1. HR Glossary
2. Performance Appraisal

Performance Appraisal

What is Performance Appraisal?

A performance appraisal is a structured process used for evaluating performance of an employee. This method compares the actual performance of the employee with the expectations set for their role. This evaluation method includes a personal review that identifies the employee's strengths and scope, how valuable the employee is to the company and assesses their potential for future growth.

Methods for Performance Appraisal

1. Management by Objectives

Management by Objectives (MBO) is a way of reviewing work where managers and employees work together to set, plan, and track goals during a specific time. They choose realistic goals, regularly talk about the progress and fix a deadline to achieve it. This performance appraisal method aligns employee goals with the bigger goals of the company.

At the end of the review period, which can be every quarter, six months, or year, employees are evaluated based on their results. Good performance may lead to a promotion and a pay raise, while poor performance might result in a job change or more training. This process focuses mainly on clear, measurable goals, but sometimes does not pay much attention to less measurable things like teamwork and commitment.

2. 360-degree feedback

360-degree feedback is a way of evaluating an employee by getting reviews from the people working around them. This includes their bosses, co-workers, customers, and direct reports. This approach allows a company to take unbiased judgments in evaluating employee’s work and shows a better picture of their performance.

3. Assessment Centre Method

The Assessment Centre Method was first introduced by the German Army in 1930. Since then, it has been improved to fit the current environment. In this method, employees are evaluated with real-life work activities like social simulation exercises, informal talks, problem-solving, and role-play. These approaches help to test their job skills.

This method helps employees understand how others see them and how it affects their work. Also, this method doesn't just focus on how well someone is doing now, but also guesses how well they will perform in the future in their job. However, this method is costly, time-consuming, and difficult to manage.

4. Behaviorally Anchored Rating Scales

Behaviorally Anchored Rating Scales is one of the performance appraisal processes that mix both quality and quantity benefits of an individual. BARS compares employee works with specific examples of behavior that are set to give numerical ratings. Each level of performance in BARS is shown by multiple statements that describe frequent behavior an employee possesses. These statements help measure how well someone is doing compared to pre-defined standards set for their job.

To create BARS, the first step is to collect examples of typical behaviors depicting your work culture. Then, these examples are made into a standard format; any repeated ones are removed. After organizing them, the examples are mixed up and checked to see if they're effective. The best examples are then used in BARS to evaluate employees.

5. Psychological appraisals

Psychological appraisals are used to find out an employee's hidden abilities. It doesn’t look at an employee's past work but focuses on how well he might do in the future. It checks several employee components like cognitive skills, intellectual skill, leadership qualities, personality traits, emotional intelligence and other related skills.

Qualified psychologists use different tests and scenarios to perform psychological appraisal like detailed interviews, physiological tests, discussions,etc This way of evaluating is slow and complicated, and the result depends on how good the psychologist is.

6. Human-Resource Accounting Method

The Human-Resource Accounting Method measures employee’s work by assessing the financial value they bring to the company. This is done by comparing the salary paid to an employee with the revenue or profit they generate for the company.

When using this method, certain factors like how much value they bring for each unit of service, the quality of their work, the costs that come with their job, how well they get along with others, etc are taken into consideration. However, a disadvantage of this method is that it relies a lot on comparing costs and benefits, which can be challenging for the person reviewing.

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