Little girl on a wall with a meter to measure her height

January 11, 2015

Rocío ValenzuelaRocío Valenzuela
Hrider Product Manager

10 Reasons to do a Performance Appraisal

At Hrider, we firmly believe in the importance of establishing performance evaluation processes in organizations and managing them effectively in line with the technological advances that currently exist. In our opinion, all organizations could significantly enhance their competitiveness by incorporating a system for measuring the performance of the individuals who comprise them. This is particularly crucial in the current professional landscape where new employment relationship models are being established. In these models, the roles of employees and companies are evolving toward more egalitarian relationships that result in mutual benefits. Jobs are no longer for life but will last as long as the relationship remains satisfactory and profitable for both parties.
Our reasons for advocating this approach are as follows:


1. Increase productivity

Faced with the abundance and wastefulness that we have experienced, a shift in mindset is necessary, focusing on concepts of efficiency and the optimal use of available resources. We've all witnessed instances in many organizations where the lack of sound criteria in resource allocation (which is always limited, although sometimes our behaviors indicate little awareness of this fact) has raised concerns. It is now widely agreed that being sustainable equates to profitability and depends on individual efforts, as nobody is going to provide handouts.

There is no longer any doubt that companies capable of harnessing the potential of their teams, motivating them to work in alignment with objectives, will be the ones to keep progressing. No longer should we waste efforts on tasks that don't add value, as these only reduce motivation and distract us from our primary focus.

A system that enables the company and employees to recurrently measure their efforts encourages improvement, clarity about expectations, and the best decision-making based on objective criteria.

2. Contributes to the professional development of the employee

The individuals who derive the greatest satisfaction from their work are typically those who manage to align their efforts with the business goals or objectives of their organization. By doing so, they can witness tangible results for the time they invest (and some may even be rewarded for their efforts). This ongoing process of improvement is reflected in the professional growth of employees, as they accumulate positive experiences and gain the necessary knowledge for their development.
One of the essential foundations of any Career Plan is the Performance Evaluation, which nurtures the development of professionals' abilities, skills, and competencies. No employee can improve without receiving some form of feedback on whether what they are doing is right or wrong. This feedback is the cornerstone of learning. An evaluation process provides constructive feedback on what is done well (recognition) and what can be improved (areas for learning). Simultaneously, it offers the organization an opportunity to determine the most effective tools to provide to its employees to assist them on their developmental journey.

It is crucial for both the company and the employee to share the responsibility for planning a professional pathway where the organization offers opportunities for growth. These opportunities need not be restricted to upward advancement but can also encompass horizontal growth. In this regard, there are no limitations, as any company, regardless of its size, can always find ways to expand and engage its teams.

3. Improve communication

Management manuals often suggest that approximately 80% of crises within organizations are attributable to communication errors. While the exact percentage may be debatable, it is widely accepted that effective internal communication channels can play a vital role in addressing a multitude of issues. Many of these crises might have been averted had organizations clearly communicated individual responsibilities and expectations.
Today, it is not only important for a company to establish its brand in the external market but also to project the company's image and values internally. This involves engaging employees to make them feel included and loyal, which aligns with the concept of "Employer Branding." Employer Branding focuses on promoting corporate culture, where clear and consistent communication is a fundamental ingredient.
Demonstrating genuine concern for employees' well-being and understanding their needs for optimal working conditions is an expectation of every professional from their employer. Some organizations have even integrated communication as a central objective in their performance evaluation processes, aiming to foster meaningful communication between employees and their immediate supervisors.

4. Prevention and detection of problems

The only thing worse than having a problem is having one and not being aware of it. Performance evaluation processes play a significant role in identifying such situations and promptly addressing problems and conflicts.
A substantial portion of the crises mentioned earlier could likely have been averted through preventive measures or early detection, allowing organizations to design strategies to address issues in a timely manner. It is quite common for individuals to confuse the symptoms of a problem with its root cause, leading to a deterioration of the situation and the gradual emergence of a crisis.

Regardless of the circumstances, when confronting challenges, sayings like "better late than never" take on profound meaning. An organization that courageously faces its obstacles not only motivates its members but also harnesses the immense potential of a system that encourages individuals to participate in problem-solving and solicits their input before implementing any changes.

5. Decision making

We analyze the income statement as an essential tool for understanding an organization's state, and we must not overlook the analysis of the behavior of the people who drive it. This knowledge equips us to make the best decisions. Understanding how employees and customers think and act provides the power to anticipate a business's evolution and growth. Whether it's a startup or a large corporation, one common thread is that people have been integral to the business from its inception.
Naturally, the decisions we make may not always be foolproof. Thus, continuously measuring the outcomes of adopted initiatives, evaluating their success without succumbing to inertia, will help us operate in an environment of continuous improvement.
The ultimate objective of possessing reliable information is to avert blindness. The finest organizations maintain a clear vision and think long-term, especially when they incorporate People Analytics.

6. Detect and retain talent

The paramount challenge for Human Resources departments can be succinctly articulated as follows: while recruiting talent can be costly, recruiting the wrong talent for our organization incurs far greater expenses.
Performance Evaluation presents the opportunity to assess human potential across short, medium, and long-term horizons and define each individual's contribution. It stands as the most forthright system for both the organization and the professional. Employees have the right to seek opportunities for growth within their organization. If these prospects are not available, they should be free to explore environments that are better suited to their skills and aspirations.
Individuals possessing the most suitable skills for the company, along with those displaying the potential to acquire these skills with the organization's support, are pivotal. These individuals should be the ones promoted within the organization, always following objective and equitable criteria applicable to all.

7. Motivation

A professional operating within an environment where clear and universally respected rules are in place, and where equal opportunities are supported by a transparent results evaluation system, is more likely to become an engaged team player who identifies with the company's objectives.
When productivity is enhanced collectively, it can lead to wage increases, establishing a virtuous cycle of motivation, improved performance, and associated rewards. This cycle can only bring about positive effects and expansion for any organization while sustaining excellent workplace morale.

8. Transparency

Maintaining a relationship of justice and equity with all employees is indeed a significant challenge, but once achieved, it becomes possible to cultivate and sustain high-performance teams.
Favoritism and emotion-based decision-making can demoralize the rest of the team. When individuals have a clear understanding of the objective criteria driving decisions, they are more likely to respect and participate in the system. Transparency is increasingly valued both internally and externally, serving as a fundamental pillar for good governance and social responsibility within organizations.

9. Fostering joint responsibility

Alignment between the company and its employees is not an inherent state but rather something that needs to be actively fostered. The organization, through its policies, procedures, and exemplary behavior, plays a critical role in nurturing this coveted synergy in management.
Encouraging employees to give their best to the organization and ensuring that this commitment and dedication are appropriately recognized are the objectives of a performance evaluation system. This tool helps shift from a compensation model based on hours worked in the office to one centered on achieving objectives.
Furthermore, it's crucial to remember that exceptional efforts and results should be directly tied to compensation policies. A performance-based rewards system is the most secure method for organizations to sustain or even enhance their profitability. The only hindrance to implementing it is the lack of systems that objectively measure these results, and this is precisely what performance evaluation provides.

10. Establish coherent Training Plans

We recognize that internal training should be viewed as an investment rather than a cost. However, this holds true only when we allocate our resources judiciously. Just as answering the wrong question is futile, providing training on irrelevant topics or to individuals who don't require it is similarly unproductive. This is particularly crucial since resources are invariably limited, and making the right investment is essential. Internal evaluation serves as the best method to identify areas in which an organization's employees need improvement and formulate effective internal training plans.


Until recently, implementing a system with these characteristics was only feasible for a select few multinational corporations. For instance, conducting a quarterly performance evaluation, a 360-degree assessment, in a company with 50 employees, including 1 manager, 2 subordinates, 2 colleagues, and 2 clients, would entail managing 1,600 annual surveys. Just envision the arduous task of collecting and analyzing all that data to derive conclusions! This is assuming the organization has the necessary computer infrastructure to handle it. Today, thanks to the advancements in technologies like Cloud and Big Data, implementing these processes is accessible to virtually anyone in a straightforward manner, requiring only a few hours of effort and incurring costs that do not exceed €1,000.

The time has come to enhance our competitiveness, and there are no longer any valid excuses for not embracing these practices.