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Two peope conducting an employee performance review

Why Bother with Employee Performance Evaluations?

Employee performance evaluations may seem like a lot of work for very little payoff. Your HR department spends hour-after-hour at least one month each year making sure your managers turn in their employee performance evaluations on time. Why?

Is it to protect yourself, and the company, in the event of a legal action by a disgruntled ex-employee by documenting negative behavior or below-average work-related performance? Or, is it to keep track of high performing workers in order to reward them appropriately?

Actually, it does both…and more!

We can all agree that it's important to reward employees who meet or exceed performance standards. By acknowledging their contributions, you are showing their value to the team, department and company, but you need some acceptable established basis for this reward. An effective recognition system is simple, appears fair and equitable to all involved, and encourages continued, similar behavior from that person and other employees. On the other hand, no one sets out to be a bad employee — deep down, everyone wants to do a good job, learn how to improve if they have missed the mark, and earn a reward the next time around. So, an employee performance evaluation gives employees who aren't meeting expectations a baseline to learn how to improve in order to be viewed as successful in the future. Generally speaking, employees want to do well and be appreciated for their hard work. The employee performance evaluation is the tool that provides the measurement for creating a pay-for-performance culture within an organization. This practice will go far in creating a workforce that is engaged, productive and loyal.

Reward high-performing employees

Employee performance evaluations allow the manager to meet with his or her employees to go over actions and behaviors of the previous year and map out future goals and expectations concerning the employee's performance. By opening up the lines of communication, you are creating a situation where there should be no surprises in regard to expectations further down the line. This is also a good time to go over established job requirements and update if necessary.

With an employee performance evaluation, a manager has the tools at-hand to measure individual performance throughout his or her team, identify top performers for further development and establish a pay-for-performance compensation plan.

Reduce employee turnover

Reasons often given for employee turnover include the following: an increase in pay, better work conditions, more interesting work, opportunity to learn new skills, and a feeling of a lack of respect or recognition in the current job.

Many companies use employee performance evaluations as a snapshot of the employee that includes a listing of past achievements, current projects, skill sets, and measurable behaviors. This information can be used to find new ways to motivate employees to live up to their full potential. Addressing each individual's needs in the organization will create a highly motivated workforce that strives for the best as a whole.

So, how can you improve retention in your organization?

Based upon the information gathered in a performance evaluation, managers can compare current skills with those required for advancement in order to develop a training plan to provide the employee with continued learning and opportunities. This act is in itself a form of positive recognition; however other recognition or reward opportunities will present themselves during the performance evaluation process as the manager tracks progress on employee goals throughout the year.

This process leads to greater job satisfaction, improved morale and employee retention because your organization is staffed with a workforce of people who are highly productive, continually learning new skills and being challenged to do their very best.

Identifying areas for improvement

One of the key objectives in an employee performance evaluation is to address any of the areas that are most closely related to the employee's ability to reach his or her personal goals and contribute to the team. You may discuss the causes of any problems achieving goals, work together on proposed resolutions and emphasize problem solving and concentrating on future actions. The employee evaluation should be focused on the key success topics to avoid potential negative feelings and defensive reactions. If any of the obstacles relate to a skill gap, you can provide a skill development or training plan or identify additional resources available for the employee to overcome the difficulties and become more successful.

Documentation protects your company legally

An employee performance evaluation can also be used to protect your company. The evaluation is a detailed paper trail that allows your legal team to build an airtight case should you need to terminate an individual due to unsatisfactory performance. Upon meeting with the employee for the performance evaluation, you allow them the opportunity to discuss the events and present their side of the issue and see if you can resolve the situation together. The goal isn't simply to defend the company in court, but to advise the employee of what's expected of them and whether they are meeting those expectations. This documentation can be a very positive process as the employee may have been previously unaware of how his or her actions were affecting others and causing a breakdown of efficiency, and, once known, corrective measures can be put into place that will turn things around and may, as a result, create a new and better working situation for everyone on the team.

Case Study: First Reliance Bank

The issue:

First Reliance Bank wanted a performance management system that would enable them, among other things, to quickly identify core competencies by employee role and allow the managers to set goals and measure against them in a disciplined, structured setting. They wanted to use this application to gather pertinent information, conduct employee evaluations and create a compensation plan that was tied to performance appropriately.

The solution:

First Reliance Bank used SAP SuccessFactors Performance & Goals solution to more easily measure and track progress toward employee goals. The company is conducting their annual performance reviews with supplemental monthly updates on goals and milestones.

The result:

First Reliance Bank gained a stronger understanding of employees' perception of individual and group performance, including gaps in communication. This helped the company to align communication and expectations — and from there, more resourcefully ascertain and target areas for improvement.

Their employees were more accountable for their performance with the increased visibility of goals and resources and management had the tools to clearly measure associates growth and properly allocate compensation based on performance.

One element that's given us insight into staff performance has been the notes section. This helps keep track of feedback that comes in about an associate… These notes are extremely valuable because as time passes, they help us record a history of our people, our culture and our company. This ultimately has lead to stronger identification and understanding of our company's mission and goals.

– Pamela Anderson, Sr. Vice-President of People Management, First Reliance Bank


When written effectively, employee performance evaluations are very helpful to the productivity of an organization. They provide you with the tools to gather information and communicate company and individual goals to all employees. They also provide a structure for a pay-for-performance system that rewards employees for successfully achieving those goals. These evaluations are tools that have the ability to make everyone more productive and engaged in their jobs and therefore make the company more successful.

About SAP SuccessFactors

SAP SuccessFactors Human Experience Management (HXM) Suite helps you completely reinvent the entire employee experience. You can shift from traditional HR transactions to engaging, end-to-end experiences, using intelligent technology to make each interaction simpler and more meaningful. And by linking employee feedback to operational data, you’ll understand what’s happening and why, so you can continuously deliver unexpectedly exceptional experiences that keep your business growing.

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