Rethinking the review calendar

For many corporations, employee performance appraisal is another annual ritual that must be performed. For the bulk of the employees it boils down to salary hikes and promotions. The 'performance' side of the programme get short shrift in the process. Will conducting the appraisal exercise half-yearly or quarterly help an organisation and its employees achieve common and individual goals?

Chaitrali Shirur

"Top management must set the right KRA strategy"

Any appraisal process - be it annual, half-yearly or quarterly - will be futile if it cannot help an employee understand how good or bad is her performance. Having said that, based on industry dynamics, every organisation is free to decide the right timing and frequency of appraisals. At Parle Products, we reward our employees once in six months. In manufacturing, targets change quarterly, sometimes monthly. While the annual appraisal still exists in our organisation, it is seen as a time when we collate the performance data gathered during quarterly reviews to take a call on promotions and salary hikes.

The Parle universe is divided into three groups: back office, operations and outsourced manufacturing units. Based on the employee's performance, bonus is distributed half-yearly in the months of April and October.

Over the years it has become challenging to capture key result areas (KRA). In fact, today KRAs are more fluid than ever. For instance, if an FMCG player decides to go for a product launch in a particular quarter, it will impact the KRAs of those involved in the launch. This is where quarterly reviews help in understanding the performance level of employees, especially the ones who are in operations. At Parle, the attrition rate in operations is less than 6 per cent.

Then there are some functions in which we see an exodus even after conducting quarterly reviews and paying bonuses. Soon after the annual appraisal, around 30 per cent of sales staff moves out before the attrition rate stabilises by July. Even quarterly incentives fail to avoid churn in sales. Operations and back office have lowest attrition rates.

While debating the right time to conduct the appraisal process, companies across industries end up missing what's crucial: to set the right KRA strategy. For instance, at the outset of a financial year, the top bosses in a company may say that the business should grow by 20 per cent. Few take the pain of explaining how various functions like finance, marketing, sales and HR will contribute towards this target. Or there is hardly any clarity on specific KRAs for each function. This creates confusion within the organisation as people across these functions are free to interpret KRAs on their own.

Going forward, this area will need extra attention from the top management which is capable of brainstorming on how various functions can contribute in achieving set targets. Remember, today companies do not have time to learn from mistakes made in the year gone by. There is added pressure of doing something new every year and this is applicable to the performance review process more than anything else.

Chaitrali Shirur
HR head, corporate, Parle Products

Atul Jain

"Decouple performance and reward to make the review session objective"

Most employees dread appraisals. It is easy to understand why. There is a lot of tension associated with the process, and there is always this apprehension that they will not get a fair verdict. Things get really bad in the case of the annual appraisal. Even if you go through the process sincerely, offer thoughtful feedback, and have a truly comprehensive discussion about strengths and weaknesses, I have found employees to be very distracted deep within. They go through the motions, but the question really bothering them is: "what is my hike going to be?" Nothing else really seems to matter when employees find themselves in that zone. And if the hike percentage is below expectation, the employee is angry, forlorn and lost - and unlikely to accept the feedback with positive spirit and sentiment.

So how about two appraisals every year? That would improve matters considerably because one of the two appraisals will only be about work. The employee would approach this in a calmer frame of mind. Of course, two appraisals mean twice the work and that can often be an unnecessary overhead. As part of a research, we found that extra work can be reduced by using software that automates and streamlines the workflow, and makes the activity easier to administer and manage.

The employee and manager need to write only a few sentences, or three to four bullet points; everything else can be discussed face-to-face. We found the software so easy to use that we got greedier. We decided to do four appraisals every year - that is, an appraisal every quarter. This helped in at least two ways. One, we had three tension-free appraisals out of four, and we gave ourselves four opportunities to review work - sometimes, employees can do up to three projects in a six-month period, so more reviews allow us to pay more attention to performance.

A quarterly appraisal also allows the managers to set the right expectations and prepare the employee better for her salary hike announcement. In my quarterly reviews with my team members, I get to tell them that they are performing below par and, unless they improve, their salary hike is likely to be modest. If they do better three months later, I get to congratulate them and tell them how they got things right. But if there is no improvement, then I get a second chance to tell the employee that she is failing. This prepares her better for the salary cut that has now become much more probable.

To sum up, quarterly appraisals cut down the angst associated with the whole process. Things become very tense if there is only one annual review. By decoupling the appraisal from the pay hike, we also ensure that our appraisal sessions become much more objective, enjoyable and valuable - otherwise employees tend to be far too distracted, and, while they are present at the meeting, they are only thinking about how their new pay check may look different.

Atul Jain
Chairman & CEO, TEOCO