November 2004
The Monthly Newspaper of the NYSSCPA
Vol. 7, No.14

The Importance of Having a Performance Appraisal Program, Part I

By Patricia Lawrence, Human Resources Manager

A performance appraisal program (PA program) is important to employees’ professional development, to meeting the company’s or firm’s goals or objectives and, ultimately, to contributing to the company’s or firm’s bottom line. No employer, whether a small CPA firm, a Big Four firm, a nonprofit organization, a government institution or a private or public company, should be exempt from having a formal PA program. Other benefits that could be derived from having a PA program include enhanced communications, an opportunity to effectively address performance problems, and improved employee morale.

Before creating a PA program, there are several factors to consider. The employer should first determine the objectives for the program. Second, the employer should develop a plan and timeframe for launching the program. Finally, the employer should prepare for any obstacles that might appear, and regularly consider ways to improve the program.


The primary reason for having a PA program is to monitor employees’ performance, motivate staff and improve company morale. Monitoring employee performance requires routine documentation, which is accomplished through completing a performance appraisal form. When employees are aware that the company is mindful of their performance and that they could be rewarded with merit increases and promotions, they are motivated to work harder. Morale is improved when employees receive recognition or reward for their work

An effective PA program will assist the company in achieving its goals and objectives. Not only will training needs be identified and addressed during a PA review, but hidden talent can be discovered as well. Through identifying these training needs, staff can perform their jobs at the highest level and be in a better position to address clients’, members’ and customers’ concerns and questions. A well-developed staff is more likely to be proactive, productive and resourceful, all of which helps give the company a competitive edge, from improved customer relations to increased profits.

Getting off the Ground

Before the PA program is up and running, a performance appraisal form should be designed with input from managers. It should be able to sufficiently measure performance, be simple enough for all employees to complete, and not take more than an hour to finish. In implementing the PA program, top management should give the plan its blessing; employees should understand how it works, and the staff at large should be encouraged to view the program as a valuable human resources tool.


Pitfalls of a PA program will be evident if the managers are not adequately trained to monitor, interview and grade their staff. Grading that does not accurately reflect the employee’s work performance could land a company in hot water, as performance evaluations often are used as evidence in wrongful termination cases. Further still, supervisors who let personal bias creep into their employee evaluations could be setting the stage for a lawsuit.

Enhancing the PA Program

The PA program should be reviewed at least annually to determine if it is meeting management’s expectations. Areas to consider when reviewing the PA form should include the grading system, to see that core skills and soft skills are evaluated effectively; sufficient space for employee comments; and categories that correctly address and measure all of the employees’ responsibilities and job descriptions. Additionally, the form should include a future goals section and a self-evaluation section.

The second part of this article, to be featured in next month’s issue, will focus on how employees and managers should complete the performance evaluation form.

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