Assessing your staff is a necessary, but delicate task. Kate Foreman examines why appraisals are good for business

The objective of last week's MOT exercise was to increase your knowledge and understanding of the FSA's CP187 Annexe 4 proposals.

If you have feedback for the FSA, you have until the end of September to make it known. I hope you benefited from the exercise and that you had a chance to study Annexe 4 of CP187 on the FSA website.

Leaving the matter of regulation for the moment, (although not entirely), let us consider the question of the place of staff appraisals this week.

For many firms, the appraisal system (or performance evaluation) is often just another irksome form filling exercise. The most frequent complaint (from staff) is that although they 'go through the motions' annually, nothing ever comes of their appraisal. Often, too, the system a firm has may well be inherited from a previous management structure and is so outdated that it presents no more than a tick box exercise, with little or no opportunity to evaluate performance, or plan for future development.

What is the purpose of staff appraisals? Is it a means for staff to air their grievances? A way of defining staff pay rises? Well maybe, but I would suggest that there are more satisfactory methods available for both of these.

The appraisal presents an opportunity to:

  • Evaluate an individual's current knowledge, understanding and application;
  • Evaluate how those areas can be improved;
  • Identify tasks which an individual is undertaking that you may not be aware of (risk management);
  • Identify training and development needs;
  • Structure career development and succession planning.
  • Those of you who have already started to put a Training and Competence Scheme in place will recognise the distinct similarities!

    One of the biggest obstacles to meaningful appraisals is the lack of understanding from both appraisee and appraiser. After all, if you don't see the reasoning and philosophy behind what you are being asked to do, you are not going to have a very positive attitude towards it, are you?

    The idea that an appraisal is not a one-off event is just as vital; it should be a continuous cycle of identification of needs and planning of development that happens throughout the year.

    Where a T&C Scheme is running, the appraisal presents a perfect opportunity for focusing on gaps in knowledge, skills and understanding, enabling the firm to address these through development.

    The risk management advantages are huge and, in an industry where fewer and fewer young people are embarking on a career, the need for the development and encouragement of the next generation is paramount.

    Be aware that this reasoning doesn't just apply to junior staff either; it is as vital that directors focus on their own development needs too.

    The regulator requires that directors - or indeed others - who are appointed to controlled functions demonstrate 'leadership from the top' and monitoring of those roles is a prerequisite of authorisation. The only viable method of monitoring the individual director's performance against the tasks of a controlled function is through at least an annual appraisal.

    Those firms who have decided that an appraisal system is not for them may well find that they have to review that decision sooner rather than later.

    It all sounds very good in theory, but what are the practicalities of putting an appraisal system in place, or reviewing the one you already have, to decide on its effectiveness?

    If you are fortunate enough to have an HR function it is likely that you have already been encouraged (forced?) to consider the subject. If you don't have a dedicated HR function, you may have to consider seeking some external guidance.

    My suggestion would be that you do this when you are structuring your T&C scheme, as the two schemes should complement each other if they are to be really worthwhile.

    Additionally, there is little point in having an appraisal system without having the means to ensure that development needs are addressed - and that means having a robust Individual Training Record, either on paper or electronically. By now you may think there is a mountain of work to complete, so let's break this down into bite-size chunks.

  • Do you have Individual Training Records that hold Development Plans for staff? If not, establishing these must be a priority.
  • Do you already have an appraisal scheme? If you do, you need to assess whether or not it satisfies the need to be objective and whether it also satisfies the regulatory requirements. For example, are you addressing the underpinning knowledge, understanding and skills required for the individual to be able to carry out their job tasks competently? Are you identifying where the gaps are?
  • If you don't already have an appraisal scheme, you need to start thinking about how you are going to create one. If you are going to seek external help then ensure you use a consultancy that really understands the nature of regulation, or you could find yourself with an 'airy-fairy' scheme that does not satisfy the regulator.
  • Do your managers/supervisors and staff understand what appraisals are about and how to carry them out? For example, staff should make a self-assessment on a pre-appraisal form so that both parties are contributing to the appraisal, preventing it from becoming a 'telling' session. The individual's perceived needs and wants should be taken into account.
  • Don't be tempted to take an 'off-the-shelf' appraisal. It won't reflect regulatory requirements, or the business needs of your firm.
  • Regulation brings the opportunity to operate a business model of excellence. A well-run appraisal scheme, linked to a robust T&C scheme will bear fruit for your firm in the months and years to come - that's good for you, your staff, your clients and the industry.

  • Kate Foreman is co-author of the FSNTO GISC Framework Kit and the Insurance Broker T&C Toolkit
  • This page is edited by RW Associates, specialists in training, compliance and competence.
  • Email,

    Here are the answers to last week's MOT based upon the FSA's CP187 Annexe 4. (Question number first, then answer, then FSA reference from Annexe 4)

    1 a (3.5.2)

    2 b (4.4.6)

    3 d (3.6.1)

    4 a (6.5.1)

    5 d (6.5.11)

    6 d (6.3.1)

    7 a (2.7.2)

    8 b (6.2.3)

    9 d (2.7.1)

    10 d (2.3.2)

    11 b (4.4.1)

    12 c (4.4.2)

    13 a (2.2.2)

    14 d (7.8.1)

    15 b (2.8.1)

    16 c (4.6.1)

    17 b (4.2.12)

    18 d (6.5.8)

    19 b (6.5.1)

    20 d (6.5.11)

    To download a PDF of this article as it appears in the magazine click here .