Performance appraisal methods refer to a set of tools and processes that help measure employee performance. New-age approaches such as the 360-degree performance appraisal and the assessment center method offer an in-depth analysis of every individual’s job fitment, abilities, strengths, areas of improvement, potential to perform better and more.
This blog highlights seven such techniques of performance appraisal that help transform critical people decisions.
The Society of Human Resource Management describes performance appraisal as a periodic evaluation of job performance against standard expectations and preset goals. This evaluation serves as an instrument for organizations to make decisions on an employee’s development, compensation, promotion, etc. However, companies must have a conscious system to reap maximum and lasting benefits from the performance appraisal method.
A well-structured and holistic method of performance management also helps establish if the organization can trust employees to take on new responsibilities. Therefore, companies must adopt performance appraisal approaches centered on ongoing workforce development.
Over time, traditional methods of performance appraisal have been losing their effectiveness in building the desired workforce. Therefore, there is an increasing need for modern, insightful alternatives. However, before discovering these new-age tools, you must learn what a performance appraisal method should help you achieve. More importantly, you must clearly understand why you need to upgrade your current appraisal process.
Management by Objectives, or the MBO method of performance management, refers to a strategic framework that focuses on collective professional growth in an organization. The method includes a definite set of goals assigned to every employee, aligned with the organizational mission. Organizations monitor and periodically review the performance toward each goal.
Key decision-makers discuss and set collective organizational goals to be achieved over a specific period.
Managers and employees plan and set individual goals to be achieved, collectively working toward achieving the larger organizational goals.
Individual progress is reviewed, goals are reassessed, and feedback is shared over regular intervals.
The outcomes are evaluated toward the end of preset timelines. Following that, decisions like higher compensation, promotion, training, etc., are taken based on achievements/failures.
One way to ensure the success of this approach is to encourage diversified inputs that ultimately contribute toward a larger pool of organizational objectives. This can be done by leveraging a performance management platform to collect the inputs.
Another strategy to boost the efficiency of an MBO method of performance management is by augmenting the monitoring and review steps with multi-rater feedback tools such as the 720-and-360-degree appraisal method.
The final step of the MBO process- rewards and training intervention– is the most crucial component of performance appraisal. It is all about making informed decisions about how employees have performed their duties and how they can improve.
Potential refers to an individual’s ability to effectively carry out tasks in a professional setting. It involves qualities, knowledge, aptitude, among other factors. Performance, on the other hand, refers to the way the said tasks are carried out, their success, elements of innovation and creativity, etc.
And the results of performance appraisal should ultimately help:
The new-age performance appraisal methods listed in the next section empower organizations to get their employees to match their potential. These methods are designed to decode structured developmental feedback, ensuring that the outcome translates into a future-ready growth plan for every individual.
These methods are designed to decode structured developmental feedback, ensuring that the outcome translates into a future-ready growth plan for every individual.
A robust performance management system should incorporate tools and processes that ensure a deeper professional analysis of every employee. The goal is to gain unbiased and wholesome insights into every aspect of employee performance. This section breaks down how the modern performance appraisal methods double up as components of a system that focuses on talent management instead of evaluating past performance alone.
For a streamlined process, the technique of performance appraisal needs to begin with elaborate planning and structure. That’s why it’s crucial to understand the various stages of the Management by Objectives process highlighted earlier. MBO is a long-term appraisal approach that has room for several other initiatives, such as the 360-degree method of performance appraisal and 720 reviews.
Let’s take a closer look at these types of performance appraisal methods.
The 360-degree appraisal method is an excellent tool to formulate individual development plans within the workforce. It is one of the most holistic ways to review performance and share feedback. The method ensures a clearer understanding of individuals’ performance by collecting feedback from their circle of influence. The feedback providers include managers, direct reports, peers and even clients. Therefore, the method helps eliminate biases and makes feedback receivers aware of how their performance affects all stakeholders.
What makes the 360-degree appraisal method an ideal performance management tool:
A 360-performance review is a highly inclusive system, ideal for all professional levels and hierarchies. The process is subdivided into self-appraisals, managerial reviews, peer reviews, subordinate feedback and customer/client reviews.
On the one hand, the 360-degree performance appraisal can help initiate coaching, counseling and career development activities within an organization. On the other hand, it encourages employees to invest in self-development while embracing change management to become more aware of how their performance impacts other associates.
There are various concerns regarding the fairness of single-rater types of appraisal methods vis-à-vis the unbiased nature of the 360-degree appraisal method. Traditional appraisals may unintentionally focus on professionals’ weaknesses instead of considering how surrounding factors could be affecting their workflow. The comparison table below further clarifies these differences.
| Areas of comparison | Conventional performance review | 360-degree performance appraisal |
|---|---|---|
| Perspective | Confined to supervisors | Inclusive of coworkers, supervisors, direct reports, etc. |
| Process | Two-party dialogue | Multi-party conversation |
| Perception | Perceived as a tool to earn rewards | Perceived as a tool for strength building, learning and long-term success |
| Objective | Evaluation of preset goals, comparison of targets met and successes delivered | A futuristic development of individual career plans, encouraging individual growth to propel company success |
| Focus | Employee performance | Holistic development |
| Confidentiality | The employee knows who the reviewer is | Anonymity ensures honest inputs that help the employee |
| Outcome | Short-term positive/negative consequences: Pay raises, promotions, demotions and transfers | Long-term achievements: Actionable plans for growth, learning opportunities, higher productivity, besides rewards and recognition |
Source: Everything you need to know about 360-degree performance appraisal
Watch how Ceylon Biscuits took to 360 Performance Appraisals to upgrade their processes.
A 720-degree method of appraisal is essentially a 360-degree appraisal performed twice. A second 360-degree is performed at a timely interval and compared against the results of the first 360-degree appraisal. Conducting a 720-degree feedback session helps evaluate the progress and efficiency of the original individual development plans.
Using 720-degree feedback as a performance appraisal method helps track the various developments happening throughout the period during which employees work toward meeting their objectives.
Performance appraisal methods that ensure holistic employee assessment is crucial for the ongoing success of an organization. Therefore, the appraisal process shouldn’t be limited to reviews, feedback and performance vs. objectives analysis. Revolutionary solutions such as the assessment center method and BARS help elevate the performance appraisal approach to the next level.
These methods allow a deeper evaluation of professional capabilities by looking for blind spots that may have been overlooked during the earlier phases of assessment. Even when used independently, these new-age appraisal methods can significantly improve how an organization assesses, develops and rewards its employees.
The assessment center method of performance appraisal combines role plays, situational judgment tests, presentations, group activities, interviews, simulations, psychometric tests and other techniques to make critical talent decisions. Using an assessment center in performance appraisal initiatives can prove to be another futuristic step toward organizational growth.
An assessment center performance appraisal helps predict future behavior, make better talent decisions, diagnose development needs and groom employees to expand their KRAs. The method can be instrumental in identifying high-potential employees and professional training needs to bridge the skills gaps, leadership development and succession planning.
The gamut of assessment center exercises offers endless opportunities for a holistic performance appraisal process, particularly among leaders and senior-level professionals. It is a highly engaging and insightful tool that adds immense value to an organization’s talent management strategy.
Assessment center reports offer a benchmark for employee development plans. They use specifically developed simulations to make observations about behaviors and performance. The comparison and analysis of these reports help take further action.
It is also important to remember that the methods to assess and develop individual contributors, first-time managers, mid to senior-level management, and leadership positions vary. And the assessment center appraisal method caters to all those varying requirements.
Behaviorally Anchored Rating Scale (BARS) is an advanced version of the traditional grading or ranking method of performance appraisal. The method compares an employee’s performance with specific behavioral examples that are assigned a numerical rating. This rating is decided according to an employee’s role and job level.
BARS has a set of predetermined standards or behavior statements. The latter are used as yardsticks to measure the performance on each BAR scale level. The scale supports a clear and consistent performance evaluation, covering qualitative as well as quantitative attributes.
The process of creating a Behaviorally Anchored Rating Scale
Generally, a BARS process is rolled out in three broad steps:
Example behaviors on a BAR scale could include negotiation qualities, mentoring abilities, expression of enthusiasm during client interactions, workplace etiquette, conflict management abilities, etc.
Various types of psychometric assessments are used to measure a candidate’s role-specific potential, industry-specific aptitude, personality traits and other essential qualities. Various question formats can support such an analysis, depending on the goal of the assessment.
These assessments are also known as psychological appraisals and help analyze six major components of an employee’s performance:
Psychometric assessments help determine whether employees can achieve a certain level of development within a specific area. Additionally, they are easy-to-implement before making important workforce management decisions.
Psychometric assessments offer predictive insights about employees, allowing decision-makers to chart a more streamlined career trajectory for individuals within the company.
As part of the larger umbrella of psychometric assessment, personality and aptitude tests can be beneficial tools in the performance appraisal process. Aptitude measurement covers understanding an individual’s intelligence and the ability to acquire new skills, becoming a future indicator of high performance.
Contrarily, personality and behavioral tests account for assessing the traits that attribute to the positive impact of the individual based on the organization’s existing environment. While aptitude tests inform whether employees can do the assigned job, personality and behavioral profiling help understand if the employees are suited for a specific professional level.
While psychometric assessments help analyze performance and potential across multiple parameters, competency assessments are solely focused on critical job skills. These assessments are domain-specific and help reveal areas where professionals need to expand their knowledge and hone new skills.
The most significant advantage of competency assessments and reviews is that they shift the focus from evaluation to learning.
A strong understanding of competencies enhances an organization’s ability to predict success in every employee’s job role and pick up the right tools to help improve his/her performance whenever required.
Performance check-ins, used as an appraisal method in HRM, refer to a frequent review and feedback process between managers and their direct reports. They are a crucial part of Management by Objectives. Besides, the process builds rapport and helps managers understand what their team members are working on throughout a timeline, between annual appraisal cycles.
Regular check-ins and internal discussions are essential elements to ensure the overall success of a team. Their primary objective is to create a consistent time and space for planning the smaller stages of the overall Management by Objectives process.
When used as a well-planned method for evaluating employee performance, they facilitate:
Most companies can effectively use check-ins. Deploying them between more intensive appraisal processes helps spread out performance discussions throughout the year without overburdening employees and the organization.
Transitioning from an annual to an ongoing process can prove to be more efficient and effective as it allows employees, managers and L&D teams to address performance issues before they become entrenched and potentially costly to overcome.
Performance appraisal is not just a limited overview of employee performance. With changing priorities and the evolution of employee-centric workplaces, the success of a performance appraisal process lies in its robust, futuristic structure. In other words, for a company to instill a robust appraisal process, the chosen method must answer the following questions.
And more!
Companies could take it a step further by incorporating the various methods of performance appraisal within the MBO framework. While these methods play a significant role at the later stages of the talent management process, they can also serve as the foundation for building high-achieving teams. For example, psychological appraisals are excellent for training needs identification. However, using them to predict performance and gauge aptitude during the planning stage of the MBO can help strengthen the system at large. Similar suggestions are highlighted below.
| Areas of improvement | The suggested method to formulate IDPs |
|---|---|
| Behavioral | 360-degree feedback, 720-degree feedback, BARS |
| Technical | Competency assessments |
| Strategic | The assessment center method |
| Social | Psychometric assessments |
It is important to note that there doesn’t have to be a one-size-fits-all formula for using different performance appraisal methods. Choosing one or a combination of many depends on respective organizational goals. The beauty of modern methods of performance appraisal is the flexibility they offer in terms of application and adaptability.
A streamlined process is crucial for implementing a performance appraisal system. While it may differ, depending on the specific industry in which the organization operates, some elements should be included as standard. If you need help in choosing the right performance appraisal method, Mercer | Mettl offers a range of solutions, such as psychometric assessments, assessment center performance appraisal, 360-degree feedback, digital L&D platforms and more!
Originally published September 3 2021, Updated October 24 2024
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