India Employer Forum

Human Capital

7 Effective Performance Appraisal Methods That Promotes Employee Productivity

  • By: India Employer Forum
  • Date: 24 February 2020

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Performance appraisal methods are an important process and must be one of the top priorities of the HR department

Performance appraisal methods are an annual exercise that organizations follow to assess the performance and productivity of their employees against a set of pre-defined objectives. It also helps organizations to examine the strengths and weaknesses of employees. When it comes to wage raise and promotion, these factors are taken into account. The objectives of performance appraisal vary from organization to organization and so do the evaluation techniques. The performance review process is vital to boost the productivity of employees and their future performance. An essential element of this process is the regular appraisals so that employees can remain on track regarding their progress and check if there’s a need for improvement. Giving specific and consistent appraisals are vital for the success of a business. The HR department of any organization must have performance appraisal methods that accurately reflects the organization’s philosophy.

Besides the professional traits, employees are also rated on their personal traits like attitude towards their job and peers, personality and stability. Appraisals also offer employees a chance to speak their heart out regarding their future plans and ambitions, as it sets the right stage and context. While most organizations do it annually, some forward-looking businesses that do half-yearly or quarterly performance evaluation. Some employees who work exceptionally well and deliver outstanding results also get pay raise or promotion during the half-yearly or quarterly performance evaluation. These shorter cycles of performance evaluation are very effective as they help boost the confidence of employees and improve their productivity.

You might also be interested to read: Upgrade Your Annual Employee Performance Review With These Effective Performance Management Tools

These modern appraisal systems are much better than the traditional methods of the performance management system since they have major limitations. They mostly focus on evaluating performance just once every year. Also, annual performance reviews focus more on evaluating past performance instead of proposing solutions for the future. The traditional performance appraisal methods offer a very goal-oriented approach through ranking templates, critical incidents, checklists, etc. On the other hand, modern appraisal techniques focus more on objectivity and the personality traits of individuals by evaluating their leadership qualities, integrity, creativity, etc. A right performance appraisal method can help companies boost the performance and productivity of their employees for better business results. It can become a rewarding experience for the organization as well as employees.

Here are seven modern performance appraisal methods that are comprehensive and effective:

1. 360-degree feedback

The annual performance management appraisals are laid-back and do not work at modern-day workplaces. Today, employees need regular communication and feedback about their performance. 360-degree feedback offers just that to employees and helps them stay motivated. Each employee of an organization appraises their direct supervisors, customers, suppliers, peers and lastly a self-evaluation in the 360-degree feedback process. It offers a holistic performance analysis and involvement of employees. However, this process can suffer due to the subjectivity of the appraiser if it is not handled effectively.

2. 720-degree feedback

In this method of performance evaluation, the appraisal is done by external stakeholders as well besides the relevant internal stakeholders. External stakeholders include clients, financial institutions, investors, vendors, etc. This modern-day performance evaluation method is one of the most effective as it is a holistic group that defines the overall success of a business.

3. Behaviorally anchored rating scales (BARS)

BARS take into account both the qualitative and quantitative aspects of the performance appraisal process. In this process, the employee performance is compared with specific behavioral examples and measured on numerical ratings. The positive elements of this performance appraisal process include consistent evaluation, improved feedback and accurate performance analysis. The drawback of this process is that it could suffer from biases if done manually.

4. Management by objectives (MBO)

This is a very popular performance evaluation method in which employees and their direct supervisors together identify and set the goals. The goals that have been set are then discussed and evaluated periodically to assess the progress and do some mid-course correction if the goals are not feasible. This method is more focused on career-oriented goals and other aspects like interpersonal skills are usually not given much importance. It is a time-intensive method of performance evaluation.

5. Psychological performance appraisal methods

This performance management process helps employers determine the hidden potential of employees. It is a forward-looking process as it lays emphasis on analyzing an employee’s future performance instead of past performance. It is conducted by qualified psychologists who will use various parameters like psychological tests, in-depth interviews, etc. to evaluate the intellectual, emotional and other traits of an employee. 

6. Assessment center method

This method of employee performance appraisal involves assessing employees in a social-related situation. In this process, employees are made to undertake role-playing exercises, in-basket exercises, simulations and workgroups. These exercises help employers gain insights into an employee’s personality in terms of problem-solving skills, ethics, tolerance levels, adaptability, etc. However, this method can lead to unhealthy competition among peers and could seriously affect low performers.

7. Human Resource (Cost) Accounting Method

In this performance appraisal system, the performance of employees is measured based on the monetary benefits they bring to the organization. It is calculated by comparing the cost to the company of an employee with the monetary benefits gained by the company through that employee’s contributions. This method also takes into account the interpersonal relationships, overhead costs, average service value, etc. 

You might also be interested to read: Is the Bell Curve Relevant in Today’s Organizations?

For businesses that are looking to make their performance appraisal method more effective, they can opt for a mix of detailed feedback besides ratings and helpful tips to help their employees grow and succeed in their objectives. Lastly, finalizing a best performance appraisal method can involve channelizing various resources and evaluating them based on the business processes and work environment. It might involve some trial and error but that will help only in finalizing the best solutions.

References:

  • 5 performance appraisal methods that garner the best results, mitrefinch.com, 21 Feb 2017
  • A Definitive Guide to Employee Performance Appraisal Methods, kissflow.com, 10 Apr 2019
  • Modern Methods of Performance Appraisal, buisnessjargons.com

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