As SM&CR and IDD approach, now is the time to start putting your ducks in an orderly row…

Of course, you will be aware of the need for job specifications that pinpoint tasks and responsibilities for individual employees, from the CEO to the junior account handler – just a nudge for those firms who have still not got to grips with this issue!

The simple truth is that you cannot have an effective appraisal system if you (and your employees) are not sure what you are appraising them against.  I know it’s a cliché, but it’s very difficult to score a goal without knowing where the goalposts are.

For many firms, the appraisal system (or performance evaluation) is often just another irksome form filling exercise. The most frequent complaint from employees 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Often, too, the system a firm has may well be inherited from a previous management structure or consultancy and is so outdated it presents no more than a tick box exercise, with little or no opportunity to evaluate performance or plan for future development.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 appraisals? Is it a means for staff to air their grievances? A way of defining pay rises? Well maybe, but I would suggest that there are more appropriate methods available for both of these.  In fact, I actively discourage firms from discussing pay rises at appraisals as the focus needs to be on competence to do the job first and foremost.

The appraisal presents an opportunity to: 

  • Evaluate an individual’s current knowledge, understanding and application. From an IDD perspective this means ensuring that knowledge and understanding of eight core areas are covered:
    • Assessing customer needs;
    • Business ethics;
    • Claims;
    • Complaints;
    • Financial competency;
    • The market;
    • Individual policy types; and
    • Applicable law.
  • 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.
  • In essence, an opportunity to evaluate an employee’s competence to do the job for which they are employed, which is what the regulator requires you to demonstrate.

Those of you who have an effective Training and Competence Scheme in place will be nodding their heads!

One of the most significant 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, not an annual tick box exercise.

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 which often struggles to encourage young people to embark on a career, the need for the development of the next generation is paramount.  The soon to be released Development Zone IDD Pathway should be your starting point.

Be aware that this doesn’t just apply to junior staff either; it is as vital that directors focus on their own development needs too and SMCR will see this embedded as part of regulatory culture, since every member of staff will need an up to date job spec that identifies areas of responsibility and this is a particular ‘gaping hole’ that I see with firms’ directors and senior managers constantly.

The regulators require 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.

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 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 as part of a review of your T&C scheme, as the two schemes must complement each other if they are to be meaningful.

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 what the gaps are and making concrete plans to address them?

  • 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.

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 years to come – that’s good for you, your staff, your clients and the industry.


About the author

Kate retired from RWA in 2020.

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