Why Do Most Companies Conduct Performance Appraisals in March or April? Pros and Cons of Other Months

Hi, I am working in a newly established startup company, and we are planning for next year's performance appraisal. I want to ask why performance appraisals in most companies are conducted in March or April. What are the pros and cons of doing it in another month? Please provide some useful insights on this.

I doubt if there is a written rule asking companies to do appraisals in March-April, as I have seen companies do so in the months of December-January as well. Basically, appraisals are to be done periodically. An appraisal is a periodic measurement of the job to check how much improvement the person has made. The ideal time frame is one year (though many suggest doing it every 4-6 months).

Now, we can follow the calendar year or the financial year.

If we follow the calendar year, assessments and appraisals take place in December so that your effective salary and increments are given from the month of January.

If we follow the financial year, the assessment is done in March-April so that the increment is effective with April's salary.

I believe most companies do it in March-April so that it coincides with the Financial Year, and calculating the taxable income is not a big tax issue. However, many small companies that do not have many resources to handle all the project completion, as well as doing appraisals altogether in March, prefer doing it in the December-January time frame.

As long as the company conducts appraisals periodically and fairly, I don't think there are issues with which month you choose to do the appraisals. Or for that matter, if the appraisal month in your company is different.

Seniors, kindly correct me if I am wrong.

Understanding the Timing of Performance Appraisals

Let us put things this way. Basically, why are performance appraisals required? Obviously, to ascertain who has done what and who has not. This is to facilitate or determine any rewards to be given to the best performer. It also helps to create a healthy atmosphere of competition in the company.

The financial year of all companies is from April to March. Obviously, it is always possible to measure the performance once the charts and figures are closed on 31st March.

I appreciate the explanation given by Ankita Shah, which is absolutely correct.

Regards,
Adv. K. H. Kulkarni

If you're just doing a performance appraisal, then whatever Ankita said is absolutely correct. If you're doing a performance appraisal along with any increment or promotion, then it is advisable to conduct the performance appraisal in the month of April. The reason behind this is that normally most companies do their financial review for the last financial year in March. After the review is completed, the management will assess where the company stands in terms of profit. Based on the profit ratio, the management will make decisions regarding increments.

Seniors, if there is anything wrong, I request you to correct it.

Thank you & Regards,
Harish Kumar

Performance Appraisal Cycle: Aligning with Financial and Budgetary Cycles

If the April-March cycle is used, then the idea is to coincide with the financial and budgetary cycles. However, this process will clash with other budget-related activities. In L&T, where I worked for 31 years, the appraisal cycle is April-March only, but the process runs from July to June.

The logic is simple: Once the budget activities for the next financial cycle are decided, objective setting for the next year becomes focused and percolates down to the bottom-most employee in the pyramid. Furthermore, it will not clash with other activities of the company, allowing employees to focus fully on PMS.

Ultimately, it is about the convenience of those involved in the process.

Performance Appraisals: Frequency and Sector Variations

Normally, performance appraisals are conducted periodically, i.e., on the anniversary date of an employee's joining. Nowadays, most companies also conduct performance reviews on a quarterly basis, which is very effective and helpful in identifying both the best and the worst performers without wasting any time.

I believe performance evaluations can be implemented quarterly, semi-annually, or annually, depending on the sector. For example, in the banking or financial services sector, performance reviews for employees are typically conducted on an annual basis.

Regards,
Hanees UK

It depends on the strategy of any company on what basis the company wants to give salary increments. If an organization decides to give a percentage of its revenue, in that case, the company will conduct performance appraisals after the closing of the financial year, which will be applicable from June-July.

In some cases, if an employee resigns and the company wants to retain him/her, the company can provide a salary hike in that month itself. I feel this occurs in almost all organizations. The statements provided by seniors above are also correct.

I want to clarify that this is applicable when performance appraisals are done yearly. If a company follows a strategy of quarterly or half-yearly appraisals, then it can be done at any time because it will be systematic and continuous. Seniors, please correct me if I am wrong.

Regards

Very nice and relevant question.

@Ankita - Very well articulated.

@Sundaram - Valid point and practical as well. BUT (there is always a but... )

Purpose of Performance Appraisal

You need to decide first why you want to do a performance appraisal. Unfortunately, in India, we have somehow confused ourselves that performance appraisal is done for increment/promotion purposes, and that is the only reason why the moment you talk of a performance appraisal, you automatically picture increments and promotions... . That is also the reason why we have always had an annual performance appraisal system coinciding with our financial calendars. Is it the right way? Not really...

Frequency of Performance Appraisals

Performance appraisals must always be done periodically. Ideally every quarter but at least twice a year. Take a scenario of a person being appraised once a year. How many of us remember what we have done 6 months before? And if you don't remember, then how are you supposed to get appraised? What happens when your immediate manager leaves mid-year? How are you supposed to get appraised then?

Implementing a New System

You have an ideal situation since you are putting in a new system to make your performance appraisal system sturdy, periodic, and effective. Just remember, a good performance appraisal system can become a fantastic motivational/development tool for your organization.

It is for you to decide. A PMS to give increments and promotions or a PMS to improve the organizational efficiency and effectiveness... 

All the best,

Regards,
Navneet

Understanding Performance Evaluation Timeframes

Performance can be defined for a task, a day, a week, a month, a year, or even a lifetime. The time period for performance is important. For IT organizations, time is often limited to a quarter or a three-month period. They may also define performance by tasks or projects rather than time, where time may become the target.

Normally, individual performance is judged in relation to a role and across a short period. We typically discuss how well an individual has performed in a given role over a period of 2 or 3 years. While organizations are interested in this performance, they are more concerned with the individual's performance in a financial year or parts of a year.

Some organizations, especially those that are project-driven, are interested in the individual's performance in a project as well as in a role. For example, one might want to know how a project manager has handled a particular project. Thus, in the context of an organization, performance management is both time-bound and role-specific.

As I have gone through various inputs given by seniors, thank you very much for sharing your valuable knowledge. However, is it mandatory to give a salary hike if we review performance on a quarterly basis? Please let me know.