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Staff appraisals: what are they and why are they important?

Regular staff appraisals are important for every employer.

As a business owner you need to know that your people are working effectively and providing value for money.

We explore more about the staff appraisal process below.

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What is a staff appraisal?

Appraisals function as a regular service or ‘health-check’ of your workforce, to keep it working effectively.

You must also check that they are happy in their roles, and try to identify any problems.

Staff appraisals will help you:

  • Focus on good behaviours and encourage them
  • Detect problems and address them
  • Spot the best staff and reward them
  • Motivate staff and retain them
  • Identify skills gaps and fix them
  • Listen to feedback from your workforce
  • Get a clearer vision of your business overall (which can help you improve your business model)

Why are staff appraisals important?

A strong employee appraisal process helps staff to feel valued and gives them clear goals.

By having an honest conversation about what is and isn’t going well, workers get to see exactly how they can contribute to the ongoing growth of your business.

Remember that an appraisal is a two-way process, and shouldn’t feel like a disciplinary.

A staff appraisals process that is too formal or high-pressure may be counterproductive.

The purpose of appraisals is to motivate your staff to work in the most effective way.

Why is staff motivation so important?

Motivated employees are willing to go the extra mile for clients and customers.

They will also feel a sense of ownership of the company, and so will work actively to improve and maintain your internal processes.

Motivating your staff means setting goals, giving praise for good work and offering constructive criticism if things don’t go to plan.

Employees who don’t feel valued will quickly start become less effective.

On the other hand, motivated staff feel they are listened to and can give their opinions on business freely.

They are your eyes and ears on the ground, so you should treat their insight as the valuable resource it is.

Motivated staff also tend to stay working for you.

High staff turnover is costly, adds a constant level of disruption to your operations, and makes it harder for teams to work together effectively.

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Keeping your staff motivated

There are four main ingredients of motivation:

  • working towards clear goals
  • being rewarded for those goals
  • stimulating work with regular sense of achievement
  • an ongoing sense of progress and development

‘Rewards’ may involve pay, but not necessarily.

Other kinds of rewards can be even more effective, such as team lunches or outings when targets are reached.

These remind your people of the importance of working together. Your accountant can set aside funds for these rewards.

Stimulating work may be harder to offer in some cases, but appraisals will enable you to explore your options.

It could mean, for instance, that rotating some roles among your staff can provide a much-needed sense of variety.

Alternatively, you could look at the things your staff find tedious and find better ways to handle them.

Appraisals can help to identify training needs and agree suitable development plans.

Training can provide that all-important sense of ongoing progress and development.

Your staff appraisals process

Aim for consistency with your appraisal process.

Appraisals should happen at regular intervals and always follow the same format.

You are not testing your employees and there shouldn’t be any surprises.

Rather, you are aiming for a structured dialogue that sets a clear path forward for both them and the business.

Here is a quick rundown of the process.

1. Setting goals

Set goals for both the business and the employee.

How can the person better perform their key tasks and how can the business best support them?

A successful appraisal requires preparation from both parties.

A good place to start is to get both employee and appraiser to fill out a questionnaire that can then form the structure for the conversation.

Create a set of well-defined goals, with a clear outline of how the employee will try to achieve them.

Make goals as specific and measurable as possible.

2. Tracking progress

An appraisal should be a ‘summing up’ of all the regular conversations and catch-ups management has had with workers throughout the year.

Ideally, nothing in an appraisal should come as a big surprise.

You should be tracking employee’s performance and progress towards their goals throughout the year, which is why clearly defined goals are a must.

3. Creating a dialogue

It should never feel as if the business is imposing goals on the employee.

Goals should be jointly defined and mutually agreed, including how they will be tracked and measured.

Part of having a meaningful dialogue is accepting criticism from your employees, so make sure you listen carefully and always ask their opinion on how aspects of their job and the business’s management can be improved.

Also, make sure you only talk about any criticisms in terms of the business. The last thing you want is for the employee to feel that they have been personally insulted.

If you need to raise the issue of a worker’s poor performance, don’t do this only in the appraisal – it should be handled via an ongoing process where you both try to address the problem together.

Staff appraisals and motivation is a complex area of business management, so it’s worth taking the time to get it right.

Are staff appraisals legally requried?

In the UK, there's no legal obligation for workplaces to conduct staff appraisals strictly by the letter of the law.

However, many organisations recognise the benefits of appraisals in boosting employee performance and retaining top talent.

So, even though it's not mandated, well-run companies often choose to implement staff appraisals as a valuable practice.

It's a friendly way to support employees and foster their growth within the organisation.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.