IMPACT OF PERFORMANCE EVALUATION ON THE RETENTION RATE OF THE EMPLOYEES
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This is the right time when organization in Pakistan should realized the importance of the performance evaluation

By NOSHABA BASHIR
Aug 02 - 08, 2004
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Some companies never have formal performance evaluations, others "go through the motions", and some have evaluation processes that really do result in increased performance and improved morale. In Pakistan normally companies do performance evaluation only for the assessment of the employees. They don't think that the result of performance evaluation can help increase the retention rate of the employees that is why they don't take this process serious. It is a big reality that companies take serious only those thing in which they feel that they are getting the advantage so in this era it is very necessary to understand that performance evaluation is beneficial for the company. Actually in Pakistan companies don't know that how much performance evaluation can protect them in the results of the following two issues:

*How to retain their employees and
*How we can save the recruiting cost

This year companies need to adopt effective performance evaluation process and it is very necessary to understand the importance of this process. They need to understand performance realities:

*People do the things that are rewarded.
*Company's reward people for things the company evaluates.
*The company evaluates people for things easily measured.
*Therefore, people do what is easily measured.

Before creating the relationship between how can result of performance evaluation helps to retain the employee, companies should know that why people leave the organization. Commonly employees leave the organization because of these reasons:

1. "It doesn't feel good around here." This can include any number of issues having to do with the corporate culture and the physical working environment.

2. "They wouldn't miss me if I were gone." Many people don't feel personally valued. When people don't feel engaged or appreciated, all the money in the world can't hold them.

 

 

3. "I don't get the support I need to get my job done." People want to do a good job; they want to excel. At the same time, most feel like their boss won't let them do a good job. When frustrations exceed the employee's threshold, they leave.

4. Lack of opportunity for advancement. "Advancement doesn't necessarily mean promotion," actually it means personal and professional growth. People want to be better tomorrow than they are today. Personal growth constitutes a very strong driver in today's work force, particularly with the younger generation.

5. Inadequate compensation.

People want fair compensation but contrary to most managers' beliefs money rarely comes first when deciding whether to stay or go. A certain percentage of people will always chase more income, but the majority of workers look at non-monetary reasons first.

If companies takes seriously performance evaluation process. They can eliminate these all reasons because through this process companies are able to find out:

*Gap in the performance
*They can find out the stress level in the existing job and environment
*They can also find out who deserve reward and how much
*Which reward increases the motivation level of the employees either monetary or non-monetary?
*How they can help in their self-development
*What type of relationship is required between employees and management
*They also can identify that where the training and development programs required

 

 

Performance reviews are a great opportunity to revisit expectations and goals. It gives the employee a chance to discuss their own perception of their performance. In addition, it opens the door to talk about the employee's career goals and how their performance ties to career growth.

The result of performance evaluation helps to make strategy to retain employees. Companies can make different strategies to retain their employees and they can only make effective strategy when they know where problem exists, what their employees actually want to get from the organization. They can get the answers of these questions with the support of performance evaluation

STRATEGIES FOR RETENTION

ENVIRONMENTAL

The primary strategies for keeping good people have to do with creating and maintaining a workplace that attracts, retains and develop good people.

"Environmental strategies address three fundamental aspects of the workplace the ethics and values foundation upon which the organization rests, the policies that interpret those values and translate them into day-to-day actions, and the physical environment in which people work."

Employees want a culture of openness and shared information. They want to know where the company is going and what it will look like in the future. How is the company doing financially? So the companies should communicate about the mission and business strategy to the employees and their performance evaluation should be on the basis that how much they contribute to achieve the mission of the organization.

GROWTH STRATEGY

Second strategy to retain employees is growth strategy that deals with personal and professional growth. Good employees want to develop new knowledge and skills in order to improve their value in the marketplace and enhance their own self-esteem.

There are many ways to help your people in personal growth that not only makes a difference in their lives, but bonds them more closely to the organization. Giving training and education is the one way for the growth of the employees. Here again the process of performance evaluation helps to identify the training and development need in the job and their career.

SUPPORT STRATEGIES

For retaining the employees companies should adopt support strategy. The purpose of this strategy is to provide tools and equipment to the people to make their job easy. People need support:

* To get adequate resources to get the job done
* They need to support from your managers to take the initiatives

Other recommended support strategies include:

*Establish a learning culture.
*Create individual learning plans.
*Encourage people to join professional and trade associations.
*Invest in career planning.
*Operate a corporate mentoring program.
*Provide incentives for learning.
*Take advantage of Internet learning.

Performance evaluation helps to identify that what type of support employees require and to what extent.

COMPENSATION

Effective compensation strategies stem from one fundamental principle money alone will not retain most employees. In the old days, companies essentially paid people for their time. Today, more and more companies pay for performance in every position, not just sales. To retain employees, your compensation plan needs to incorporate this trend.

In pay for performance plans, two basic activities involve defining the job and checking performance against expectations. This strategy is playing a very important role to retain the employees but it will work only when the companies will do performance evaluation of the employees effectively.

So Performance Evaluation may also include performance goals tailored to support the business goals of the individual's organization. These performance goals may be specific to the organization, job classification, targets (e.g. Quality, Cost, Delivery, Safety, and Morale), or values.

Hypothesis1: the reason of low retention rate is that companies are using informal method to evaluate employees that is why they are failed to identify the reasons of low retention rate.

Hypothesis2: companies are conducting performance evaluation process only to assess the employees not to develop the employees that is why the companies think that performance evaluation has no role to retain the employees

For proving this hypothesis a survey has been conducted. In this survey only private companies were involved. For collecting data, interview session with the HR managers and CEO's of the companies to fill the questionnaire have taken place.

 

 

Survey says that the trend has been changed now, the companies are using formal method to evaluate their employees. They are using the result of performance evaluation to promote their employees and to give bonus and increase in the salary. Their ultimate purpose is to retain employees. 65% companies are using formal method to evaluate employees. 82% companies are using result of performance evaluation to increase the efficiency of the employees. 82% companies are using pay for performance approach. 76% companies are giving extrinsic reward to the employees in the shape of salary increment.84% companies are using the result of performance evaluation for the development of the employees. Their purpose is not only to assess the employees.

The result of survey does not support the both hypothesis. In Pakistan, now the trend has been changed. Companies are getting success to increase their retention rate with the help of performance evaluation.

CONCLUSION

The result of performance evaluation is the key for the companies to solve these issues: How to retain their employees and how we can save the recruiting cost. With the help of performance evaluation, companies can eliminate all the reasons why employees leave. This is the right time when organization in Pakistan should realized the importance of the performance evaluation and its impact in the retention rate of employees.