If organisations reviewed their own performance appraisal systems, there is a good chance they would gain a 'does not meet expectations' rating. New research has revealed serious shortcomings in appraisals, which means talent is not being identified or engaged. The question is not just about whether managers make the most of their talent management tools, but whether the tool itself is up to the job.
The figures show dissatisfaction on a massive scale. A survey of 175,000 employees by assessments company ETS found 38% are unhappy with their employer's appraisal system. This supports research by YouGov for Investors in People, which recently found 29% of those who are given appraisals think they are a waste of time.
Appraisals seem to be failing on four counts. First, they do not engage talent and make them feel recognised, because managers don't take them seriously. The YouGov survey found 23% of those who are given appraisals think their manager looks on it as a tick-box exercise, and 19% think their manager does not even think about it until they are in the room.
Second, they still fail to give employees effective objectives for the future. John Mahoney-Phillips, head of the leadership, performance and talent team at UBS says: "A major source of dissatisfaction is the clarity of objective setting and the extent to which the appraisee is involved in the setting and ongoing review of achievement against objectives." In many cases objectives are also divorced from the broader needs of the business. In fact, the ETS research found only 74% of people knew what the company wants to achieve over the next year, falling to 66% in professional services and 60% in manufacturing.
Third, appraisals fail to provide a roadmap for the development of talent. Appraisals are meant to result in individual plans for employee development, but the YouGov survey found only 21% think their manager will always act on these plans and 20% say their boss rarely or never follows up concerns. The ETS survey found only 67% are happy with their opportunities for career development.
Finally, appraisals still do not feed into broader promotion and reward. Mahoney-Phillips says: "Very often processes aren't as transparent as they could be, in terms of the factors that go into promotion decisions. Organisations must work to make standards clear to employees." As a result, the ETS survey fund only 59% of people believe the promotion system is fair, while the YouGov survey found 21% have had an appraisal they thought was unfair.
These flaws should not be beyond fixing, but HR directors say managers must be trained to buy into the process. Dawn Etherson, human resources manager, Aggreko Manufacturing, says: "I have seen the value of appraisals first-hand. I know they can be motivating."
The ETS survey found line managers are able to work outside a formal system. The same survey actually found 81% of employees feel they are well-managed and 85% say their immediate manager shows appreciation of their work. It is just a case of embodying this within the appraisals.
Some companies are bucking the trend shown by the research. On linking employees' objectives with the broader business, group HR director of Land Securities Angela Williams says: "All our performance measures are aligned with business objectives at the individual, business unit and group level. Employees can see their contribution makes a difference."
Some appraisals are also being fed directly into personal development and reward. Gabrielle de Wardener, human resources director for Groupe Aeroplan, the loyalty management company that runs Nectar, says. "In the first instance, information from appraisals feeds into bonus payments. They are based 50% on company performance and 50% on individual performance, and we are quite explicit about what has been awarded from each. We also take appraisals into account when deciding promotions and succession planning."
Helen Frewin, head of people performance at Gala Coral, is equally explicit about this link: "The scores feed into pay. The four-point rating scale will relate to the percentage of pay they are awarded, once the scores have been calibrated."
Some, however, feel that the performance review is just one conversation a year, and there needs to be ongoing communi-cation if employees are going to remain engaged.
Significantly, the line manager may not always be the best person to identify talent. According to Sue Filmer, principal at Mercer HR Consulting, talent management is made up of "different data points". She says: "The appraisal is one of these points, but it's the view of just one manager and it doesn't tell you anything about potential."
At Agrekko, the human resources department provides an additional point of view. Etherson says: "At the end of the appraisals I conduct a people review with the function heads to identify talent, and then roll that up to the managing director, so there's a strategic view of talent from the top."
Elsewhere, this more rounded view could come from leaders. Filmer says: "In some cases the managers make the initial judgment and groups of them get together in a meeting to share views and come to a wider consensus."
If this starts to sound like 360-degree feedback, it is because it is. "Organisations can pull data from 360-degree questionnaires to gather a broader range of information, so it doesn't allow bias or prejudice to creep in," says Tracy West, senior consultant at the Assessment, Development and Talent Practice at Reed Consulting. And more HR practitioners are also being encouraged to provide mentors.
Charlie Keeling, HR director of law firm Field Fisher Waterhouse, says: "We have a mentoring scheme for all staff, but once you get to senior associate level, mentoring is much more focused and regular and aligned with the relevant career path."
Carole Tansley, professor of HR innovation and director of the International Centre of Talent Management and Development at Nottingham Business School, adds: "Organisations have reported a range of additional methods. These include: involvement in 'stretch' projects; taking on a new area of responsibility; one-to-one coaching; and visits to external sites for benchmarking and personal development."
Appraisals do still have their place. However, they are just one link in the talent management chain, and at the moment in many organisations they may well be the weakest link.
STANDARD CHARTERED'S 'CONVERSATIONS THAT COUNT'
The international bank, Standard Chartered, delivers the appraisal process via a scheme known as 'conversations that count'. These are the four conversations managers have with staff each year that embody their talent management process.
There is a booklet for each conversation, guiding managers on how to use them. The four are: perform (the appraisal); learn and develop (the learning they need to meet their objectives and how to access it); build careers (once the employee has mastered the core aspects of their job); and an engagement review where managers are guided to ask questions under the headings of 'know me', 'care about me', 'focus me' and 'build strengths' (focused on building on competencies).
The 'perform' conversations are planned in January, reviewed in July and assessed in December. Aside from this, the conversations take place on a flexible basis when the employee is ready for it.
The aim is to increase engagement, enable staff to develop and use their strengths, ensure the bank keeps its best talent, encourage energy, innovation and fun, satisfy customers and deliver better business and financial results. Managers are advised that their HR regional manager can help them access further sources of support if needed, including training and extra information.