HR Magazine, October 2000: The Benefits of Performance Appraisals

Vol. 45, No. 10

Flawed as they may be, performance appraisals still provide employers with important benefits. For this reason, they should not be abolished.

Here is a short list of some of the benefits that appraisal systems can provide:

Communicating deficiencies. The performance appraisal process requires supervisors to take note of deficiencies in employee performance at least once a year. Without this obligation, supervisors may be reluctant to undertake this difficult process—and employees might never be told that their work is subpar.

If underperforming workers are terminated without being given a chance to improve, they will perceive the discharge to be unfair. Of course, unfairness is not unlawful. But it can motivate employees to take legal action. And even the most pedestrian plaintiff’s lawyer can turn an unfair treatment claim into a viable discrimination or wrongful discharge claimby arguing that the employee was fired for belonging to a protected group (e.g., age) or for engaging in a protected activity (e.g., complaining about harassment).

Ensuring consistency. Discrimination complaints often allege that employees with similar performance levels were handed dissimilar rewards or discipline. However, a good performance appraisal instrument increases the potential for consistency by ensuring that all similarly situated employees are evaluated on the same criteria.

Stated otherwise, in the absence of uniform criteria, there is greater potential for inconsistency.

Distinguishing among employees. Personnel decisions between similar candidates can be difficult to make and hard to justify. When choosing who will be promoted to influential positions—or who will be laid off in a downsizing—employers often must choose between individuals with very similar skill sets, experience and performance histories.

A properly conducted performance appraisal that is consistently applied throughout the organization can help employers pinpoint the strongest—and weakest—employees. It also can help justify in court, if necessary, any positive or negative personnel actions taken.

Recognizing valued performers. Even in the best companies, attitude surveys often show that employees complain about a lack of appreciation and recognition. In a labor shortage, this can quickly result in the loss of stellar employees, who are lured away by competitors.

The performance appraisal lets top performers know, in a concrete way, how much they are valued by the organization. As such, it is a necessary component of a comprehensive employee retention program.

Communicating strategic vision. An important element of conducting a performance appraisal is establishing employee goals, which, ideally, should be tied to the organization’s broad strategic aims. For example, an organization that values diversity can reflect this by evaluating supervisory personnel on their sensitivity to and appreciation of diversity.

When properly executed, an appraisal instrument can become a powerful tool for establishing corporate culture and ensuring that employees understand and act on the organization’s broad strategic goals.

–Jonathan A. Segal