methods of performance appraisal

Top Methods of Performance Appraisal – A Comprehensive Guide


Do you dread performance appraisal season like a trip to the dentist? Skipping them meetings like leg days? Don’t worry, the lack of clarity on the methods of performance appraisal and the procedures might be what is acting as a hindrance. Let us try by understanding what performance appraisal methods are. Performance Appraisal methods help companies periodically evaluate their employee’s work. The main aim of this exercise is to find out ways to improve employee productivity. If you are wondering about the methods of performance appraisal that a manager can adopt to measure the work done by their subordinates, we will discuss a few of them in the below paragraphs.

Different Performance Appraisal Methods

Employees eagerly wait for the appraisal season and if the specifics are not communicated effectively, HRs can expect a zombie apocalypse in the workplace where the employees are eating your brains and just sluggishly walking around! Let us take a look at the different performance appraisal methods.

performance appraisal methods
Management by objectives (MBO) Performance Appraisal Method

Management by Objectives (MBO) is among the most progressive methods of performance appraisals. It is a performance appraisal method that focuses on setting clear objectives and goals for employees and evaluating their performance based on the achievement of those goals. The process involves setting specific, measurable, achievable, relevant, and time-bound (SMART) goals for employees and managers, which are aligned with the organization’s overall objectives.

The MBO performance appraisal method typically involves the following steps:

  1. Goal setting: The employee and manager work together to set specific goals and objectives for the employee to achieve during the appraisal period.
  2. Performance planning: The employee and manager develop an action plan that outlines the steps the employee will take to achieve the goals and objectives.
  3. Performance monitoring: The manager monitors the employee’s progress towards the goals and provides feedback and support as needed.
  4. Performance evaluation: At the end of the appraisal period, the manager evaluates the employee’s performance based on the achievement of the goals and objectives.
  5. Performance feedback: The manager provides feedback to the employee on their performance, including areas of strength and areas for improvement.

The MBO performance appraisal method is popular because it provides a clear and objective way to evaluate employee performance. It also helps to align employee goals with organizational objectives, which can increase motivation and productivity. However, it requires a significant amount of time and effort to set and monitor goals, and it can be challenging to develop meaningful and measurable objectives for some roles.

360-Degree Feedback

360-degree feedback is among the most preferred among the different performance appraisal methods. It focuses on creating a continuous feedback mechanism between employees and their superiors. This 360-degree performance appraisal methods help to measure an employee’s performance based on feedback from multiple stakeholders. The HR managers of a company get in touch with the managers, customers, peers and subordinates of an employee. They seek inputs from these parties over the performance of the employee over a fixed evaluation period. This is one of the few performance appraisal methods that involve other parties to measure the performance of their employees. The 360 degree feedback has become increasingly automated in the recent years. With the development of brilliant HR tech platforms, these processes have become efficient and quick.

Behaviorally Anchored Rating Scales (BARS)

Behaviorally Anchored Rating Scales (BARS) is a performance appraisal method that combines the qualitative advantages of narrative critical incidents with the quantitative benefits of ratings scales. In BARS, the performance appraisal is based on observable behaviors that are anchored to specific rating scales.

The BARS method involves a panel of experts who identify and describe specific behaviors that are relevant to the job being appraised. These behaviors are then grouped into categories, and a scale is developed that describes each category in terms of specific behavioral examples. Also, each scale is anchored by a range of performance levels, with specific behavioral examples provided for each level.

During the appraisal process, supervisors or managers rate the employee’s performance by selecting the behavioral examples that best describe the employee’s performance. The selected behaviors are then matched to the appropriate scale, and a score is assigned based on the rating scale’s performance levels.

The main advantage of the BARS method is that it provides a detailed and specific evaluation of an employee’s performance, allowing for more targeted feedback and development planning. Additionally, the use of specific behavioral examples helps to eliminate bias and subjectivity, making the ratings more reliable and valid.

However, the development and implementation of BARS can be time-consuming and requires a panel of experts with a deep understanding of the job being appraised. Additionally, BARS may be more difficult to implement in jobs where performance is less observable or where behavioral categories are difficult to define.

Human Resource (cost) Accounting Method

The human resource (Cost) accounting method is one of the leading performance appraisal methods used by organizations.

Human resource accounting is a method of accounting that assigns a value to the human resources of an organization. The cost accounting method for human resources involves measuring and analyzing the costs associated with employees and their contribution to the organization.

There are several ways to approach human resource cost accounting, including:

  1. Historical Cost Method: This method measures the cost of human resources based on their original cost, which includes the cost of hiring, training, and developing employees. This method is useful for analyzing the cost of an employee’s contribution to the organization over time.
  2. Replacement Cost Method: This method measures the cost of human resources based on the cost of replacing them in the current market. This method is useful for determining the cost of losing an employee and the cost of recruiting and training a replacement.
  3. Opportunity Cost Method: This method measures the cost of human resources based on the opportunity cost of not having the employee in the organization. This method is useful for determining the value of an employee’s contribution to the organization and the potential cost of losing them.

The goal of human resource cost accounting is to provide a better understanding of the value of human resources to an organization. Additionally, it helps organizations make better decisions about their workforce. By analyzing the costs associated with employees, organizations can better manage their human resources.

Psychological Appraisals

Psychological appraisals are frequently used in the workplace to help employers make informed decisions about hiring, promoting, or training employees. These assessments provide employers with valuable insights into an employee’s personality, cognitive abilities, emotional stability, and job-related skills. This helps them to determine the most suitable job roles and work environments for each employee.

Psychological appraisals can also be used to identify potential areas of improvement for employees. For example, an assessment may identify an employee who needs additional training or support to improve their communication skills or an employee who would benefit from more opportunities for leadership development.

In addition, psychological appraisals can help employers to identify potential sources of conflict or stress within the workplace, and to develop strategies for managing these issues. For example, an assessment may identify a particular team or department that is experiencing high levels of stress or tension, allowing employers to implement measures to improve working conditions and reduce the risk of burnout or turnover.

Overall, psychological appraisals can provide valuable insights into employee behavior and performance, helping employers to create a more productive and positive work environment for all employees. However, it is important to use these assessments ethically and responsibly. Ensure that employee privacy and confidentiality are always respected.

What is the Best Method of Performance Appraisal

The various methods that companies use to evaluate their employees have their own merits. But the best method is one that delivers actionable insights for the management regarding feedback on their employee’s performance. It should also provide inputs to improve employee performance and productivity in the long run.

Traditional v/s Modern Methods of Performance Appraisal

There is always a debate on the effectiveness of both traditional and modern methods of performance appraisal. Traditional methods of performance appraisal focus more on an individual’s personality traits. These include the ability to take initiative, punctuality, dependability, integrity, intelligence, creativity and leadership potential. But modern methods of performance appraisal focus on an employees’ work results over the evaluation period. They give a greater emphasis to achievements on the job compared to the personality traits of an employee.

In a nutshell, performance appraisal is a crucial aspect of managing employees in any organization. It provides an opportunity for employers to evaluate the performance of their employees and identify areas that need improvement. There are various methods of performance appraisal that employers can use.

Each method has its strengths and weaknesses, and employers need to select the appropriate method based on the specific needs of their organization. However, it is essential to ensure that the performance appraisal process is fair, transparent, and consistent to avoid any biases and discrimination.

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