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Here’s what experts said:

Expectations must be kept in mind

Sandeep Chaudhary, chief executive officer, Aon Hewitt Consulting India

Focusing solely on a rating or bonus is the wrong way to conduct the annual appraisal process, says Sandeep Chaudhary.

“The minute a final rating or bonus figure enters the conversation, the subordinate will never be able to reflect on anything else discussed in the review meeting. He or she will remember only the rating or the incentive," he says.

Chaudhary adds that the meeting should be at least 90 minutes long for it to prove fruitful. “In these 90 minutes, one should focus on four main aspects—first being expectations, which the manager and subordinate had earlier agreed to. The second aspect should involve results, including feedback from the manager, peers and clients wherever applicable," he explains.

The third aspect should involve discussing the “gaps"—the difference between the actual result and the expectations set at the beginning of the year. Chaudhary says how the gap is articulated is critical. There needs to be conformity between the manager and the subordinate.

“The fourth step or aspect is opportunity—where one should discuss consequences and opportunities going ahead. It is more of a ‘feed forward’ than a feedback. In this aspect, one should be able to clearly define what more can be done by the person being reviewed to improve further," he says.

Chaudhary also warns that one should not try to list too many goals in a review meeting. He does not see the year-end review meeting as an opportunity to set new standards for the organization. “It is critical (setting new standards for the organization), but a year-end review meeting should be focused on the individual, who is being reviewed, and improving standards at the individual level," says Chaudhary.

Goals should be realistic

Sumit Mitra, head (group human resources and corporate services), Godrej Industries and associate companies

Appraisal is as much about setting goals as it is about evaluating the year gone by, and companies should not mix up the two as they are separate events, says Sumit Mitra. The goal-setting exercise has to start from the organization’s goals standpoint, followed by setting the context of the employee’s role in achieving it. Mitra warns that a disconnect between the organization’s and employee’s goals at the very beginning would be setting the person up for failure.

While it is necessary to make the goals challenging and have a reasonable stretch, they have to be realistic. “The goals should not be such that the person gives up even before he or she starts," he says.

Mitra says he feels that managers usually struggle to make goals measurable. “Measuring impact can be done easily in functions such as sales, but to do it with staff is challenging," he says. In cases like that, it is necessary to lay out a milestone for employees to achieve so that the impact can be captured.

Managers should also be wary of the “recency effect". “Recent events tend to impact feedback and the evaluation of a person, and that may also affect the way goals are set," he points out.

Mitra says he believes that goal-setting should be mutually acceptable. “It is important that the employee is transparent about his/her comfort level with the goals that are being set and shares the same with the manager right at the beginning," he adds.

And the manager, in turn, needs to realign it with the next level of hierarchy to address the concerns of the employee. The other critical aspect of goal-setting is ensuring that employees are aware of the support and resources that they will need to achieve those goals.

Put appraisal in sync with training

Amit Nandkeolyar, assistant professor (organizational behaviour), Indian School of Business

Companies frequently treat the appraisal process as a ritual with very unclear goals, leaving out the more important goals, says Amit Nandkeolyar.

The appraisal process should match the structure of the firm to make it efficient, he says. “If your organization is structured in project teams, then setting and rewarding individual goals can make the whole process very confusing," he adds.

Managements also need to ensure that the appraisal process is in sync with the training and development programmes, says Mitra. “Feedback that comes out of this process should ensure that people who are deficient should be put on specific development programmes and that these training programmes should meet the organization’s needs," he says.

The top management’s role is very important in setting clear expectations. “The top management should be clear about what they want. Their commitment to the process is very important as they are the ones who have to drive the big goals. They need to ensure that the appraisal process is aligned with the organization’s goals," says Mitra. And this, he says, can only be set up from the top. Top management’s commitment can add a lot of credibility to the process, he adds.

Also, the needs of organizations change, the markets change, and these changes need to be incorporated in the performance measurement systems. “Managements need to ensure that the process is dynamic enough to capture these changes and that it is in tune with the rest of the market," says Mitra.

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