Unveiling the impact: Understanding performance appraisals through the lens of mental health

The impact of performance appraisals on employees is a critical aspect of organisational dynamics, and understanding why it happens is essential for fostering a supportive and productive work environment. 

Performance appraisals serve two primary purposes: administrative decisions such as salary, bonuses, and promotions, and supporting learning and development. However, studies have shown that a significant portion of companies, particularly in North America, find their performance management systems ineffective. This dissatisfaction extends to managers, with a staggering 95% expressing dissatisfaction with their organisations' review systems. 

The problem with performance appraisal systems is not new, but its significance has increased, particularly among millennials and Gen Z individuals who prioritise career development. Performance reviews, often conducted once or twice a year, tend to focus on an employee's past 6 or 12 months, which can be problematic. Employees may feel helpless in changing feedback about actions that occurred months ago, leading to increased anxiety, depression, and low motivation.

Understanding the HICO domains within the IBA framework provides insight into why certain individuals are significantly impacted by performance reviews, often experiencing negative effects on their mental health. Harmony seekers prioritise stability and safety, Immediate individuals thrive on fast-paced environments, Careful individuals value planning, and Optimistic individuals embrace dynamism. When these domains are challenged, anxiety can arise, leading to a loss of confidence and resilience.

For example, individuals who prioritise harmony may experience stress if their peace is threatened, while those who value immediacy may feel frustrated in slow decision-making environments. Similarly, individuals who require careful thought may experience stress in rushed decision-making scenarios, and those who prioritise fun and dynamism may feel rejected or hurt when these aspects are compromised.

Leaders who understand these dynamics can provide better support to employees experiencing stress during performance review periods. Likewise, employees who understand their own reactions can better control their emotions and reactions. By fostering this understanding and empathy, organisations can create a more supportive and psychologically safe work environment for all employees.