5 Steps to an Effective Performance Evaluation System

All, Miscellaneous, Human Resource

A traditional performance evaluation system has only been about a single process – The managers and employees would have a review meeting once in a year where the employee’s performance would be given a numerical rating based on their results and at times a ranking would also be given after comparing their work with other employees. This system has now started acting as a huge demotivation for the employees as it’s not structured correctly. Let’s look at a few ways that the performance evaluation system can be altered to make it more efficient and effective.


1. Review the current system:


To begin with, you need to present a case to your senior management explaining to them how there is room for improvement in the current performance system. In order to do that, you first need to provide a baseline metric to which you can compare your system to track the difference in performance development. The current system can be reviewed through the below parameters -

How often is the evaluation process conducted?

Do the employees receive regular feedback?

Does the process help capitalize on the employee’s potential and also help develop new skills?

Are the appraisal and the benefits are given in an unbiased manner?

Once you have answers to this question, create the new system. A change in the evaluation system will result in an immediate shift in the performance development helping you quantify the improvement.


2. Approval from the management:


Communicate with your senior management on how the current performance system needs improvement. 70% of companies today are shifting towards a modern approach that focuses on developing a closed-loop feedback system wherein the feedback cycle is continuous in nature and helps in managing the talent in a better manner. While presenting the review of the performance system, explain how planned and frequent feedback and coaching will help improve the employee’s performance, adding on to the company’s overall performance. Additionally, it also explains that the new system can be developed keeping in mind the areas that need to be improved in the evaluation process, helping the organization on multiple fronts.


3. Set guidelines: 


Before implementing the new system, there is a need to run it through the employees to make them a part of the process as their feedback is equally important in making the process successful. The HR Manager needs to ensure that the assessors who will be conducting the process should understand the know-how of the process – how to conduct evaluations, to give the right feedback, to accept the feedback from the assesse, etc.


4. Implement the new system:


Once buy-in has been received from the senior management, implement the new performance system. This should be beyond abolishing the annual reviews; it should be about replacing old techniques with the newer ones which would benefit the employees as well as the organization. While implementing the system, ensure incorporating the below points:


KRA (Key Result Areas) – Define the KRA’s of all your employees individually and let the evaluation be based strictly on them


R and R (Reward and Recognition) – Recognize and Reward your employees every quarter, this will act as a morale booster as well as a guideline for the annual evaluation Guide poor performers – Recognize and guide underperformers, understand their strengths and weaknesses and help them accordingly. This will help balance the overall performance of the organization. Link the performance appraisal results with relevant training programs, identify the gaps by analyzing the performance and provide appropriate inputs for the training. It’s important to assess the results of the training program at regular intervals to make it a success


5. Evaluate the new system:


Based on the baseline metric originally established, do a comparative analysis after 6 months. Track the changes in the employees, their productivity and the overall performance of the organization. If you note a substantial difference, then do report the same to the senior management to make them aware of the success of the new evaluation system. And in case you don’t, then you need to analyze the new system, check if you have missed out on any critical areas and if the new system needs to be reworked. Do ensure that the new system incorporates the employee’s and employer’s perspective equally and is as less subjective as possible.


Employees are the organization’s best assets and they should be a priority. Through the performance evaluation system, the organizations have an opportunity to transform their employee’s work experience into a motivating and content one allowing them to bring their best to work every day.


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