Is Waiting for Annual Appraisals Too Long? Exploring Monthly Alternatives for Feedback

Hello viewers,

Actually, the appraisal method is generally followed on a bi-annual and annual basis. This is a major drawback of the system. Why do we have to wait for such a long period? Is it possible to have it on a monthly basis?

I asked our professionals about this and would appreciate your valuable ideas and suggestions.

Murali Krishnan

If you are talking about reviews that translate to growth in salary and position, then it's not possible for organizations to have it on a monthly basis. However, if it's an evaluation of performance, you can make it task-based and timely; this can happen in a week or a month.

Performance Appraisal

Most companies make this grand error of using performance appraisal as a tool for making salary reviews. Performance appraisal/performance management systems are tools for employee development. Under the current management system, salary increases are given to everybody—let's say 5% to cover inflation rise etc. When it comes to merit increases, then the overall performance is considered. At that time, performance appraisal is not done, but the overall performance for the 12 months is considered and exceptions noted.

Linking/conducting performance appraisals at the salary review is bad news. Because 11 months of good performance could be damaged by the last month of poor performance, as the current perception lingers on/influences the decision. During my consulting career, I always emphasized to the management the need for/importance of separating the two.

Regards,

Leo Lingham

Hi Leo,

I have been looking at the variable pay compensation package at the organization where I am doing my summer project. It consists of two parts - individual performance and company performance. As your grade increases in the organization hierarchy, the weightage of company performance starts increasing. For example, the weightage of company performance for an Executive Director is 50% and 50% for individual performance.

The criteria used for measuring company performance is EBITDA, as this is the ultimate goal that all the departments in the organization work for. I just wanted to know your opinion on this. Is there any other criteria that can be added, like production, sales, etc.? Also, can the company performance measurement criteria be different for different departments in the same organization?

Can EBITDA be considered as a universal measurement for any organization across sectors?

Regards,
Sajita Nair

Sajita,

EBITDA is universally used to evaluate the value of a company. To rate the company's value, investors apply a multiplying factor from 10 to 20 times the value of EBITDA, depending on the company's image/products, etc. If the EBITDA is 25 million dollars, the company could be valued between 250 million to 500 million. Hence, EBITDA is a valued criteria, and an executive director can make a significant contribution to EBITDA.

The individual performance criteria could include other factors like:

1. EXECUTIVE DIRECTOR - SALES
- MARKET SHARE
- SALES
- GROSS PROFIT

2. EXECUTIVE DIRECTOR - MANUFACTURING
- PRODUCTIVITY
- QUALITY IMPROVEMENTS

3. EXECUTIVE DIRECTOR - FINANCE
- ROI
- DEBTOR CONTROL

Regarding your third question related to PMS--

Could you please send your email, as I have to attach an Excel format.

Regards,

Leo Lingham

Hi Murali,

There are a few organizations that conduct monthly appraisals for higher-level employees, i.e., GM and above up to the ED level. I am a PG student currently working on a project about PMS in a steel-making organization. Here, the appraisal for GM and above cadre employees is done on a monthly basis by the reporting officer and reviewed quarterly by the reviewer. The rationale for conducting monthly appraisals for these employees is because of the criticality of their positions and their contribution to the business decisions and goals of the companies. For employees below GM and below, the appraisal is conducted quarterly to check if their performance is on track with the goals.

Regards, Sajita Nair