Ian Jerrum looks at the key role that appraisals and performance management should play within a company and considers some of the key issues involved

Carrying out proper supervision is an essential part of complying with the FSA's requirements on training and competence. Unlike other methods of assessing competence, which often focus primarily on reviewing past performance, appraisals involve a structured two-way discussion of past and future performance between assessors and those being assessed.

It is important to carry out frequent reviews, but providing regular and ongoing feedback is also a critical part of the manager's role. What an employee hears at a formal appraisal should never come as a shock.

Full appraisals usually take place only once or twice a year. There would normally be one full annual review, possibly interspersed with half-yearly, quarterly or mid-term reviews.

Some roles - such as telephone-based roles in call centres - require more frequent reviews. It may also be advisable to carry out appraisals more frequently for new employees during their first year.

Some firms link appraisals to annual salary reviews. Others prefer to keep the two issues separate.

Whatever the system adopted, it is important that all employees are made aware of their firm's appraisal process, how it is conducted, and the rationale behind it. This information should be provided to new employees.

Employees should always be given advance notice of appraisals, so that they can properly consider any issues they may want to discuss. The employee should be warned at least two weeks in advance to allow him adequate time to prepare. The process should be supported by appropriate documentation such as a pre-appraisal form for the employee to complete. This will assist both the employee and the supervisor in preparing for the appraisal.

Appraisals should take place away from the normal work area, and adequate time should be put aside for the discussion, so that the employee will feel the process has been both fair and objective.

Generally speaking, no more than two or three appraisals should be completed by a manager in a single day, with a reasonable amount of time allowed between each in which to make notes from the previous one and prepare for the next.

An appraisal provides an ideal opportunity to form an overall view of an individual's performance, training and competence. It should be based on the role profile or job description and any associated competencies, and should also include a review of any objectives that have been previously agreed for the period under review.

Typically, the appraisal will cover the jobholder's performance over that period, his strengths, any areas for improvement, and action plans for the future including target-setting and agreeing training plans.

Before concluding any appraisal it is important to agree goals for the forthcoming period. In setting such objectives it may help to bear in mind the acronym, Smart. Goals should be:

S Specific and stretching. An individual needs to understand precisely what is required and expected of them and they should be given some kind of a challenge, encouraging them to lift their performance

M Measurable. Any objectives set must be capable of measurement, both during and beyond the forthcoming period

A Achievable. Setting unrealistic objectives can be highly counter-productive and targets should always take sensible account of the individual's level of experience and competence

R Relevant. Objectives should always be appropriate to the overall aims and objectives of the employing firm and to the role of the individual within it

T Time bound. All objectives should specify a time period within which they are expected to be achieved.

Appraisals will very often highlight a need for additional training. This is a good moment at which to formalise or update an individual's training and development plan. There will always be some areas in which the employee can improve, and development and training is key to that process.

Employees should also be required to keep their knowledge and expertise up to date through a process of continuing professional development (CPD).

In addition to formal training, a variety of other activities can contribute to CPD attainment. These might include: attending conferences or seminars; published research; assessed self-managed learning; examination work; research work; mentoring students; and reading articles and bulletins.

It is essential to keep full records of all CPD-relevant activities undertaken by an individual. It is important to record not simply the activities undertaken but also the key learning points achieved from each, and how the individual has benefited from or applied this learning. Reviewing an individual's CPD record should form part of the appraisal process.

Once the appraisal has been completed the manager should document the discussions and the agreed way forward. An appraisal form should also be completed and signed by both appraiser and employee. There is usually an opportunity for the appraisee to insert any comments he may wish to make.

Supervision and monitoring are an essential part of complying with FSA regulations. The employer is responsible for ensuring that all members of staff are competent or, where they are found wanting, that they are receiving appropriate training and support.

New recruits are not required to be fully competent from day one; but their competence must be assessed and an appropriate level of supervision put into place, along with a training and development plan.

For recruits with greater experience, more detailed assessment is likely to take place once they join the organisation.

If they have the appropriate competence, the assessment will show this and the level of supervision can be reviewed. A similar process should take place when an employee changes roles.

A new recruit with no previous insurance experience will require close supervision initially. This may take the form of a supervisor sitting with him, or requiring him to refer each completed task back for checking until the supervisor is confident the employee has attained an appropriate level of competence.

Supervisors should continue to reassess employees on a regular basis to ensure that they remain competent, and maintain records of these assessments.

If such assessments raise any concerns, the supervisor must decide whether the individual requires more training before being allowed to continue in the role without supervision again.

Following training, it may be necessary to supervise an employee closely in the short term until the supervisor is satisfied that he is demonstrating competence on a consistent basis. Whatever action is taken, it is important that the supervisor keeps a full record as proof of the actions taken. IT

Ian Jerrum is managing director of Searchlight Solutions

This feature is based on materials available on Searchlight's market-leading e-learning system Tick. ian.jerrum@ssluk.net