Performance Appraisal: The Key To Better Staff Selection, Retention, And Rewards

Performance Appraisal: The Key To Better Staff Selection, Retention, And Rewards
Summary: Performance, in any discipline, is about conforming to or exceeding specific expectations, and the only way to assess performance is through an appraisal. So, what is performance appraisal, and how does it tie into staff selection, retention and rewards practices?

The Value Of Performance Appraisal

At the outset, we described performance appraisals as key to making better staffing decisions, including selecting the right candidates, rewarding them for their performance, and retaining them for the long-run. Before we talk about how good appraisal practices translate into better employee selection, let’s explore the value that performance appraisals bring to rewards and retention.

Recognizing Performance

Every employee wants to be recognized among their peers as being someone whose contributions, to the team and the company, are valued. Avenues to provide such recognition include awarding badges, gift certificates and other company perks (preferential parking, tickets to sporting events, etc.). But the two most visible ways that value is recognized in today’s work environment are through pay raises and promotions.

However, there are many questions that often put supervisors and HR professionals in a difficult position.

  • How do you know that one employee is more deserving of a promotion than another?
  • What is the basis for awarding a 5% increase to one member of the team, while only rewarding the others with a 1% pay raise?

It all comes down to doing an impartial appraisal of everyone’s performance. It is the result of that appraisal which will drive decisions on whom to reward and how. But appraisals should be more than about whom to reward and by how much.

So, what is a performance appraisal that does more than handing our rewards to employees? Well, it’s an ongoing process rather than a milestone event. Like Palo Alto, California-based Bhuvaneswar Naik, Head of Global Talent Experience, Talent & Leadership for global enterprise software leader, Germany’s SAP, put it: “The focus on employees’ development and careers should be continuous, not a once per year event, which is more compliance-driven vs. value-driven.”

Aubrey Daniels, the founder of Atlanta, GA-based Aubrey Daniels International, provider of leadership development expertise and behavioral technology to global corporations, agrees that one of the biggest drawbacks of performance appraisal is that they aren’t done on a timely basis. To be of value, performance must be appraised and recognized continually otherwise, as Daniels noted, performance appraisals end up being a “…negative process for everybody involved”.

Recognizing Performance Gaps

And a significant outcome of such an appraisal process is the identification and addressing of employee skill deficiencies. SAP has a formal workflow, which wraps around the employee assessment system of any enterprise. The approach, customized and adopted by many leading global corporations, is known as the “Calibration Process”.


Performance appraisal is a key component in determining where an employee needs to improve his/her skills gaps, a detailed “calibration plan” can be developed to bring those shortcomings in line with performance expectations. But it all starts with an objective appraisal of what the gaps are, and how they should be plugged.

Plugging The Gaps

Even though the review might indicate the employee should be rewarded for his/her performance, a good performance appraisal system could also highlight areas where employees require “calibration”. Such “calibration” can come in a variety of ways, depending on the results of the performance appraisal.

One of the most effective value-adds from good performance reviews is the identification of potential learning opportunities for staff. If managed properly, targeted enterprise learning will not only enhance employee productivity, but it can also open new avenues for both employees and organizations to benefit.

For instance, ongoing performance appraisal systems can then leverage technologies, such as AI and Data Analytics, to provide targeted learning that gives employees a head-start in new roles within the company. These tools can also assimilate a range of knowledge content within an organization (PowerPoint slide decks, Video presentations, Word documents, How To PDF documents, etc.), to help plug learning gaps identified through the appraisal process.

Motivating Employees

The most impacted constituents in any performance appraisal process are employees. So, when this segment of the company feels “disenfranchised” by the company’s performance appraisal process, perhaps due to it being untimely or overly biased, it impacts employee morale and attitudes. It is, therefore, important that to achieve its desired objectives, any performance appraisal system must be “democratic”.

For example, when global tech giant, Armonk, New York-based IBM transitioned from a decades-old annual performance measurement/review system to their more open and interactive Agile Performance Management System, there was a definite increase in positive performance outcomes from across the company [1]. Post-transition surveys concluded that: “…employees who receive frequent coaching feedback (14% of our sample) are much more positive with around three quarters saying that coaching feedback has contributed to their professional growth and/or has improved their work performance (77%)”.

Transparent and unbiased performance appraisals create a self-sustaining virtuous cycle of positivity within organizations. Employee motivation creates positivity in the workplace, which then fuels better performance and motivates employees even further.

Appraising For Retention

Another unique value-add that appraisals offer is in employee retention. So why is retention so vital to companies? Michael Kerr, noted North American business and motivational speaker, and author on workforce-related subjects and Hall of Fame international business speaker, sums up the value of retention thus: "…finding top talent is a costly and time-consuming enterprise, to begin with, so holding on to them for dear life has to be a priority."

Some of the world’s largest and best-run corporations are doing just that: they use regular appraisal sessions to poll whether good employees are at risk of leaving and if additional retention motivation is necessary. Facebook is a classic example of this strategy.

Menlo Park, California-based Facebook's VP of People Lori Goler talks about how the company uses a twice-yearly “checkpoint” meeting to get a feel for what’s going on in an employee’s life. According to Goler, it is a “…process that is designed to recognize, acknowledge, and show appreciation for people who have done really great work…”.

And an appreciated employee is one that’s prone to stick around longer!

Sunnyvale, California-headquartered LinkedIn co-founder Reid Hoffman, in his book, The Alliance: Managing Talent in the Networked Age (co-authored with Ben Casnocha and Chris Yea), explains how the professional networking company builds a paradigm of partnership and trust in its talent management strategy.

The idea, espoused by Hoffman and his co-authors, is to recognize and reward loyal and hardworking employees for their performance. And that recognition and a rewarding process can only happen through a frank and open appraisal process. According to Hoffman: “By putting this new alliance at the heart of your talent management strategy, you'll not only bring back trust, but you'll also be able to recruit and retain the entrepreneurial individuals you need to adapt to a fast-changing world”.

Appraisal’s Role In Employee Selection

Okay; we now know how good performance appraisals can support motivating, rewarding and retaining good talent. But how does it play into employee selection? Well, paradoxically, if a company is unable to recognize, motivate and retain existing (good) talent, it is highly unlikely that they’ll be able to identify potential in prospective job applicants.

Organizations build a deep pool of HR knowledge and expertise through successful performance appraisal processes over time. This expertise can then be transferred into the selection and hiring process, which is a different view of the appraisal process. It’s almost as though HR managers and talent specialists within the company develop a sixth-sense about individuals they meet, talk to or consider hiring.

The bottom line is that strong performance appraisal processes aren’t just vital to rewarding and recognizing current employees. The same basic principles can be used to also ensure you appraise and select employees who have performed well throughout the selection process, but who have the propensity to subsequently perform well within your organization.


[1] Implementing Agile Performance Management