The perfect performance review
For time-strapped managers and business owners, that means more work. But as Julian Lippi, director of the MBA at Swinburne's Australian Graduate School of Entrepreneurship says, it's an important investment, both for employees and the company.
"If you don't do the work, you have de-motivated staff. You have the old ones in the corner who are angry, their productivity is down and they pollute the minds of any new hires you have got,'' Lippi says.
"If you expend the effort upfront in a proactive way, you don't have to expend the effort when a lawyer goes you for unfair dismissal."
Under the new industrial relations laws, businesses with fewer than 15 employees can sack a worker within 12 months of hiring them without redress, as long as they follow a small business fair dismissal code. For businesses employing more than 15, it is six months. Additionally, the legislation removes the previous exemption from unfair dismissal relating to "genuine operational reasons" and replaces it with a narrower and more prescriptive defence of "genuine redundancy".
The code will require an employer to provide one warning, either verbal or written. Employers will also have to provide an employee with a reasonable opportunity to respond and improve their behaviour or conduct prior to termination of employment.
Lawyers say that whether or not an employer gave a verbal warning to an employee is likely to be a contentious issue where they are trying to defend themselves by referring back to the code.
And that is where the performance appraisal can be important. While performance appraisals are not usually the time to give warnings, they could provide companies with the documentation that could prevent a big payout.
Matthew Robinson, a partner at FCB Workplace Lawyers, says performance appraisals will become critical for demonstrating poor performance and showing genuine redundancy. "It's going to be important for all businesses making redundancies to have performance appraisals to distinguish between employees,'' Robinson says.
"Giving frank and fearless feedback will be important for all businesses to avoid unfair dismissals."
Preparing for the review
The trouble is most organisations are bad at performance appraisals. According to an Australian Human Resources Institute survey of more than 1600 HR professionals last year, four out of five respondents said that performance management processes in their organisations were either ineffective or somewhat ineffective. Nearly four in five respondents rated the skill level of managers giving the appraisals as average or poor.
Senior lecturer at RMIT's graduate school of business, Michael Sargon, says companies need to do more to support managers before throwing them into the deep end.
"What they don't do is give the managers who do these appraisals enough training, so managers are reluctant to do them because they are not very good at it. What happens then is that they treat it like it's another disciplinary interview or they say: "Let's not worry about it, you're OK'. They don't use it for what they are intended to be.
"The whole idea is to use it as a developmental process and unless you have an actual HR development program in place, they look at it as something they have to do rather than something that is advantageous to the business. That's the fundamental skill most managers lack."
So what steps should companies take to make performance appraisals deliver results, both for the business and the employee?
What should a performance review cover?
The managing director of employee award programs specialists, Trésor, Karen Rowell, says performance appraisals need to link the employee's day to day performance with the organisation's wider goals. Ideally, they should highlight areas that need developing, recognise and reward them for their recent performance, address issues such as promotions, transfers and succession planning and identify problem areas that might need improving.
The performance appraisal, however, should not be used as a star chamber. "The performance management system should be used as a positive tool to assess performance at a set point in time, with the view to addressing any developmental needs such as growth opportunities or improvements that are needed in a non-threatening and collaborative manner," Rowell says. "It should not be used, or, rather misused, as an opportunity to intimidate."
"It's all about setting the right tone, ensuring that the system is used in a positive manner and not as a rap over the knuckles. Employees should not feel frightened or worried about their performance appraisal. They should see it as an opportunity to have an open, supportive and constructive discussion about their strengths and weaknesses, with the view to developing strategies for improvement and development.