Performance appraisals are universally unpopular – with both the managers and the employees. 

The traditional performance appraisal approach focuses excessively on previous performance while paying insufficient attention to current and future performance. To overcome this, new-age startups have been gradually moving towards a continuous development-focused dialogue between managers and their employees.

Read on to know how you can build an effective performance appraisal strategy that’ll help scale your business and boost employee satisfaction.

But, first things first.

What is performance appraisal

Performance appraisal is a regular review of an employee’s work performance. These periodic assessments are used by businesses to provide feedback on employees’ work and to explain wage raises, bonuses, and, in some situations, terminations.

Why are performance appraisals important

Some of the key reasons why performance appraisals are essential in a workplace are –

  • Improving employee engagement and satisfaction 
  • Talent retention through development-focused feedback 
  • Employee up-skilling to ensure career advancement
  • Increasing people development through collaboration and teamwork
  • Allowing employees to raise concerns, if any 
  • Identifying underperformers and arrange for appropriate coaching & learning sessions 

What makes an effective performance appraisal strategy 

Here are various strategies that businesses can adopt to implement an effective performance appraisal strategy tailored for a 21st-century workplace.

Ensure continuous feedback

Traditional performance appraisal systems focus on a year-end dialogue between managers & employees, preventing a healthy cycle of continuous feedback & professional development. It is important to set short term project goals and discuss achievements, progress, roadblocks and learnings through employee-manager 1:1’s regularly. 

The system of continuous and ongoing manager-employee conversations also helps in the early identification of poor performers. Waiting for the year-end to identify underperformers allows inefficiency to persist in the system for far too long without corrective intervention. Early identification of employees struggling to cope with the job requirements enables the HR team to make timely arrangements for monitoring and coaching them – helping reduce retrenchment.

Increase focus on people development

While building a performance appraisal strategy, it is necessary to focus on upskilling the employees. HR teams should ensure that managers focus on giving employees an opportunity for learning and personal advancement. Enhanced employee motivation & engagement consequently results in a lower resignation rate.

Reward teamwork

To build an appraisal strategy for the 21st-century workplace, HR teams need to adopt a system that emphasises and rewards teamwork rather than working in silos. This results in improving overall team performance.

Establish a continuous system of performance recognition

A move towards a year-round recognition and reward system is based on managers’ qualitative and quantitative assessments. Continuous conversations and feedback between the managers and the employees enable a more comprehensive evaluation of performance, lending greater validity to merit-pay decisions and greater acceptability among employees. 

Over to you

A performance appraisal can boost employee engagement, communication, transparency, and recognition. Hence, it is a crucial aspect in scaling employee satisfaction & productivity.

However, performance appraisal is just the beginning. To ensure true employee happiness, you need to ensure that their hikes are managed properly with on-time salary payments.

Many HR professionals use automation tools to simplify the payroll process and rule out manual errors. You also can easily manage bonus payments & salary hikes for your employees with India’s only fully automated payroll software  – RazorpayX Payroll, along with 

  • Automating salary disbursals & compliance payments like PT, ESI, PF, and TDS
  • Providing employees with a self-service portal that lets them access their payslips, apply for leaves and more
  • Insuring employees’ health with best-in-class group health insurance 

And a lot more.

So get started and simplify your salary payments along with incentives & bonus payments like never before.



A potterhead finding magic in words | Content Marketer @ RazorpayX

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