“There are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: employee engagement, customer satisfaction, and cash flow. It goes without saying that no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.” – Jack Welch
The quotation (albeit a long quotation) mentioned above by Jack Welch highlights the three primary measurements that all business owners (and senior management) need to pay attention to when determining whether their business is successful or not.
At the risk of repeating myself, these three benchmarks are employee commitment, cash flow, and customer satisfaction. Without all three elements working both as individual aspects of the business, as well as together as a united whole, there is very little chance of a successful business venture.
Furthermore, both cash flow and customer satisfaction are driven by employee engagement and commitment to the business. In other words, the employee has to be a chief cornerstone of the thriving business model.
As a result, the question that should be asked is how should the business (or upper-level management) determine whether its employees are contributing to the elements of customer satisfaction and cash flow.
The good news is that there is a simple answer to what might otherwise be thought of as a complex, possibly unanswerable question. In essence, the most straightforward explanation is that the Performance Appraisal Process (when set up correctly) will provide the insights management requires. After all, no business can afford to employ and pay unproductive staff.
The performance appraisal process: out with the old and in with the new
The standard (and outdated) format of the performance appraisal that is still widely used to date is the annual review. In other words, once a year (either at year end or the employee’s anniversary date), management provides their underlings with a set of questions based on their pre-agreed Key Performance Indicators (KPIs).
These questions are designed to determine whether, and how well, employees have performed during the last year. Furthermore, once the employees have submitted the answers to these questions, they are individually called into a meeting with senior management to discuss their performance over the last year.
Finally, a new set of KPIs is agreed upon (by both the individual staff member and management) for the year going forward.
There are two challenges with the annual performance appraisal process:
The generic set of questions based on the annual KPIs do not allow management to form an adequate and correct picture of the individual staff member’s performance. Simply stated, people are different, with different temperaments and strengths and weaknesses. Therefore, it makes sense that individual employees might not always gel with other staff members when tasked with working on the same team. Needless to say, this situation becomes untenable very quickly and can result in the failure of the project as well as the loss of income and business.
Furthermore, the role that each individual plays within the company is different. Therefore, asking everyone to answer the same set of questions is not going to provide an accurate picture of each employee’s performance of over the same time frame.
Seen as a waste of time
The performance appraisal is seen as an interrupter and waste of time by the business. Consequently, the review process is usually only scheduled for once or twice a year. Simply stated, the prevailing thought is that the sooner the review process is over, the quicker the business can get back to its primary function, that of earning money.
The focal point (project-based) review process
It is an accepted fact that the appraisal (or review) is a robust way to measure employee performance. Therefore, the question that begs is what format should this review process take.
Our human resource experts at AssessTEAM posit that the performance appraisal must be a vital element of the project management (or focal point) process. Not only will this help increase company profitability, but it will also aid management in determining the reasons for a successful (or unsuccessful) project.
The case of the employee that does not function well within a specific team dynamic that has been mentioned above is a primary example of where the annual appraisal will not necessarily help management determine what is wrong and why the project is not successful. Or, it will provide the necessary insights after the fact when the company has lost income and clients.
On the other hand, the focal point appraisal is designed to evaluate employees based on the success of each project that they work on. It should be noted that the focal point appraisal does not need to be conducted at the end of the project, it can be part of the essential milestones that make up a project plan. As a result, the resulting measurements will help determine if, and why, a project might be lagging and prompt action can be taken to rescue the project.
Based on the arguments set out in the above content, it is reasonable to conclude the focal point performance appraisal process adds more value to the business than the anniversary date appraisal. In summary, the project-based review process allows management to remain in control of the project plan and to take quick action if the objectives set out in this plan are not met.