Why Is Employee Performance Evaluation Important For Your Business?

Why Is Employee Performance Evaluation Important For Your Business?
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As a business owner, you already know the importance of a productive employee. A great performance can take your business to an optimum level whereas poor performing employee can be detrimental to your company’s success. Hence to ensure they are performing to your expectations, you need to gauge your employees’ annual performance.

Evaluating employee performance can give you a number of metrics that can quickly reveal how someone is doing. It is also an excellent way to figure out the negative points and create an action plan to turn things around.

Not convinced? Here are some more reasons why you should evaluate employee performance.

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Reason 1: To Get a Clear Picture Of What Each Employee Is Doing

By analyzing the performance of every employee, you will get to know about their participation in the company’s vision. This will give you a view of whether an employee is prepared for the greater responsibility. There may be multiple candidates, who are vying for promotion, but through performance evaluation, you can screen the one with outstanding achievement and professional readiness.

Reason 2: To Screen the Star Performers

The employee performance evaluation also enables you to figure out the amazing employees in your organization. There may be some out-of-the-box overachievers who need to be appreciated. You can put additional focus on their development to improve your business.

Reason 3: To Discover the Training Needs

Ever wondered why some employees struggle with the tasks and lag behind quotas? This may be due to the quality of training they received. If you neglect such issue, you are likely to jeopardize your company’s attainment of its goals.

Employee performance evaluation can reveal such training needs. Remember, every player in a team should perform in peak condition to win and performance evaluation is a great way to ensure that. You need to elevate individual self-esteem and groom the week performer to bring the best out of them.

Reason 4: To Set New Goals

The performance evaluation of employees will also help you determine the keyholes in your business. Using annual reviews, you can set new goals for your organization. For instance, if you find most of your employees are not doing well, you can work on their improvement and find a better way to motivate them.

Reason 5: Employees Will Know Where They Stand

Your employees may not have any idea of how they’re doing. Ongoing development is a core mandate even for small start-ups. The work pressure may not allow you to give constant feedback. However, a formal work evaluation program can help the employees to stay the course.

Reason 6: To Keep Rewards Fair

Rewarding employees is a great way to boost their morale and performance evaluation makes it easy to decide the deserving candidate. Keeping track of performances of each employee in detail make this process a lot easier and unbiased.

Reason 7: To Give Clarity to Employees

When the employer gives priority to the performance evaluation, employees learn exactly what is expected of them. It helps the new employees to gear up their work and meet the company’s outlined expectations.

Reason 8: For Positive Reinforcement

Performance evaluation is not only to point out shortcomings of employees but also to provide positive reinforcement for a job well done. Positive feedback will encourage the employee to continue better performance.

Reason 9: For Determining Weak Links

Through performance evaluations, you get to know what’s off beam in your working process. You find out where you are going wrong and which employees aren’t performing well enough. You can use software and apps to keep track of their performances. From this determination, you can design several routes in fixing the problem. You can either enroll the weak employee in a training program or let him go.

A Final Thought

The success rate of your business highly relies on how well your employees are performing. If conducted correctly and frequently, employee performance measurement can have a really positive effect on your company. Considering all the reasons listed above take steps to enhance your productivity and take your success rate to peak with regular performance evaluation of your employees.


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Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented journal of the Indian financial markets. Ankur has more than eight years of equity research experience covering emerging markets, with a focus on India and South East Asia. He has worked as both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can learn more about his latest views on global markets at the Value Investing India Report. -- He can be emailed at [email protected]

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