The process of performance appraisals in organisations is fraught with issues like lack of trust, a feeling of unfairness arising out of personal biases and the fact that the process is extremely time consuming.

Every aberration is an opportunity. While the recent pandemic shook the world and constrained regular work in many ways, it also provided an opportunity to relook at work and work processes. It would be plain redundant to list the examples of how work has changed since we have experienced the change first-hand. The intention of this article is to discuss one important aspect of work – performance appraisal and its place in the post pandemic world.

To begin, so to say from the beginning, we need to refresh our understanding of the term performance and the need for appraising the performance of employees within the organisation. Though both the concepts are extremely familiar to all working people, let us try and put them in perspective.

Performance refers to the execution of a pre-decided plan of action. At times, performance also refers to execution of an unexpected or unplanned event. Organisations are driven by goals. Setting performance goals is usually a top down approach, implying that an individual employee’s goal is derived from the organisational goal. Through this process, every organisation tries to control the unpredictability in its environment.

Performance appraisal on the other hand is a bottom up process. This means that the performance of an individual is assessed to see how much the person has contributed to the organisational goals. The appraisal process intends to control his/her work outcomes. It also intends to coordinate the activities at the individual level with the departmental and organisational level.

These objectives of performance appraisal remain unchanged for all organisations, whether it was before or after the pandemic. Therefore, doing away with the performance appraisal process altogether might seem equitable as a one-time measure, but would not help any organisation in the long run.

Deciding on Key Performance Indicators

The strategic intent of the organisation, the professional training of employees and the technology used to convert the inputs into outputs are used by organisations to determine the Key Performance Indicators (KPIs).

Organisations that strategically focus on innovation, have highly qualified employees and are driven by knowledge or information technology, usually use KPIs that focus on the outcomes of work and learning. They do not monitor the process through which work is done. The employee can work from home with minimal supervision even during non-pandemic times. The underlying assumption is that their professional training will control the performance of employees. Regular updates and feedback by the managers and use of staggered goals to keep track of performance is helpful for this cohort. The pandemic would have changed little in the process of performance appraisal for workers in this category.

In contrast to the above stated work design, some organisations use employees with lower skill levels, they are usually in the manufacturing and product sectors and are driven by the strategic intent of efficiency. Such organisations usually use behavioural monitoring of performance. This means that the employee is supervised closely by a superior. The rules and procedures are clearly laid out. Hierarchy is stringent. The focus is not just on the outcome of the work, but also on the process followed to reach the outcome. The issue of performance appraisal during the pandemic is most problematic for such organisations. A well calibrated and quantifiable evaluation mechanism is crucial for them. Many organisations have adopted the use of IT driven applications that allows employees to feed in daily work completion reports. These applications are especially useful when work is done remotely.

Designing Rewards

Once the organisation has decided on the aspects of performance that it wishes to monitor and control, the second decision that needs to be made is on rewarding employees for high performance. Organisations use rewards like bonuses, promotions, role changes, training and transfers etc. While the intent of setting KPIs is to maintain control over performance of employees, the intent of rewards is to motivate employees to perform better.

The kind of performance-based rewards that organisations can give is determined by the size and resources of the organisations. Large organisations can bear the shocks arising out of unprecedented events in the environment, for example, like the pandemic. Such organisations are also able to dole out large bonuses to their employees even in difficult times. It is not surprising then that organisations like Facebook paid out equal bonuses to all their employees. It is a large, cash rich organisation whose business probably flourished even more during the pandemic. Smaller organisations in sectors affected by the pandemic (e.g. restaurants, hotels, travel, and tourism etc) might not be able to afford these incentives. The challenge faced by these organisations is motivating their employees, especially the high performers in the absence of cash reserves.

The issue of performance appraisal is a huge problem for smaller, cash strapped organisations which are driven by the principle of efficiency. They need to monitor their employees all the time. Remote working makes this difficult. They are also unable to motivate their employees through monetary rewards.

Culture as an Enabler

The conversation on re-evaluating the process of performance appraisal is not new to the field of Human Resources. The redundancy of force fitting performance of employees into a bell-shaped distribution and the use of continuous feedback in place of annual performance reviews has been discussed and implemented by many firms even before the pandemic struck. If not anything, the pandemic has underscored the importance of continuous feedback instead of an end of the year appraisal. Remote working makes it inevitable for organisations to ensure regular meetings and updates with the employees.

The shift to continuous feedback, however, also entails a philosophical change in the mindset of the organisations. The spirit of continuous feedback lies in a concern for the personal and professional growth of the employee. It flourishes in a culture where employees experience psychological safety and believe that the organisation is genuinely interested in them. When learning orientation is a key aspect of the culture of the organisation, it tacitly justifies the need for continuous feedback by an organisational mentor or manager.

In organisations where the culture is based on mistrust and apathy for learning and growth of the employee, continuous feedback as a performance appraisal mechanism feels intrusive and usually backfires.

Culture is a tacit meaning making mechanism for people within the organisation. Extant research has found that organisational culture is very effective in controlling, coordinating and motivating behaviour of employees. Some indicators on what organisations can do to build a culture of trust are listed below.

i. Performance meetings should focus on employee development rather than bottom lines. When employees feel that the organisation is interested in their well-being, they feel loyal to the organisation. Research has underscored the positive co-relation between employee loyalty and striving towards the achievement of organisational goals.

ii. Organisations that have a learning culture also spend well on employee development. The percentage of budget allocated to employee development might vary from one organisation to another, but when cutting costs this should not be the first area to suffer.

iii. Culture is also built through a well thought through selection and socialisation process. When companies use attitude and personality characteristics as important parameters for recruitment, half their job is done. A poor selection process leads to poor performance in the future.

iv. The top management’s behaviour is extremely important in culture building. When the leaders of the organisation trust their employees and communicate the trust regularly through action and speech, it alters the DNA of the organisation.

When the organisational culture is built on trust and learning orientation, the employees strive to achieve the organisational goals irrespective of the rewards. Organisations that have cultures which are competitive and nurture the spirit of the survival of the fittest, create a psychological unsafe environment for the employees. The fear of being overlooked, or the feeling of unfairness might paralyse the performance. In such situations, continuous monitoring gets tenuous both for the manager as well as the employee, and political activity is bound to become rampant.

The process of performance appraisals in organisations is fraught with issues like lack of trust, a feeling of unfairness arising out of personal biases and the fact that the process is extremely time consuming. Remote work, with additional pressures arising out of the overlapping demands on the home and work fronts accentuates these insecurities surrounding performance appraisals. This seems to be an opportune moment for organisations to adopt the practice of continuous feedback. But this needs to be coupled with a culture or learning and growth. A performance enabling culture is the key differentiator between organisations that manage performance appraisals well and the ones that struggle with it.