Managing the performance of your staff

This guide outlines how to identify and set out objectives for your staff, the different styles of appraisal you can use, and how to carry out an appraisal interview.

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Why have appraisals?

A good appraisal system will:

• help you to assess your staff against defined objectives
• give you the chance to give constructive feedback and to praise staff for their good work
• allow you to define medium and long term objectives for your employees

It also offers the opportunity to:

• address any problems
• discuss apparent weaknesses
• find solutions, such as offering training
• identify better ways to carry out tasks

There are four key elements in a good performance and appraisal system:

1. set objectives
2. monitor performance against objectives – help staff to improve if you think they aren’t performing as required
3. carry out the appraisal
4. provide rewards/remedies

How often should appraisals happen?

Many businesses carry out an appraisal after a set period of time for new employees or those who have changed jobs within the company. After that, appraisals once or twice a year may be enough.

Get it right from the start

A performance system will work only if you plan and implement it properly:

• make sure that you know what an employee’s job involves – read their job description
• keep it simple – this will save you time and money
• use a standard format for your appraisal forms
• make sure managers are committed to the appraisal process and they know what each employee will be expected to achieve
• discuss what is proposed with employees, or unions if appropriate, before you implement an appraisal system

If you have an information and consultation agreement in place, you have a duty to inform and consult employees or their representatives on substantial changes to work, organisation or contractual relations. This includes the introduction of a new appraisal system.

Make sure you tell your employees about it in writing and include it in any new starter information packs.

The Acas Model Workplace

The Acas Model Workplace tool can help you assess the effectiveness of your performance management practices and give you guidance on setting up and maintaining good employment relations. You can find out about the Acas Model Workplace on the Acas website- Opens in a new window.

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Agreeing objectives

Setting objectives can help you measure your employees’ performance over a set period of time, and they usually form the basis for appraisals.

There are a variety of different ways to agree objectives with your staff.

Key performance indicators (KPIs)

KPIs are objective factors that can be clearly identified and measured, such as:

• sales figures
• production output
• machine downtime
• financial performance

To make sure objectives are useful, you could use the SMART system. This means making sure objectives are:

• Specific
• Measurable
• Achievable
• Realistic
• Time-based

For example, instead of ‘increase sales’ as an objective for a sales person, you could set: ‘Increase sales to new customers by 10 per cent over the next six months.’

When performance is hard to measure

If results aren’t easily quantifiable, try a system that scores employees. For example, you might give them a score between one and six for their level of competence in certain areas. These might include:

• leadership skills
• team working
• initiative
• flexibility

The objective might be for the employee to achieve an increase in their score.

Competencies

You may prefer to base your appraisal on competencies, rather than objectives. These are behaviours or qualities that your employee should display and include things like:

• teamwork
• communication
• time management
• leadership
• problem solving

You will need to agree competencies that fit in with your business objectives.

Whichever method you choose, it’s important that your employees understand their objectives and know how they can achieve them.

Involve them in the objective setting, as they are often best placed to know how a particular task is done most effectively, and will ensure they commit to achieving it.

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Rating performance

There are many different methods of appraisal, and it is important that you choose the best one for your employees and your business.

Rating

Using the objectives you agreed with your employee, rate them on each one using a number, for example from one to six, with one being excellent and six unacceptable.

Critical incidents

The appraiser keeps a record of good or bad performance (critical incidents) throughout the year. They discuss these incidents with the employee as and when they happen, but at the end of the year these records form the basis of the appraisal.

Comparison with objectives

This style of appraisal concentrates on whether objectives or competencies have been met, partially met, or not met.

If your employee falls short on meeting their objectives, the appraisal offers the opportunity to understand why, and to look for solutions to any problems, such as the need for further training.

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Carrying out the appraisal

Line managers usually carry out the appraisal. They are likely to have day-to-day contact and be aware of the employee’s performance. It is also common for senior management to see the results, so that they are kept up to date on staff progress.

Another option is the 360-degree appraisal system, where a variety of people who come into contact with the employee give written feedback on their performance. This could include their line manager, peers, staff working below them, and in some cases even customers and suppliers. It may give a broad picture of how the employee is performing, but it can also be time-consuming and costly, and needs to be handled sensitively.

Preparing for appraisals

Make sure employees know in advance what to expect, and ask them to prepare.

When filling in appraisal forms, try not to focus solely on the recent past. It helps if you keep records of performance throughout the year, including occasions when the employee has been praised, or when problems have been addressed.

The appraisal meeting

To make the appraisal meeting as productive as possible:

• set aside enough time
• make sure the room you use is comfortable and that you won’t be disturbed
• open the meeting with positive comments
• use the appraisal form as a guide throughout the meeting
• discuss any objectives set at the last appraisal and whether they have been achieved – make sure it’s a two-way discussion
• remember that any criticism should be constructive
• agree further objectives together
• make sure the employee understands the next steps, such as a pay review or training programme
• always end the meeting on a positive note

Following up an appraisal

Give employees a written copy of their new objectives, and keep one in their personal file. Some companies give their employees a copy of the appraiser’s comments. Your employees have a right to access appraisal or performance review notes.

It is good practice to give the employee the right to appeal if they don’t agree with the appraisal and the opportunity to have this noted on their file.

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Rewarding good performance

You may choose to link your appraisal system to decisions about pay, bonuses and other financial incentives.

One-off bonus payments

These are based on a combination of a percentage of salary and how far the employee has achieved their objectives over the year.

Pay increase

This could be based on overall performance rating – for example:

• below average performance – no pay increase
• average performance – 2 per cent pay increase
• above average performance – 3 per cent pay increase
• excellent performance – 5 per cent pay increase

Shares

If you are a limited company, you may want to reward employees with shares. This means it is in their financial interest for the company to do well and the share price to rise.

Promotion

Consistently good performance and a willingness to take on more responsibility might make you consider an employee for promotion.

The pitfalls of financial reward programmes

Offering financial rewards can be an excellent way to motivate employees, but it can also backfire. There may be cause for dispute if employees discover some are given greater rewards than others. Rewards should be fair and consistent – make sure you do not discriminate against particular employees

At a management level, incentives don’t always have to be financially related and can be tailored to different sorts of success.

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CASE STUDY

Here’s how staff appraisals help us monitor performance and motivate staff

Anglesey Sea Zoo is Wales’ largest marine aquarium, attracting over 75,000 visitors per year. Director and partner Alison Lea-Wilson describes how the company introduced an appraisal system that has proved to be a key motivator for its 25 staff.

What I did

Set up a system

“When we started, our appraisals were more of an informal chat. As we grew, we decided to implement twice-yearly formal appraisals. We wanted to ensure that employees’ contributions closely fitted the goals of the business as well as provide a chance to recognise good performance and address issues.

“Appraisals run hand in hand with performance objectives. We based ours on each employee’s job description. We also talked to staff so that the objectives could be agreed in advance and they knew what to expect.”

Measure performance

“The majority of our performance objectives aren’t as easily quantifiable as, say, sales targets, so we use a scoring system. Each objective is rated on a scale of one to four and both managers and employees fill in the form. Comparing the two perspectives can be very useful for resolving mismatched expectations.

“Providing a forum where staff can express their views and have issues addressed definitely boosts motivation, as does giving praise where it’s due. We know this because we conduct anonymous staff surveys to assess the effectiveness of our appraisals.”

Conduct the appraisal

“We invite staff to appraisals in writing, including a copy of the appraisal form to fill in. The completed form is discussed during the appraisal itself, with an emphasis on constructive two-way feedback. As well as covering the defined performance objectives, we discuss related issues, for example, how training can help employees achieve their performance objectives.

“After the appraisal, team leaders document the discussion and put action points and timescales against each item before circulating a copy to the employee. However, the desired outcome isn’t for team leaders to provide a ‘to do’ list. We encourage employees to formulate their own solutions to any issues identified. That way they feel more involved and in control.”

What I’d do differently

Don’t rush it

“In the early days, we underestimated how long a thorough appraisal takes. It’s counter-productive if the appraisee feels their manager has one eye on the clock. We now allow a minimum of an hour and a half for each employee.”

Delegate to line managers

“I used to think that it was my responsibility to conduct all appraisals. I’ve learnt that delegating to line managers is equally effective and demonstrates trust in their abilities.”

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