Performance appraisal methods
Performance Appraisal Methods Explained: Types, Examples, and Benefits
In this post, we will discuss performance appraisals – what they are, why they matter, and the different methods companies use to review employee performance effectively.
Let’s look at them in detail:
What is performance appraisal?
A performance appraisal is a formal way for a company to evaluate an employee’s performance. It looks at the employee’s work quality, skills, and overall contribution. This review is usually done once a year or at regular intervals.
The primary purpose is to give clear feedback, discuss expectations, and help the employee understand where they can improve. Performance appraisal is carried out methodically, involving measuring employee performance and comparing it against all goals and targets.
Why is performance appraisal important?
Performance appraisal is critical for these reasons:
- Performance appraisals help companies build a strong foundation for growth and progress. When done correctly, they create a positive impact on both employees and the organisation in many ways.
- Performance appraisals support employee growth. They help employees understand where they stand, what skills they need to improve, and what steps they should take to move to the next role within the company.
- They also improve employee engagement and retention. When employees receive regular and clear feedback, they feel valued. Knowing that there are growth opportunities within the organisation encourages them to stay longer.
- Appraisals help identify skill gaps and improve overall performance. By reviewing performance and setting clear goals, companies can plan training, prepare employees for future roles, and stay competitive.
- They improve communication between managers and employees. Regular discussions about work, goals, and expectations help avoid confusion and keep everyone aligned with company objectives.
Top Performance appraisal methods
Every company uses a different way to review employee performance. There is no single best method for everyone. The right appraisal method depends on your company size, work culture, and business goals. Below are some commonly used performance appraisal methods, explained in a simple and practical way.
1.Management by Objectives (MBO)
In this method, managers and employees sit together and set work goals. These goals are reviewed from time to time, and progress is discussed openly.
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2.360-Degree Feedback
Here, feedback is taken from managers, teammates, juniors, and sometimes even clients. All inputs are used to understand the employee’s performance.
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3.Peer Review
In peer review, employees are evaluated by their coworkers who work closely with them on a daily basis.
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4.Behaviourally Anchored Rating Scale (BARS)
This method uses clear behaviour examples for each performance level. Employees are rated based on how closely their actions match these examples.
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5.Graphic Rating Scale
This is one of the most commonly used methods in Indian companies. Employees are rated on traits like teamwork, punctuality, communication, and job knowledge.
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Each organisation can choose one method or a mix of methods based on what suits their work environment best. The key is to keep the process fair, clear, and helpful for employee growth.
Performance appraisal examples:
Punctuality
- Positive: The employee comes to work on time every day. All tasks and projects are completed on or before the deadline. Meetings are attended without delay.
- Negative: The employee often comes late to work and submits tasks after the deadline.
Accountability
- Positive: The employee takes responsibility for their work, whether the result is good or bad. They do not hesitate to accept mistakes and learn from them.
- Negative: The employee avoids taking responsibility for their actions and usually blames others when things go wrong.
Communication
- Positive: The employee communicates clearly with team members and customers. They make sure everyone understands the discussion before moving ahead.
- Negative: The employee does not communicate clearly. This often leads to confusion among team members and customers.
Common Challenges in Performance Appraisals
- Bias or personal opinions affecting the review
- Lack of clear performance goals or expectations
- Infrequent feedback throughout the year
- Over-focusing on recent events instead of overall performance
- Poor documentation of employee work and achievements
- Discomfort in giving honest negative feedback
- Inconsistent appraisal standards across teams
- Employees not taking the appraisal seriously
- Limited time spent on meaningful discussions
- Appraisals feeling like a formality rather than a growth exercise
Conclusion
Performance appraisals are not just a formality. They help organisations clearly understand how employees are performing. This information is useful when deciding on salary hikes, bonuses, promotions, and where to allocate company resources. It also helps identify what is going well and where improvements are needed.
HR teams should design a proper and practical appraisal process so that the feedback collected is actually helpful. A well-planned appraisal system supports employee growth, helps management make better decisions, and improves overall company performance.
By that, we have come to the end of this post. If you have any questions, feel free to leave them in the comment section below.
FAQs
Q. Which traditional method is best for small companies?
Ans: Small companies usually do well with rating scales or essay appraisals because they are easy to use and flexible. Methods like paired comparison can be complex with very few employees, and forced distribution may not work since the team is too small.
Q. Is it worth investing in a performance management system instead of using spreadsheets?
Ans: Yes, definitely. A performance management system makes things much easier. It helps track goals, get feedback from multiple people, generate reports automatically, and gives valuable insights from the data. Spreadsheets can’t do all this correctly. It also grows with your company and saves a lot of time on admin work.
Q. How can biases be minimized in performance evaluations?
Ans: Biases in performance evaluations can be reduced in a few simple ways.
- First, use clear, standardized criteria to judge everyone fairly.
- Second, involve more than one evaluator to balance opinions.
- Third, use performance management tools or software to track results and progress, which helps maintain alignment with the assessment objective and is based on real data.
Q. How often should traditional performance appraisal methods be used?
Ans: Traditional performance reviews are usually done once a year, though some companies do them twice a year. How often you do them depends on your company, your industry, and what is best for your employees. Many companies also have regular, smaller check-ins in addition to the main review.
