Appraisals undervalued? Then calculate their return on investment

Does performance management add real value in your organisation or do people dismiss it as an HR bureaucracy that takes valuable time away from the ‘day job’? Intuitively, we all know that performance management can benefit individuals and the organisation. But too often it does not.

Part of the problem might be that different people have different views on the real purpose of performance management. Team members may use it as an excuse to look for a pay rise; managers may see it as a chance to deal with poor performance; and business leaders may promote it in order to reassure themselves that everyone understands and supports the business objectives.

So, although you may have a performance management process in place, conflicting perceptions such as these may be preventing individuals and the organisation from getting the best out of it and seeing little return on investment.

So how can you convince the senior team – and all managers and staff in your organisation – to change not only their point of view on performance management but also their behaviour? Why should they invest in adopting best practice? The answer to both of these questions is to express the benefits of performance management in figures, because numbers are the 'language' that is best understood by the business - and calculating the return that you could achieve by implementing best practice performance management is not as difficult as you might think.

After all, every organisation is quite different but they all do have one thing in common: people create value in teams led by a manager. So calculating that is a good place to start.

If we also assume that this organisation introduces best practice performance management, each manager starts to become more effective as a coach to their team. And other benefits accrue, such as: better goal alignment and increased employee engagement; more relevant, goal-focused conversations about performance; issues of underperformance start to be addressed and more relevant development planning starts to take place.

Here is the critical question: if all of this happened, what impact would it have on the performance of each team? Could it make a 1% improvement in a team’s performance in a year? Would it, more realistically, be a 5% or even a 10% improvement? What is the ROI?

Read the full article which was first published on 25 April 2014 on PersonnelToday.com.

When you're ready to work through your own example, then please get in touch.