved. The key to a successful performance appraisal is clear communication, accurate information and flawless execution.


Employees generally feel more motivated, empowered and appreciated when performance appraisals are executed properly. As a result, employers realize the benefits associated with higher productivity levels, increased employee performance and improved quality results.


Performance appraisals can help to increase employees’ support of company goals and objectives. An appraisal that contains clearly defined goals, objective measurements, and an accurate summary of the employee’s performance has a higher potential of increasing employee satisfaction and inspiring ongoing performance than appraisals that fail to support these elements.


Although there are many steps that have proven to be effective in delivering successful outcomes, proactively communicating expectations, frequently following up, and properly aligning goals and objectives should never be omitted.


Proactively communicating clearly defined expectations, goals and objectives to employees is one of the most important steps.  Omitting this step often results in performance appraisals that are perceived by employees as ambiguous and unfair. In addition, it is difficult for supervisors to truly hold employees accountable for their overall performance at the end of the evaluation period.


Providing employees with regular feedback regarding their individual performance is another important step. However, communicating clear goals and objectives, but failing to provide employees with frequent and ongoing performance related feedback often results in less than favorable outcomes. Failure in this area has the highest potential of producing negative results in employee satisfaction, loyalty and performance. Frankly, this is a critical area where both the employee and the employer suffer equally.


Another extremely important step in the performance appraisal process is the alignment of department-level goals and objectives with the company’s overall business strategy. Generally, the human resources department holds the responsibility of assisting with the development of department-level goals and objectives. When executed effectively, HR ensures that each department’s goals are clearly defined and aligned.  Often, this area is commonly overlooked in both large and small organizations. 


A performance appraisal that only supports general elements rarely produces high-performing employees. How the appraisal is communicated to the employee, and how frequently the employee is given performance related feedback between appraisal periods play a significant role in the effectiveness of the appraisal process.


Poorly written and executed appraisals often result in employee dissatisfaction, reductions in productivity, and unwanted employee turnover. Failure to meet the employee’s expectations during the performance appraisal process can be disastrous.  


To achieve and sustain exceptional employee performance, companies must engage their internal resources, and then develop and execute a performance appraisal program that leads to a strong alliance between its human resources department, management team and most importantly, its employees. All three groups must have a clear understanding of everyone’s role, responsibilities and expectations. This, combined with ongoing communication, meaningful feedback, and flawless execution, will position companies to achieve desired results in employee performance, lowering operating costs, and improving financial position.     

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