Some people advocate separating appraisals from pay review; however this does not make sense in organisations which require staff to be focused on their contribution to organisational performance, especially where there are clear accountabilities and measures, which in my view should apply in all organisations.
Organisations rightly or wrongly are geared to annual performance, and the achievement of a business plan. This flows to departments, teams and individuals, so it makes sense to assess people over a time period that fits with what the organisation is aiming at.
Transparency and accountability are prerequisites for proper assessment and appraisals.
Departmental, team and individual objectives provide the context for the appraisal, linking clearly to performance bonus and performance-based pay awards, the rationale for which needs to be transparent and published prior to the start of the year to which they relate, for the full benefit and effect on staff effort to be realised.
Pay review would also coincide with the financial year, which makes sense from the planning and budgeting perspective.
The business is in a position to know by the close of the final quarter what the overall pay review position is because the rationale has already been / should have been established and year-end financials can be predicted.
Moreover the next year’s corporate plan (at least in outline) is established, which gives another useful context for appraising people, especially those who have contributed to the planning process (i.e., committed as to what they can do for the coming year, targets, budgets, staffing levels, priorities, objectives, etc).
The appraising managers can therefore go into appraisals fully briefed and prepared to discuss and explain the organisation’s overview results and financials to the appraisees.
And the appraisees can see results and think in terms of their full year performance and contribution to corporate results, plus what they plan for next year, which provides the basis of the aims and objectives to be reviewed through the coming year and at the next year’s appraisal.
Other guidelines for organisational appraisals planning
Other than for directors, complex or difficult appraisals, appraisal meetings should not be 3 hour marathon sessions - this extreme situation happens when manager and subordinate never sit down together one-to-one other than for the annual appraisal.
If you only talk properly with someone once a year, no wonder it takes all afternoon...
Manager and subordinate should ideally sit down one-to-one monthly (or at worse, quarterly, for the more mature, self-sufficient people), to review activity, ideas, performance, progress, etc., which makes the annual appraisal really easy when it comes around, and manageable in an hour or 90 minutes maximum.
Use of a good appraisal form including self-assessment elements is essential for well organised appraisals. Ensure that appraisers and appraisees understand what they must prepare in advance.
Training for appraisers and appraisees on how to use the appraisals process properly is very helpful obviously, especially taking a more modern view of what makes people effective and valuable to employers, and how to encourage this development, which relates to developing the whole person.
Pay reviews and awards
If you want to be regarded as a caring and ethical organisation, it’s also helpful for the organisation (board) to agree a basic across-the-board inflationary salary increase close to year end and announce this - everyone gets this.
This can be based on a collection of factors, decided by the board, typically: inflation, the organization’s financial position, demographics and competitor market forces on salary levels.
Individuals can then receive an additional increase on top of this according to criteria agreed before the start of the year (at their last appraisal) based on performance, achievement of targets, job-grade advancement, qualifications attained, training aims achieved, and any other performance levers that it is sensible, fair and practicable to incentives.
The basis for these individual awards must be established and budgeted for by the board, circulated, and explained to all staff via managers.
Whilst not always easy or practicable to design and implement, arguably the best collective annual pay increase mechanism is one that effectively rewards everyone directly and transparently for corporate performance, i.e., ‘profit share’ in spirit, based on the whole organization and a business unit/department to which they relate, plus an individual performance-linked award based on the sort of levers mentioned above.
It’s about people believing that they are all part of the group effort, pulling together, and all enjoying a share of the success. Profit share deals just for directors are rightly regarded by most staff as elitist, exclusive, and divisive.
Appraisals and training planning
Where appraisals coincide with year-end, training department must not rely exclusively on appraisals data for training planning (the data arrives too late to be used for training planning for the next year quarter 1 and probably quarter 2).
Training planning must work from data (based on audits, analyses, manager inputs, questionnaires, market and legislative drivers, etc) gathered/received earlier during the year.
Training planning by its nature is a rolling activity and thought needs to be given to how best to manage the data-gathering and analysis (including the vital details from staff appraisals), training planning activity, and integrating the costs and budgeting within the corporate business planning process.
Obviously, training for appraisers and appraisees on how to use the appraisals process properly is very helpful, especially taking a more modern view of what makes people effective and valuable to employers, and how to encourage this development, which relates to developing the whole person, in the direction they want to go, not just job skills. Appraisal techniques are vital for employers to assess performance thus a benchmark to progress.