APPRAISAL REPORT 2017

A broken personal development system is plaguing small businesses

INSIDE

Employees' thoughts on the SME appraisal process

The state of feedback in SMEs

Steps to improve the appraisal process

Contents

Foreword 02

Introduction 03

Generation statistics 12

Appraisal process statistics 09

Feedback statistics 07

Personal development 04

Conclusions 13

About breathing space 14

In this report we’re looking at appraisals and feedback. Why is this important? Talent – attracting and retaining it – has always been a key issue for businesses. People are the heart and soul of a company; they make it what it is. Therefore, having the right people in the right roles isn’t just ideal; it’s a competitive advantage.

Before I started my own company, I took a big pay cut to move out of the city. I was a trader and things were going well. The main problem was that I hated it and so decided to retrain as an accountant. I still couldn’t tell you why accountancy, but it felt right and it has done ever since. The company I joined agreed to sponsor my training and my boss took me under his wing. The feedback andinsight he gave me were invaluable, as were the opportunities he exposed me to that were way above my paygrade and enabled me to make myself valuable to the business.

This experience taught me so much about the culture and values I wanted to become the ‘norm’ when I set up breatheHR. I wanted to provide everyone with the same opportunities that job gave me. And, when I analysed why I loved that job so much, I found it came to down to the fact that value was placed on ensuring I had the input and feedback needed to progress in my career.

It wasn’t a one sided endeavour either. My line manager and I met regularly, feedback was constructive and, as a result, I was motivated because I felt I was always moving forward – and being pushed to do so.

Hopefully, this is a scenario most people reading this will recognise and could provide an example of their own. But now ask yourself the question: does your company deliver when it comes to employee development?

Feedback and appraisals need to be seen as a valuable undertaking. Overwhelmingly, our study found that employees aren’t being given opportunities for growth, and companies often fail to prioritise employee feedback in their wider business. Instead they focus on customer acquisition and retention, which is understandable when the majority of companies don’t make their fifth birthday. But, it’s important to remember who makes these things happen: people.

Welcome back to breathing space, the report series that lifts the lid on the employee experience within small businesses, and looks to provide guidance on how you can optimise your talent in order to grow a successful business.

Jonathan Richards

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Keeping employees within the business is an ongoing priority against the backdrop of a seemingly never-ending skills crisis. The need for talent outstrips the demand, making it, very much, an employee driven market. Workers can pick and choose the opportunities offered to them, and whether they stay or whether they go. The onus is on you – the business – to keep your star performers.

A key part of ensuring employees feel valued and that they have a future within your company is personal development. They want to know that you understand the size and scale of their ambitions, that you can offer them a career path that challenges them, and that you’re always going to push them to reach their full potential. In an environment like that, people achieve things that they never thought they could. That’s when they really start to fly. Their success and yours are undeniably intertwined.

Our study found that 30 per cent of employees never have meetings about their personal development. SMEs in the UK employ 15.7 million people, so that means 4.7 million people – almost a third of the SME work force, aren’t getting the input needed to help them further their career.

That’s a staggering amount of human potential that’s going untapped right there, but what we’re going to look to try and understand is why. The indicators are good: both employees and employers place a value on development. So what’s going wrong? Are the processes not right? And how do perceptions of the development process vary as a company grows?   

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Introduction

30%of employees never have meetings about their personal development

Our research found that 75 per cent of employees consider personal development to be valuable. Employers were equally positive about its benefits with 72 per cent saying the appraisal process was valuable, and a third (32%) considering it to be essential.

Interestingly, employee perceptions of the value of personal development peaks at key transitional growth stages for companies when they are sized 10-29 and 50-99 people. It is around 20 employees that companies reach a crunch point and realise that far from being ‘business admin,’ HR is a fundamental lynchpin for growth and retaining employees. It tends to be that when a company reaches around 75 people they bring in a dedicated HR resource. Both stages require a HR gear change as they are transitional periods of growth. As such, it is likely that the value of appraisals increases around these points due to positive change in HR processes.

Whilst the goodwill is certainly there from both sides, somehow it’s not translating. The overall theme of the research results indicate that employers aren’t providing employees with ample opportunity for personal development and feedback.

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Personal development

0%

20%

40%

60%

80%

Not valu

able

Neither

Valuable

How valuable employees find personaldevelopment (%)

0%

20%

40%

60%

80%

Not valu

able

Neither

Valuable

How valuable business owners consideremployee appraisals to be (%) 

When we asked businesses about their priorities, employee satisfaction ranked fourth out of customer retention, new business, cash flow, employee satisfaction/appraisals and suppliers. This indicates a lack of understanding about the importance of HR within the business. Motivated and engaged employees are the key to retaining customers and converting the new business opportunities vital for growth.  

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Top 5 business priorities for SME owners

Fragmented Feedback

A further 37 per cent of employees only have meetings with their line manager about personal development once a year, one in five (19 per cent) every couple of months, 9 per cent once a month and 2 per cent once a week. The lack of structure around feedback is further exacerbated by the fact that 21 per cent – or 3.3 million people – never receive feedback and 20 per cent only receive it when requested.

This is simply staggering. Delving into the statistics doesn’t show any great variance around the regularity of feedback depending on company size. However, companies sized5-9 people are the least likely to have meetings about personal development at 53 per cent.

3.3mThe number of workers that never get feedback from their employer

Customer retention

New business

Cashflow

Employee satisfaction

Suppliers

84%

63%

69%

57%

26%

This is likely attributable to the roles people occupy in the early stages of a business. Typically, you might have a couple of founders, who bring in some senior people to help with the go to market strategy. Feedback within that environment can feel awkward and inappropriate. The issue is that without realising it, the tone is set in these early stages – when a business is most likely to prioritise customer retention and new business – and quite unintentionally the cultural norm has been established having overlooked the importance of personal development.

This is a classic symptom of organisations thinking about HR too late, something that larger companies demonstrate. Those sized 100-249 employees are the least likely to never have a meeting about personal development at 21 per cent.

For smaller companies personal development can often be seen as time consuming and when you’re chasing the next deal and survival is key, it can be hard to comprehend why you need to focus on HR. But companies have to play the long game. Right now with five employees it might seem unnecessary, but fast forward to a year’s time and you need to recruit two or three people a month, how are you going to on-board them? Develop objectives for them? Assess their performance in line with their role?

The short answer is, you won’t be able to. People enjoy the fast-paced nature of  

When asked how employee appraisals madethem feel, 46 per cent of employers replied that they found them motivating. Just over one third (37 per cent) felt neutral towards them, 11 per cent felt stressed and 10 per cent felt nervous or anxious.

Small business owners, perhaps for the reasons above, are the most likely to feel neutral about the appraisal process, but the level of motivation from appraisals increases as a company grows. 

This feeling of motivation peaks at companies sized 100 – 249 with 67 per cent of employers getting satisfaction from conducting employee appraisals.

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A motivating experience?

working for a start-up, but they don’t stay for the ping pong table and Friday night beers;  they stay because they are committed to the journey that the company is going on. Feedback and personal development are vital tools in making the link between employee success and commercial success. 

46%of employers find employee appraisals motivating

SMEs think about HR too late

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Statistics

0%

10%

20%

30%

40%

Never

Once a ye

ar

Couple of m

onths

Month

ly

Weekly

Other

How often employees meet with their managers about their personal development (%)

0%

5%

10%

15%

20%

25%

Never

When re

quested

Once a ye

ar

Couple of m

onths

Month

ly

Weekly

Daily

How often employees receive feedbackfrom their manager (%)

0%

15%

30%

45%

60%

5-9 10-29 30-49 50-99 100-249

Employees that never meet with their manager about their personal development by company size (%)

Levels of stress around appraisals are at their highest (16%) when companies have 50– 99 employees. Typically, we find 75 employees tends to be the magic number when organisations start to take HR seriously. So it could be that stress comes from the introduction of a new process, appraisals being done properly for the first time or indeed the sheer number that an employer may now need to undertake.

In stark contrast however, only one in five (20%) employees consider appraisals motivating. Just 19 per cent consider them valuable for their personal development – but given the wider lack of ongoing feedback, why wouldn’t they? A shocking one in four (25 per cent) say that they don’t seem worth the time.

This feeling increases as companies get bigger. By the time a company has 100 – 249 employees this figure has risen to 32 per cent, a third of the workforce. This is a high stat considering larger companies (100-249) are more likely to prioritise employee satisfaction /appraisals (77 per cent) over cash flow (58 per cent), new business (53 per cent) or customer retention (72 per cent), and that employers in this company size are the most likely to be motivated by appraisals. What we’re witnessing is aserious disconnect between employees and employers expectations of the feedback process.  

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0%

14%

28%

42%

56%

70%

5-910-2

930-4

950-9

9

100-249

Employers that feel motivated by appraisals by company size (%)

0%

5%

10%

15%

20%

25%

5-910-2

930-4

950-9

9

100-249

Employees that feel motivated by appraisals by company size (%)

What employees think about the appraisal process in their company

25%

They don't seem worth the time

They're unfair

4% 12%

My manager doesn't seem well prepared

15%

They make me feel anxious

20%

They motivate me

19%

Really valuable for personal development

Statistics

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Statistics

Employees that think appraisals aren't worth the time by company size (%)

0%

10%

20%

30%

40%

5-9 10-29 30-49 50-99 100-249

0%

5%

10%

15%

20%

5-910-2

930-4

950-9

9

100-249

Employers that feel stressed by appraisals by company size (%)

0%

5%

10%

15%

20%

25%

5-910-2

930-4

950-9

9

100-249

Employees that feel anxious/nervous  by appraisals by company size (%)

The study also shines a light on the emphasis placed on feedback by different generations – both employees and employers. Employees aged 18-34 are the most likely to find appraisals valuable (84 per cent), feel motivated when they have them (34 per cent) and are the most likely to receive feedback (42% receive feedback every couple of months or more frequently). This attitude is reflected by younger employers, who place importance on employee satisfaction/appraisals in their top three business priorities, above new business acquisition. They are also the most likely to come to appraisals prepared (69 per cent), feel motivated by them (59 per cent) and at 45 per cent are the most likely age group to consider appraisals essential.

 In contrast, older business owners (55+) at 18 per cent were most likely not to find appraisals valuable, nearly four times as many as young business owners (18-34) at 5 per cent. Whilst their employee counterparts were the least likely to find personal development valuable (66 per cent), are the most likely to never have meetings about their personal development (41 per cent), and are the least likely to feel motivated by appraisals with only 12 per cent stating that they are motivated by the process.

These findings are consistent with other studies which have found millennials are keen to get more feedback in the workplace. A US-based study by TriNet and Wakefield Research found that infrequent feedback led

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to millennials being dissatisfied with the appraisal system because it left them in the dark about their performance. Interestingly, 85 per cent of respondents in the TriNet survey said they would feel more confident if they had more frequent conversations with their line manager.  

For the first time in 2017 we have five generations in the workplace. Of course their attitudes towards feedback will be different and, whilst it could be tempting to adapt HR processes for the generation most motivated by feedback, this could be counterproductive. Harvard Business Review argues in this article that, whilst it is easy to focus on the differences between age groups, they also have a lot in common. HR needs to be flexible, but it also needs to evolve in order to remain a positive force for change within a company. 

Talking about my generation

0%

20%

40%

60%

80%

18-34 35-54 55+

Employers that find employee appraisals valuable by age group (%)

Millennials want more feedback

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Statistics

Employees that find personal development valuable by age group (%)

0%

15%

30%

45%

60%

18-34 35-54 55+

Employers that feel motivated by appraisals by age group (%)

84% 75% 66%

18-34 35-54 55+

34% 17% 12%

18-34 35-54 55+

Employees that feel motivated by appraisals by age group (%)

0%

5%

10%

15%

20%

25%

Never

Whe

n re

ques

ted

Onc

e a

year

Couple

of m

onth

s

Mon

thly

Wee

klyDai

ly

How often employees aged 18-34 receive feedback (%)

Employers that believe employee appraisals are essential by age group (%)

0%

10%

20%

30%

40%

50%

18-34 35-54 55+

When it comes to feedback and appraisals employers and employees are approaching the process from totally different vantage points. Employers are pleased to have a yearly process in place for feedback and consider it a box tick. They don’t realise that this approach is no longer sufficient, and that employees want a more agile and dynamic approach to feedback. They also want more of it and they want to feel that their employer is invested in their development. The result is a motivated and engaged workforce that understands how their role links to the wider vision of the company and how they can positively impact its development.  

These are factors that should not be underestimated. People are a force for positivity and they can change the growth trajectory of your company. But if they’re disengaged, unsure of their role or unconfident about their performance, they are not only likely to leave but can negatively impact moral. 

The good news is that the ramifications of a fragmented and inconsistent appraisal and feedback are relatively simple to fix. The first step is to understand what your employees want from feedback and how regularly they would like it. 

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Conclusions

Next, look at that in conjunction with your needs as a business and devise and system that works for both parties. Identify areas for training – how to deliver feedback for example – and then make the investment.  

The choice is simple: continue with things as they are and see the chasm between leadership and employees widen or pioneer a new way and reap the rewards. 

Don't underestimate your people

APPRAISAL

REPORT 2017

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No business is too small to do HR, but many small businesses are under the misconception that HR isn’t relevant to them. People are the foundations on which great businesses are built and we believe that as long as there are people in your business, you will be doing some form of HR.

breathing space is run by breatheHR, a cloud based HR software, and is paving the way to raise awareness of the importance of HR in small businesses. We are championing a world where employers strive to provide an exceptional employee experience and succeed in creating engaged and inspired teams. We do this by providing the insights, tools and resources employers need to be the best that they can.

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