Top 7 Challenges Organizations Face When Conducting Performance Appraisals

Introduction

Performance appraisal involves evaluating and documenting an employee’s job performance. It measures progress against goals set annually in collaboration with their manager. Employees and managers may have periodic check-ins, but the performance appraisal process in HR in the Philippines usually concludes in an end-of-year review where the manager assigns a final rating.

Also known as performance review, development discussion, or employee appraisal, performance appraisals provide employees with feedback on their work, help managers determine salary increases and bonuses, and highlight areas for growth and improvement. Unfortunately, they do not always work as intended.

77% of HR leaders agree that traditional performance reviews fail to accurately capture an employee’s daily contributions. Additionally, 95% of managers are displeased with their company’s performance appraisal system. This highlights a fundamental issue: traditional appraisal methods are often outdated, subjective, and disconnected from the day-to-day realities of work.

Without a clear and fair process, performance appraisals can do more harm than good. So, what is going wrong, and how can organizations fix it?

We at Q2 HR Solutions are here to help you navigate the obstacles in your performance appraisal system. Read further to learn how our dedicated team can help.

Major Challenges When Doing Performance Appraisals

Performance appraisals can be a powerful tool for employee development, but they come with challenges that make them less effective. For this reason, it is important to recognize common pitfalls and implement solutions to overcome them.

Personal Biases

The performance appraisal process in HR in the Philippines is supposed to be fair. However, staying completely objective is difficult. Managers, after all, are only human, and personal biases can get in the way whether they realize it or not. Chances are, they may unconsciously favor employees they get along with or judge others more harshly due to their preferences.

Gender, age, personality, or even work style biases can affect performance reviews. Once personal opinions overshadow actual job performance, employees may feel undervalued and demotivated. In fact, 25% of employees believe that their supervisor’s personal biases unfairly influence their performance reviews.

Insufficient Performance Data

Performance appraisals can become subjective or inconsistent if managers rely on memory rather than key performance metrics (KPIs). If they are not able to document achievements, challenges, and contributions, they are likely to provide vague feedback. This makes it harder for employees to improve or understand where they stand.

Possible Halo Effect

The halo effect happens when a manager allows one positive characteristic, such as an employee’s charisma, technical expertise, or past success, to outweigh other aspects of their performance. This can lead to inflated ratings, where shortcomings are overlooked simply because the employee excels in one area.

Although recognizing strengths is important, an unbalanced view can result in unfair advantages and missed development opportunities.

Recency Errors  

Recency bias is a common problem in HR performance appraisals. Many managers will usually remember what the employee recently did and not necessarily what they have done overall throughout the year.

For instance, if an employee had a stellar few weeks before their review, they might get a glowing evaluation even if they struggled for most of the year. At the same time, if they mess up a few times before the appraisal, that may trump months of good work. This can create inaccurate assessments that keep them from advancing in their careers.

Irregular Performance Appraisals  

Some companies fail to consistently conduct performance reviews. Without regular feedback, employees may struggle to understand expectations or address areas of improvement. This can also make it difficult for managers to accurately assess long-term performance, leading to rushed or incomplete evaluations.

71% of companies still conduct performance reviews only once a year. While this provides some structure, a McKinsey study found that organizations that actively prioritize employee performance are 4.2 times more likely to outperform their competitors.

Inadequate Training Opportunities

Even if your performance appraisal system points out areas where employees need to improve, it will not do good if they do not have the necessary resources. Without proper training, coaching or mentorship, employees may feel uncertain about their next steps, which leads to frustration and disengagement.

Nobody wants to hear about their weaknesses without being given a way to fix them. If employees feel stuck, their growth stalls, and so does your company.

Lack of Recognition

Employees want to feel valued for their hard work. However, if they only hear about their mistakes and never get credit for their wins, their motivation takes a hit. As a result, they might stop going the extra mile and push them to find opportunities elsewhere where their contributions will be appreciated.

Leave Performance Appraisals to Us at Q2 HR Solutions

If you experience any of these challenges, you are not alone. Many organizations struggle to make performance appraisals fair and beneficial for employees. The good news is that Q2 HR Solutions is here to help you overcome these problems.

Our dedicated experts will help you refine your performance appraisal process in HR in the Philippines. With our organizational development services, we provide the structure, strategies, and tools to make performance appraisals a driver of engagement and long-term success.

We will first conduct an HR audit to assess your existing performance appraisal system. Then, we will recommend data-driven approaches to promote fairness and objectivity in evaluations. We will also equip your leaders with the right skills to conduct meaningful evaluations and motivate their teams.

Additionally, we offer talent assessment solutions to ensure high performers are rewarded and developed into future leaders. Let us help you transform your performance reviews into a strategic tool that boosts productivity and morale. Contact us today for more information.

Conclusion

Employees perform at their best with clear feedback, recognition, and growth opportunities. Unfortunately, many performance appraisal systems fail due to biases and outdated methods. Instead of inspiring employees, these can lead to disengagement and higher turnover, ultimately impacting your business’s success.

At Q2 HR Solutions, we will help you create appraisal systems that support career growth. We ensure that every performance review is a valuable, constructive experience through our comprehensive HR audits, organizational development, and innovative technology. Get in touch with our dedicated team to get started.