Is It Time For Smarter Performance Appraisals?

Welcome to the Vantage HR Influencers Podcast. This podcast is sponsored by Vantage Circle, the leading employee benefits and engagement platform.

Performance appraisal was a familiar practice in which employees and managers sat down together for an annual assessment. If the workers were fortunate, they walked away with raises. Nobody really liked it, but in the old corporate model of command and control, this seemed like a great thing.

Today, with the widespread focus on collaboration, joint leadership, and an ongoing fight to find and retain professional workers, it's a model that is gradually falling out of favor. It has been getting a lot of bad publicity, and research says that almost 51% of employees believe that performance appraisals are inaccurate. This actually raises a lot of questions and doubts about the worthiness of a standard performance appraisal system.

However, gradually we can see the entire process change. Managers are diving deeper than the traditional performance appraisal process to gain the most out of it. Let's know more about this.

Susmita Sarma: I'm Susmita, and in today's episode of Vantage HR Influencers Podcast, we have with us guest speaker, Kyle Chetty. Kyle is an HR executive with over 11 years of experience in the HR fraternity. He was recently awarded the Young CHRO of the Year and named the Top 100 Inspirational Leaders of 2021. He was also nominated as HR Director of the Year and for the best HR strategy of the year. He is an avid food lover and very much a family man. Welcome to the show, Kyle.

Kyle Chetty: Thank you so much, Susmita. Thank you for the opportunity. It's very good to be part of this podcast.

Susmita Sarma: Okay, thanks. So let's start with the topic today, is it time for smarter performance appraisals? So before we start with that, can you give a quick introduction to your background and your vision for HR, for our listeners?

Kyle Chetty: Yeah, so I was fortunate enough to be exposed to HR at a very young age in my career. I officially started working in HR when I was working for a company over in the USA. And when I returned back to South Africa, where I'm from, I actually started working as a call center agent, and I then moved into an HR environment and I grew through the ranks. I am a firm believer of HR being one of service delivery as well as being a strategic partner and adding value to an organization. My vision for HR is that we should be a key role player and a decision maker, because after all, it's people that drive our business. So in many organizations, they make decisions that concern processes, policies, strategies. But the most important thing is that all of these things impact people. So my question is, why would we not involve the HR department, because this impacts us? We must not also confuse ourselves. HR is not just focused on people. It's really a combination of policies, governance, transformation, inclusion, and actually helping the business move forward and reach its strategic objectives.

Susmita Sarma: Okay, so then, Kyle, how do you explain performance appraisal? You know, it's a big part of HR, I guess. And how do you explain the term and its goals?

Kyle Chetty: So I think performance appraisals, for me, is really about having a conversation and reviewing performance. And I think it's really about fundamentally aligning individual effort to organizational priorities and strategic decisions. And I think an appraisal is really about setting individual expectations to reach the organization's goals, and reviewing this performance, appraising the employee, and measuring and seeing how well did you perform, did you meet the objectives, what assistance can we do to help you, and what are you struggling with, because I think that's also important. But I think part of performance appraisal is also about taking good performance and making it great.

Susmita Sarma: Right. So what do you consider, like, what are the things that you should consider while doing performance evaluations, apart from, you know, performance here?

Kyle Chetty: Yes, I think if we go a step back, the main objective of a performance appraisal is really to measure and improve performance of employees, increase their future potential, and their value in the company. And I think performance appraisal has three basic functions. One is really to provide adequate feedback to each person on his or her performance. Number two is to serve as a basis for modifying or changing behavior towards more effective working habits. And three, to provide data to managers so they are able to judge future job assignments, compensation, and so forth. I think the performance appraisal concept is central for effective management. Now, there's a lot of imagination and work that has gone into developing and refining performance appraisals, but there's a great deal of evidence that indicates how useful effective performance appraisals are. And for many people, having a face-to-face performance review can be challenging or stressful, and also for managers, this can be very tense for them when they're actually doing it.

Susmita Sarma: So definitely, you'd say that an effective performance appraisal is very critical in today's organization, right?

Kyle Chetty: Yes, I totally agree with you. And to be effective is important, because with the ever-changing business world that we're working in, we need to also look at how do we become more effective in performance appraisals, and how do we make this more tangible and more real in the business environment, to transform our businesses.

Susmita Sarma: Right. So I've already mentioned in the introduction that the standard performance appraisal methods that organizations take on get a lot of bad publicity, and research also says that almost 51% of employees believe that performance appraisals are inaccurate. So gradually, the processes are changing, of course. So what are your views on the modern and the traditional performance appraisal methods? How has that entire process changed over the years?

Kyle Chetty: Yeah, I think that's a valid point, and I agree with the research that is there. Firstly, when we're looking at performance appraisals, it shouldn't just be more than an annual chat. Now, we know that there's traditional methods of saying we review your performance annually, or every quarter, or whatever the case may be. But each method of performance appraisal has its strengths and weaknesses, and it may be suitable for one organization and not suitable for another. So I think it's important to understand where the organization is, what its maturity state is, to understand whether I'm going with a traditional performance appraisal method or a more modern stance on it. And as such, there's no single appraisal method that's accepted by all organizations. In my experience, working with companies, what I've seen is that they normally combine some of the traditional methods and incorporate them into the modern way of managing performance. I think the traditional methods worked for a very long time, things like the rating scale, the grading checklist method. And now, with the new modern ways of managing performance, we're moving more to objectives, 360 feedback, behavioral assessments, and so on. These have evolved over the years and have been adaptive to the ever-changing business environment. Now, research and experts say, no matter how you conduct your appraisal, it's important to ensure that employees are well motivated and connected with management, and that makes them satisfied in the job. Most experts also claim that annual appraisals are a vital tool for keeping the workforce engaged and must not be scrapped altogether, but we must reform how we become more agile now. In the old times, the manual, paper-based process has become outdated. By using paper and pen techniques, we've not evolved to the modern use of technology, and technology-based systems are the best approach to make employees feel satisfied. It's quick, it's transparent, it's time-saving, it's a method we can use on our fingertips. I think adopting a cloud-based performance appraisal system actually allows organizations to evaluate employees in an objective-based manner. There's no bias in terms of how I feel today. I think it's important that organizations understand the value of appraisals as well as the secrets to their effectiveness. It's not only a way to evaluate employees and guide them, it's also a way to help employees sort out their issues and overcome obstacles. Traditionally, we do annual performance appraisals, which are essential, but it's not wise to rely on a single process, and that's just my belief. We shouldn't just do an annual performance appraisal. What we should do is have other forms or reforms to regulate and measure performance for our organizations effectively.

Susmita Sarma: Right. So would you like to highlight some of the latest trends in performance appraisal methods? When you talk about smart performance appraisals, are there any recent trends you'd like to highlight?

Kyle Chetty: Yeah, I think the way in which we do performance definitely needs to change. We also need to understand the environments in which our businesses are operating. If we look at the new workforce coming into businesses, and how they want to be managed, the newer generations entering the workforce, it's important that we relook at things, but that doesn't mean we need to reinvent the wheel. I think the fundamentals of performance management and appraisals will always be there. But some of the new trends we're finding are that employees need continuous feedback. I was reading an article a while back, while we were preparing for this podcast, and a survey stated that only 28% of employees reckon that their managers focus on delivering real-time feedback instead of just filling out forms. In 2020 and 2021, we've seen COVID and how it's impacted how we manage performance, and managers cannot now go and fill out their appraisal forms for the sake of filling them. It's not just going to happen once a year. We need to look at continuous feedback, and this will help identify and bridge the gaps in employee performance. I also think continuous feedback helps when a manager rates an employee, because there's actual data to manage performance, rather than just how I feel today. I also see one of the other trends being how we make our employees feel valued through upward communication, because traditional business methods rely heavily on downward communication and very little upward communication. And I think a company's growth also depends on how well the higher management receives feedback from its employees, because if employees have a voice and can communicate upwards, we show them that we actually value their feedback and their contribution, and management actually listens to their concerns and suggestions. That's how we're going to change how we measure performance going forward. I think another trend we've seen more recently is around learning. Learning has changed so much in the last year, almost the whole world was in lockdown, and when that happened, people were scrambling because they needed to learn how to use tools like video conferencing, or learn how to work remotely and manage their performance from home. So from a performance appraisal perspective, 360 feedback has become one of the new modern methods of managing performance. We see peers, subordinates, managers, external and internal stakeholders, and customers giving feedback on employees, and organizations using analytics and recognition to help employees measure their productivity and performance, and provide additional learning opportunities to bridge that gap. One of the things I'm very passionate about in terms of a new modern method is coaching employees, because I believe this is one of the ways we can bring out the best in them. When managers are trained to deliver quality feedback to their staff, it creates a framework to succeed in coaching their employees. Continuous feedback from managers should not be sharp or lack empathy. It should be something embraced in the culture of the organization, and something that shows employees we care enough to challenge them and help them grow and succeed in their role. I think it's also about showing employees that we believe in them, and that we can help create expectations that shape their performance. Another big thing in modern performance management is around instant gratification. A survey I was recently looking at found that four out of ten employees said they don't get recognition from higher management, and it's important to understand that when good performers leave the company, it becomes a question of stability and profit. In the digital era, we should be able to check performance continuously, and have a system in place where we're rewarding and recognizing employees based on their performance.

Susmita Sarma: So my next question is related to what's in the conversation. Vantage Circle, we are an employee engagement company, and rewards and recognition is a very core product of ours, and you have so much experience in performance appraisals. So how do you relate rewards and recognition to performance appraisal, as you're saying?

Kyle Chetty: I think the goal of employee recognition in the workplace is really to reinforce particular behaviors, practices, and activities that result in better performance, and ultimately give us positive business results. Employees respond to appreciation expressed through recognition of their good work, because it confirms that their work is valued by others. A simple example, think of yourself when you've done something great at work, and you've given it 110%. When your manager gives you feedback around that and says, well done, I appreciate what you've done, this was great, this is the impact you've had, you feel valued, you feel your contribution was noticed. At the same time, when we're giving real-time feedback, if a manager is able to coach the employee and say, you've done this really well, but these are some of the things I feel you're lacking in a little bit, or these are some of the things we may need to focus more attention on next time, that employee will be receptive to this, because when employees feel their work is valued, their satisfaction and productivity rises, and they feel more motivated to maintain or improve their work. I'm also a Gallup coach, and Gallup's studies show that employee recognition is a key factor in influencing and growing engagement. We know that employee engagement is crucial to organizational performance, and meaningful reward and recognition systems can only operate in a business if there are accurate and visible processes of performance feedback and discussions. Continuous performance management enables us to identify activities and efforts worthy of praise or reward, and at the same time promotes a growth mindset amongst teams. It allows managers to see where employees go above and beyond, helps track the process of personal development, and helps make more informed decisions around compensation, salary increases, and bonuses. It's so important to understand that meaningful reward systems matter for employee engagement and happiness. We know engaged employees stay longer, are more actively involved in the workplace, and are able to produce better results. By improving employee engagement levels, this is key to boosting productivity and maximizing ROI in an organization, and if performance management is done well, it's vital for having engaged employees in the workforce.

Susmita Sarma: Right. Okay, so again, relating to COVID-19, how important is performance appraisal when people are trying so much to adapt to a new working environment brought in by COVID-19?

Kyle Chetty: Yeah, I think during this time of crisis, it can be really difficult to operate businesses as usual, with all the uncertainty. I think HR faces the biggest challenge here, because they've been pulled in different directions, from managing communications, to crisis response planning, to maintaining some level of continuity of the business. And it's so important that uniting employees around the common goal of doing their best to keep the business running as usual, if we want to call it that, can actually help inspire and enable them to stay focused during a crisis. There was no handbook around COVID-19 that we could pull off a shelf, there was no research around this. We had to adapt to this new working environment very quickly. Now, maintaining the organization's operations also offers some sort of safety, normalcy, and comfort, so that people start finding a routine for daily life in this new world of work they're facing. We're all facing uncharted territory, and we're all learning as we go. This means many organizations are currently assessing their feedback strategy, and will need to weigh in on a variety of factors to meet unique organizational needs. During a pandemic, employees may not have been as productive as we wanted them to be, due to the crisis and the circumstances they're in. Some are fully adjusting to remote work, some are dealing with unexpected life challenges, some are juggling caregiving responsibilities, looking after their kids, homeschooling. In this environment, performance evaluations can be a heavy lift. But irrespective of the situation, it could signal an opportunity for our businesses to start rethinking our performance framework. Particularly during a time of crisis, managers and employees should be encouraged to explore whether it's necessary and possible to take something off someone's plate. For example, a low priority project could be pushed out or taken on by someone more junior as a stretch assignment. This is also a good moment for the manager and employee to reset work expectations around hours, responsiveness during the day, and prioritization of tasks. And if possible, we should also look at offering reduced working hours, or allowing staff members to request this because of the crisis they're facing, because let's be honest, we all need to adjust to this new normal. And at the same time, our organizations and our teams need to adjust as well. Managers and employees can set adjusted individual goals in a collaborative fashion, and agree on what needs to be accomplished, considering what's realistic for the employee to achieve. I think one final crucial consideration when deciding to pause employee evaluations is to ensure the employees still have a framework in which they can provide each other feedback for continuing learning and growth. I think that's very important.

Susmita Sarma: Yeah, right. So, kind of turning towards the biases that we face in performance appraisal, what are the biases that you think managers can and should avoid?

Kyle Chetty: Oh, I like this question. So I think what's important, I recall a culture expert saying something around there being a vast majority of human opinions and decisions that are based on biases, beliefs, and intuition. Many of our decisions and human behaviors are not always based on facts and logic, and this is part of why, even with the best intentions, people have a tendency to bring biases into a performance review process. Bringing in bias is essentially an error in judgment that happens when we allow a person's conscious or unconscious prejudice to affect the evaluation of another person. And when it comes to performance reviews, this matters greatly because of unconscious bias, that sometimes we don't even know we're carrying. When reviewing an employee's performance, managers tend to focus on the most recent time period instead of the total time period.

Susmita Sarma: Yeah, just, you know, just before the review.

Kyle Chetty: Exactly. If we're reviewing performance over the last three months, we tend to focus on what happened in the last month or the last few weeks, rather than the full period. This is why it's so important for managers to document performance and make reference to different points throughout the time period. If someone completed a great project, get feedback on how the project went, get feedback from stakeholders, and build a database of performance feedback, so that when you're actually sitting with an employee, you're able to give them feedback for the whole period, not just the last few weeks. I also think, when reviewing employee performance, managers focus on information learned early on in the relationship, like first impressions. I've seen this a lot coaching managers, they tell me they can't understand why an employee isn't performing anymore, because they were so good when they started. That's what I'm talking about with first impressions, because there's a psychological behavior when a new employee starts, they want to showcase their skills, they want to show they made the right decision, and we form this first impression that this is a great employee. But as we start managing their performance later on, we start doubting all of that. I think one of the biggest biases we also face is something referred to as the halo and horns effect. Here, we allow one good or bad trait to overshadow the others, and we bring this into how we manage and appraise performance. It's so important to make sure we evaluate performance on multiple dimensions instead of leaving it open to interpretation. Are we rating individual achievement but failing to look at how someone contributes to the success of others? Does this person have a particular set of technical skills that's highly sought after, but they don't finish their work on time? That's the halo and horns effect we're talking about, and we need to make sure at least two to three different aspects of performance are considered, to get a holistic view, so one standout trait or skill doesn't overshadow everything else. There's also central tendency bias, which is the tendency to rate most items in the middle of the rating scale. I'll give you a real-life example from an organization I was with, we used to have a five-point scale, and what we found was that when managers were giving performance reviews, they were afraid of having difficult conversations, so they would give every employee a three. Now, that's important because you do need a rating scale, but for managers, central tendency bias means this may not feel like an issue for them, because selecting the neutral option makes it easy for them to avoid a difficult conversation with an employee. So what I did was change the rating scale in the organization, to a one-to-four scale, so there's no neutral option to fall back on. I've either said they haven't met expectations, they've partially met expectations, they've met all expectations, or they've exceeded expectations. So where are they sitting now? That's something we found really helped. But I think also, one of the other biases I find really crucial in a lot of organizations we coach is similar-to-me bias. There's an inclination to give a higher rating to people with similar interests, skills, or backgrounds to the person doing the rating. In simple terms, we tend to rate people who are like us more favorably. So in addition to making performance reviews tricky, this can also make a workplace feel less inclusive than it actually is, because of this bias of rating people we like more, or who we get along with more, or who share our interests and values, more highly. Those are some of the things that can really impact the fairness of a performance appraisal. We need to actively work to remove our personal relationship from the situation, and instead look at how we manage this person's performance.

Susmita Sarma: Yeah, really nicely explained. So anything else you'd like to add, or any suggestions to HR professionals on why they should ensure performance evaluation is conducted accurately?

Kyle Chetty: I think over the years we've seen this performance evaluation process evolve, and I think one of the things we need to start doing is removing the dependency on HR for conducting performance reviews. This is really a manager function, not an HR function. HR is there to provide the tools, the support, the guidance, and the coaching. The manager is actually responsible for managing performance and conducting the evaluation of the employee. That said, we don't want to pass responsibility entirely, it's still vitally important for HR to provide the required training and coaching to enhance the performance of those not meeting the required standard. HR should play a strategic role in helping managers identify needs and the right support to give employees. We shouldn't be afraid to have difficult conversations with those who aren't performing, and likewise, we should be giving recognition when recognition is due. But to answer your question, I think fundamentally it's important that performance evaluation is conducted accurately, because this ensures employees are recognized for their contribution and are receiving feedback. At the same time, we're linking rewards and recognition to their performance, and removing subjectivity from the process. By accurately conducting performance reviews and evaluations, we're able to get real-time data on how our organization is performing, get accurate trends around disengagement levels, and then start working on those things to have an actual impact on performance.

Susmita Sarma: Right. So how can our listeners reach out to you?

Kyle Chetty: Well, you're welcome to find me on LinkedIn, and you're welcome to follow me on Facebook. You're also welcome to contact me via email.

Susmita Sarma: Okay, and it was really good listening to you, thanks for being a part of the Vantage HR Influencers podcast.

Kyle Chetty: Thank you so much for the opportunity.

Thanks for listening to the Vantage HR Influencers Podcast, where we engage with HR influencers about human resources. Please do subscribe to the Vantage HR Influencers Podcast on Apple Podcasts and Spotify for new episodes.