Why Is A Performance Appraisal Important Accounting Essay


This is a very controversial statement. As upto some extent I agree with this statement and somewhere I don't agree with the same statement.

I agree because higher level management positions usually have more quantifiable goals that can be objectively measured by such things as profit and loss statements, business unit statistics, etc.

And reason for Disagreement is because the numbers do not always tell the whole story. Turnover, and employee problems may not show up in the numbers. Also, some problems may not appear in the short- term. Further, external influences may help determine the numbers, beyond the performance of the employee.

A performance appraisal is described as the process by which the executive director and a board committee meet to:

Formally review the accomplishments and challenges of the executive director

Identify and address areas of concern

Reach a decision regarding a salary and benefit increase

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Identify the next performance appraisal period

Establish goals and action plans for the next appraisal period

Why is a performance appraisal important?

Performance management of the executive director can seem to be an overwhelming task for boards that lack a human resources specialist. If the board is one of the many that have never given a performance appraisal of the Higher positioned employee, you may wonder why it is needed. You may tell that the Higher positioned employee is a professional, and is therefore doing a fine job. You may not be completely sure what the Higher positioned employee does, apart from attending board meetings. And, to add to this uncertainty, you may not feel confident that you have the skills and experience to provide a performance appraisal.

One of the key responsibilities of a board of directors is to provide the Higher positioned employee with a thorough performance appraisal on a regular basis. The performance appraisal process is part of performance management, which is one of the board's governance roles. The performance appraisal of the Higher positioned employee is an opportunity for a process that allows the board and the Higher positioned employee to improve communication and productivity in the organization.

If you have recently hired a new Higher positioned employee, you will need to assess his/her work at the end of the probationary period. This assessment is the first performance appraisal that you will do with the new Higher positioned employee, and it will be the beginning of an ongoing process.

Benefits of a performance appraisal

Performance appraisals have a proven record of effectiveness in keeping an organization on track. A board that provides the Higher positioned employee with regular, thoughtful, and well- documented performance appraisals can expect many benefits, including:

A better understanding of the work of the Higher positioned employee and the organization.

Clarity on the progress of the organization towards its mission.

More effective responses to changes in funding, community needs, and strategic direction

Better communication between the board and the Higher positioned employee

Identification of opportunities, challenges, and areas of concern that can be addressed before problems arise

Agreement on specific priorities and goals for each appraisal period

Improved performance of the Higher positioned employee

Where to start From?

It is important to provide a performance appraisal on a regular basis. Regardless of how much time may have passed without a performance appraisal, you can start immediately by sitting down with the Higher positioned employee to plan the process. Any awkwardness that you feel will soon go away as you plan the process together. If it has been over two years since the last performance appraisal, make sure that both the staff and the Higher positioned employee know that this is a planned and constructive process, rather than an attack on the Higher positioned employee.

A long delay between appraisals may be a sign that there is a problem with the Higher positioned employee's performance on which the board is unwilling to take action.

If you are doing a performance appraisal that is directed at releasing the Higher positioned employee, obtain legal advice on the correct supervisory process to follow. This can help to reduce the chance of a costly wrongful dismissal suit.

Assess the working relationship between the board and executive director:

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A good starting point for the performance appraisal process is to assess the current effectiveness of the working relationship between the board and the executive director. To do this, both board members and the executive director answer the following questions.

The examples that you use are the important part of this exercise. Examples indicate the state of the working relationship, and can provide solid ground on which to build for improvement. Answer these questions again in a year's time to see how the relationship has progressed.

The steps to the performance appraisal process:

There are a number of parts that make up the process of appraising the Higher positioned employee. The board assigns the authority to a committee to lead the process. The Higher positioned employee prepares his/her portion of the reporting. The committee coordinates the information from the external feedback sources. Working with the executive director, the committee sets the schedule for the appraisal meeting, the salary meeting, and the future planning meeting. Finally, the committee evaluates its own performance, with a view to future improvement on their part of the process.

This step-by-step guide will help you to organize the performance appraisal process. Consider each step, and tailor the information to work for the organization.

Step 1: Is your house in order?

The first step in this process is making sure that the organizational house is in order. You will need the information in the strategic plan to do the performance appraisal. If the strategic plan has changed, that may mean changes to the key responsibilities for the next appraisal period.

Step 2: review the higher positioned employee's mandate:

If you have recently hired an executive director, then it is likely that the job description is up-to-date, and reflects the key responsibilities of the executive director during the appraisal period. The key responsibilities are based both on the strategic plan and on what the executive director does to manage the organization.

The key areas listed in the job description, as well as the executive director's regular board reports, form the basis of the information that the board has about the organization. These reports also form the basis of the information that is needed for a performance appraisal. In addition, the executive director prepares an annual report that emphasizes the link between the program and services goals and activities within the organization's strategic plan.

Step 3: assign responsibility for the performance appraisal process:

The Performance Appraisal Committee, The board appoints a performance appraisal committee, and gives authority to the committee to conduct the performance appraisal. As well, the board decides whether this is a standing committee with ongoing work, or an ad hoc committee that is appointed for a specific performance appraisal period. The performance appraisal committee may be unnecessary if there is another committee with this personnel responsibility.

Often, the appraisal committee is made up of the board chairperson and other members of the executive committee. It is important that the membership on the committee represents a broad selection of the board members, without getting too big to be efficient.

Although the committee is in charge of the appraisal, other board members may wish to provide feedback on the executive director's performance. The committee may invite board members to provide their signed comments, in confidence, for inclusion in the final report.

Committee and Assigned Authority: The board clearly states the role, responsibilities, and the final reporting time frame of the performance appraisal committee. The board decides whether or not the committee shall have the authority to approve a salary and/or benefit increase to the executive director. The board makes sure that the committee understands the confidentiality of its work, and that the report to the board reflects that understanding.

Role of the Executive Director: The executive director works with the appraisal committee to plan the appraisal process. S/he provides the committee with the annual report, which is based on the executive director's monthly reports to the board. If s/he has examples of external feedback, s/he gives the committee this information, as well a list of external feedback contacts in the community.

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Role of Staff: The role of staff in the appraisal of the executive director is a sensitive issue. When staff is in the position to appraise the performance of their supervisor, the result can be role confusion. The information that staff brings to the appraisal may lack the needed objectivity, and may not serve the broadest interests of the organization.

One of the executive director's key responsibilities is personnel management, so the appraisal committee needs to find a way to assess the executive director's supervisory abilities. The committee needs to discuss this issue, and to find an appropriate way to get information on the working relationships between the executive director and the staff.

Step 4: Gather documentation:

The information that the committee needs to gather for the performance appraisal of the executive director includes:

The organization's current strategic plan

The executive director's job description

The executive director's regular reports to the board during the appraisal period

The executive director's annual report to the board

The executive director's annual goals, with action plans

Examples of external feedback

The executive director provides the committee with the necessary documents and reports, including a list of contact people that the committee can interview to gather external feedback on aspects of the executive director's work.

If there has been a significant break between appraisals, the committee and the executive director will need to establish a mutually-agreeable starting point for the appraisal. Board leadership may be necessary to move this process forward. For example, you might ask the longest-serving board member to be the historian who sets the starting point for the appraisal process.

The Executive Director's Regular Board Reports: Depending on the needs of the organization, the executive director's report to the board is either monthly or quarterly. The regular board report provides information on the activities and issues outlined in the key responsibilities of the job description. In the report, the executive director describes activities and issues so that the board can understand what the outcomes have or have not been, in terms that are specific, measurable, and relevant.

The Executive Director's Annual Report: There are three parts to the executive director's annual report:

The first part is a summary of the regular board reports, with an emphasis on identifying the overall trends, outcomes, and areas of challenges of the previous year.

The second part is a summary of the organization's movement on the strategic plan of action.

The third part is a list of the future considerations that will shape the action plans for the coming year.

When there is good communication and regular reporting in the organization, the first and second parts of the annual report should hold no surprises. The third part of the report may raise emerging issues that the board will need to address.

The Executive Director's Annual Goals, with Action Plans: The executive director prepares his/ her annual goals, with action plans, and reviews these with the board. The annual goals are based

on both the strategic plan and the day-to-day management of the organization. During the performance appraisal, the committee reviews the annual goals that the executive director has reported in the regular board reports and the annual report.

Each action plan needs to show specifically what will be undertaken, and the anticipated outcomes. The outcomes of the action plans are related to the strategic plan, and move the organization towards the vision. These outcomes need to be attainable, given the other organizational responsibilities held by the executive director. Each outcome is written in concrete and measurable terms, with time lines included.

Example of Goal with Action Plan:

Goal: To work in partnership with geographic communities and communities of interest, to both build and maintain a high quality of life in Alberta.

Goal will be met by: Providing resources and leadership to community service organizations, to assist them in the delivery of their programs and services.

Desired outcome: That Albertan volunteers and boards have access to comprehensive leadership and governance development opportunities.

Measured by: The number of organizations directly assisted, and the number of volunteers who benefit from the assistance.

Action plan: Continue to develop and promote partnerships with key players in the not-for-profit, public, and private sectors, focusing on leadership development and governance skills.

External Feedback How do outsiders view the performance of the executive director? In order to assess the executive director's networking and community relations performance, you need to know this. The search committee asks the executive director to provide a list of outside people who can give feedback on the executive director's networking and community relations activities. People on the list should be qualified to comment fairly, without personal bias. This is a good way to collect vital and important information that may otherwise be overlooked.

The committee interviews these contact people, prepares a report on this information, and presents it during the appraisal meeting. As a professional courtesy, let the executive director know what questions you will be asking. When you contact the outside person, advise them that the executive director provided you with their name. When you summarize the outside person's comments, let him/her read them before you share them with the executive director.

Another way to gather external feedback is to ask the executive director to collect information such as newspaper clippings, letters to the organization, comments from speaking engagements, and comments from community telephone calls.

S/he can do this throughout the appraisal period, and provide copies to the committee.

No Goals Set with the Executive Director?

In some organizations, the executive director works without having any specific goals set. To ease into a performance appraisal, set a meeting to discuss what the board and executive director agree to be the goals and outcomes for the appraisal period. Through discussion, you establish a number of points of agreement as the departure points for the upcoming appraisal. In six months' time, you will then have a basis on which you can conduct the performance appraisal. The idea is to get started as soon as possible, and to work towards developing an ongoing process of regular appraisals.

Step 5: set meeting Dates and agendas:

The appraisal committee, in cooperation with the executive director, sets a schedule of meetings and related activities that result in a report to the board. Remember to schedule the performance appraisal meetings to avoid the busiest work periods of the executive director.

The committee coordinates the meeting dates and agendas for:

The performance appraisal meeting

The salary review meeting

The future planning meeting to determine the executive director's goals and action plans for the next appraisal period.

Allow sufficient time after the performance appraisal meeting to prepare the summary report for the board, as well as to prepare information for the following two meetings.

The Performance Appraisal Meeting

The appraisal meeting need last no longer than one hour. The underlying philosophy of a performance appraisal is to be honest. Review the goals and action plans with an eye to recognizing the executive director's efforts, as well as to identifying the challenges that s/he did not meet. While you want to avoid reviewing every detail, you also want to cover each of the key areas in the job description. Review the external feedback report.

Discuss the kudos and the challenges that the information presents only as issues to be considered. Together, the committee and the executive director develop strategies to address any concerns.

Set the Right Atmosphere: Select a location for the meeting that is private, relaxed, and comfortable. You do not want the executive director to be distracted by the day-to-day obligations of his/her position.

Avoid holding the appraisal meeting over a meal: Give the executive director the full attention, and maintain a professional atmosphere by keeping the overall focus on the performance of the executive director, rather than on his/ her personality traits. Set up open and safe communication. Ask yourself:

Do you expect the executive director to be all things to all people?

Can the executive director be frank when discussing the expectations of the job?

Can the executive director feel safe in appraising his/her own performance?

Handling the Unmet Challenge: The committee has a number of ways to consider, and deal with, unmet challenges:

The goal or expectation was unrealistic, given all the other actions that the executive director needed to accomplish. In this instance, you can move the goal to the next appraisal period, or even drop it altogether.

The expectations and outcomes of the goal are not clearly indicated. If you carry this goal over the next appraisal period, you may need to clarify what is expected.

The executive director may not have the time resources available to be able to complete the goal. If it is sufficiently important, you need to identify how the executive director will get the help that s/he needs to accomplish the goal.

The executive director may lack the education and training required to accomplish the goal. The committee and the executive director can identify this training or educational need as part of the goals and action plans for the next appraisal period.

When addressing an unmet challenge, it is important for both the committee and the executive director to understand how the challenge is to be met, as well as how this will be reviewed. Follow-up on unmet challenges is a critical task in the performance management of the executive director.

Summary Report of the Performance Appraisal: The committee prepares a summary report of the performance appraisal to present to the board. Organizations may use different formats for this, but the most important point is that two people reading the report would reach the same conclusion. This report includes:

Information on the accomplishments, as well as the unmet challenges

Strategies resulting from the external feedback

An indication of challenges that are brought forward to the next appraisal period

A description of any short-term follow-up with the executive director, with dates for the follow-up

Identification of any professional development needs

The Salary Meeting Separating the salary and appraisal meetings can work to the advantage of the executive director, as well as to the board. An executive director may have a glowing performance appraisal, but not receive a salary increase, due to the organization's financial situation. By keeping these meetings separate and distinct, the benefits of positive feedback to the executive director for the performance appraisal will not be diluted by the bad news of no increase in salary. Prior to this meeting, the committee researches the current salary and benefits range for an executive director in comparable organizations. Be careful to avoid the situation in which the entire board participates in the salary review, with the executive director present. This discussion works better in a committee setting. The board may reserve the right to have final approval on any changes to the salary or benefits.

The committee negotiates with the executive director on whether or not there will be a salary increase. If there is to be an increase, the committee and the executive director agree on what it will be. There may be a section in the organization's personnel policy that provides the committee with direction on this issue. The increase may be an increase in salary, an increase in benefits such as holidays, or a combination of both.

If no increase is financially possible, then the committee needs to consider alternative ways to recognize the executive director's work. For example, one way to increase his/her salary without paying more money is to reduce the number of work days per month. As long as the executive director is agreeable to this adjustment, this is a positive way to recognize his/her hard work.

The committee may decide that the executive director's performance does not warrant an increase in salary. This finding has serious implications. For the organization. The board may need to move into a supervisory process with the executive director, until either s/he meets the expected standard, or s/he is released from the position. Always seek legal advice regarding the supervisory process to reduce the risk of a wrongful dismissal suit.

The Future Planning Meeting: The committee and the executive director meet to determine the goals and action plans for the next appraisal period. The information developed in the future planning meeting will provide important information for the next regular performance appraisal.

Together, the committee and the executive director:

Establish the timing for the next appraisal period

Bring forward unmet goals from the previous appraisal period

Develop new goals and action plans to meet emerging needs

Write action plans in terms that are specific, measurable, attainable, relevant, and time-oriented

Identify the educational and training needs that the executive director will need to carry out her/ his current and/or emerging duties more effectively, and develop strategies to meet these needs.

Step 6: carry out the performance appraisal process:

Based on the information in Step 5, the committee holds three meetings with the executive director to carry out the performance appraisal process, and prepares a final report for the board.

Hold a Dress Rehearsal of the Appraisal: A Canadian board chairperson says that the uncertainty that administrators often experience before an evaluation breeds tension that can lead to an unproductive meeting. That's why he came up with this idea. Instead of a single performance review, he conducts a two-part evaluation that gives the executive director lots of room for input.

"To avoid any conflict over the contents of the final evaluation, I meet with the administrator to discuss a rough draft of his evaluation," he says. "We do this on our regular evaluation form, only we write in pencil.

"This is the dress rehearsal for the real thing. It's also the executive director's opportunity to react and comment on my penciled-in assessment. I encourage him to tell me if there's something I've overlooked or if there's some language he objects to. If there is, we work together to resolve the disputed points. "After this meeting, I make the changes to the form we agreed on. This approach tells the administrator that I listen to his concerns, and he's satisfied that evaluations are fair." Gillis, John, ed. Evaluating the Nonprofit CEO - A Guide for Chief Executives and Board Members. Akron, Ohio: Aspen Publisher, Inc., 1996.

Step 7: conduct a Committee self-evaluation:

After the final report is completed, the committee members ask themselves three questions about their own performance in the performance appraisal process:

What worked well?

What needs more work for the next performance appraisal?

Are there any recommendations for changes in policy?

If the organization has no policy on performance appraisal of the executive director, the committee can draft one as part of its self-assessment.