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Seven modern performance appraisal methods to boost workforce development

Learning and Development | 8 Min Read

Seven modern performance appraisal methods to boost workforce development

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.

 


Understanding performance appraisal

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.

Ideally, a robust performance appraisal process should have four following fundamental goals:

  • Initiating a process that accurately assesses an individual's level of job performance
  • Creating an evaluation system that helps identify employee strengths and weaknesses for formulating employee development plans
  • Setting goals for all employees and measuring how well they are able to achieve them
  • Laying the foundation for systemic workforce training, succession planning, leadership development and more

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.

The annual review’s biggest limitation is its emphasis on holding employees accountable for what they did last year, at the expense of improving performance now and in the future. That’s why many organizations are moving to more-frequent, development-focused conversations. Besides, traditional appraisals are not helpful in aligning individual and organizational goals, awarding merit raises, identifying poor performers, and countering claims of discrimination.

Peter Cappelli and Anna Tavis
The Performance Management Revolution, HBR

 


Setting up for success: The strategic appraisal approach of Management by Objectives

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.

 

The MBO process cycle can be divided into four vital steps:

Setting organizational objectives

Key decision-makers discuss and set collective organizational goals to be achieved over a specific period.

Setting employee objectives

Managers and employees plan and set individual goals to be achieved, collectively working toward achieving the larger organizational goals.

Performance monitoring

Individual progress is reviewed, goals are reassessed, and feedback is shared over regular intervals.

Rewards and training intervention

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.

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.

 

Performance Appraisal_infographic 1

 

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.

 

Performance vs. potential

 

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:

  • Measure maximum employee potential
  • Ensure that employees have the necessary means to perform up to that potential
  • Offer support and resources to help them exceed their potential

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.

 


Seven new-age methods of evaluating employee performance and how to use them

Seven new-age methods of evaluating employee performance

 

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.

360-degree feedback

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.

 

360-degree feedback

 

What makes the 360-degree appraisal method an ideal performance management tool:

It boasts of inclusive, multi-dimensional components

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, anonymous subordinate feedback and customer/client reviews.

It benefits employers as well as employees

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.

It offers solutions to the problems posed by traditional methods of performance appraisal

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 comparisonConventional performance review360-degree performance appraisal
PerspectiveConfined to supervisorsInclusive of coworkers, supervisors, direct reports, etc.
ProcessTwo-party dialogueMulti-party conversation
PerceptionPerceived as a tool to earn rewardsPerceived as a tool for strength building, learning and long-term success
ObjectiveEvaluation of preset goals, comparison of targets met and successes deliveredA futuristic development of individual career plans, encouraging individual growth to propel company success
FocusEmployee performanceHolistic development
ConfidentialityThe employee knows who the reviewer isAnonymity ensures honest inputs that help the employee
OutcomeShort-term positive/negative consequences: Pay raises, promotions, demotions and transfersLong-term achievements: Actionable plans for growth, learning opportunities, higher productivity, besides rewards and recognition

720-degree feedback

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.

Assessment center appraisal method

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.

Using assessment centers in performance appraisal allows assessors to:

  • Evaluate employees in situations that imitate real-life workplace scenarios
  • Observe behaviors and skills that are specific to pre-defined competencies

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.

 

Why use the assessment center method of performance appraisal:

 

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.

  • Best of many worlds
    They offer one platform to carry out many performance appraisal activities: behavioral profiling, psychometric tests, potential evaluation and more!
  • Higher accuracy
    Assessors get to observe and evaluate employees in real-time, thereby eliminating biases concerning past performances.
  • Adaptability
    Assessment centers can be designed and customized to match specific appraisal requirements and job profiles.
  • Engagement
    The interactive quality of virtual assessment centers is a welcome alternative to monotonous performance appraisal methods.

Behaviorally Anchored Rating Scale

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:

  • Collection of role-specific examples of effective vs. ineffective behavior with expert guidance
  • Allocating rating scales to behaviors with the help of subject matter experts
  • The actual rating exercise

Example behaviors on a BAR scale could include negotiation qualities, mentoring abilities, expression of enthusiasm during client interactions, workplace etiquette, conflict management abilities, etc.

Using BARS as a performance appraisal method offers the following advantages:

  • It outlines ideal or expected professional behaviors for employees in specific workplace scenarios.
  • It creates a clear standard for measuring performance across multiple instances.
  • It is applicable across departments and hierarchies in an organization.

Psychometric assessment as a performance appraisal method

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:

 

Performance Appraisal_infographic 3 copy

 

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.

 

How organizations can use personality and aptitude tests

 

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.

Competency assessments

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 competency-based performance appraisal method helps:

  • Communicate the latest expectations of the skills required to function in a specific job role
  • Articulate what is new and evolving in a certain domain, e.g., tech updates, invention of new software, adoption of new equipment within the organization, trends affecting entire strategies like marketing, content, social media and more
  • Encourage professionals to open up to new ideas and learning opportunities

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

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:

  • Better planning and setting of agendas
  • Optimum utilization of professional skills and potential
  • Efficiency in the design of individual training and development goals
  • Employee motivation strategies
  • Transparent communication

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.

 


Choosing the right technique of performance appraisal

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.

  • Could the employees fulfill their preset goals during a specific duration?
  • At what level are the employees performing?
  • What is the quality of their work?
  • Can they perform better?
  • What measures can help the entire workforce to reach its optimum potential?
  • What skills or behavioral modifications are required for the employees to get better at their roles?
  • How well is an individual suited for a particular role?

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 improvementThe suggested method to formulate IDPs
Behavioral360-degree feedback, 720-degree feedback, BARS
TechnicalCompetency assessments
StrategicThe assessment center method
SocialPsychometric 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.

 


Conclusion

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 September 3 2021

D'ipanjenah Ali

Written by

D’ipanjenah is a writer and marketing professional associated with Mercer Mettl since 2020. Her working style thrives on a balanced approach towards standard insights and novel trends. She utilizes creative content and digital strategies to help brands start important conversations. When not reading/writing, she enjoys art and parents a calico.

About This Topic

360 degree feedback is a method of collecting anonymous feedback about an employee from multiple sources - manager, peers, subordinates - for appraisals and organizational planning. 360 degree feedback empowers organizations to make better people decisions.

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