Performance Appraisal and Method

Organizations use a performance appraisal process to evaluate and assess an employee’s performance over a specific period. It involves measuring various factors such as productivity, quality of work, communication skills, teamwork, and other job-related skills. The primary purpose of an effective performance appraisal is to provide feedback to employees to help them improve their performance and contribute more effectively to the organization’s goals and objectives.

What is A Performance Appraisal?

A performance appraisal is a formal process by employers to assess an employee’s job performance and contributions within a specific period. It involves reviewing goals, objectives, skills, and accomplishments to provide feedback and determine areas of improvement or recognition. The appraisal often influences promotions, salary adjustments, training opportunities, and overall employee development decisions.

The Aim of an Effective Performance Appraisal in HRM

Performance appraisal is a crucial human resource management (HRM) process that aims to evaluate and analyze an employee’s performance and productivity within a specific timeframe. The primary purpose of performance appraisals is to provide employees feedback, help them identify their strengths and weaknesses, and provide guidance for future improvements. Performance appraisals can also determine an employee’s training and development needs, set goals and objectives, and make decisions about promotions, transfers, or terminations. Ultimately, performance appraisals are an essential tool for HRM to ensure that employees contribute to the organization’s goals and objectives and identify opportunities for growth and improvement.

How do Performance Appraisals Benefit Organizations?

Employee evaluations can influence an organization’s performance. They give organizations knowledge on how workers are contributing and allow them to:

• Determine how management may enhance working circumstances to boost output and the caliber of the work produced.
• Before they have an impact on departmental productivity, deal with behavioral difficulties.
• Recognizing employees’ abilities will motivate them to give more.
• Encourage the professional and skill development of staff.
• Enhance strategic decision-making when necessary for internal hiring, succession planning, or layoffs.

7 Useful Performance Appraisal Methods For HR 

Here are some of the most popular performance appraisal tools organizations can use to evaluate their employees’ performance.

Management By Objective

Management by objective (MBO) is a performance appraisal method that involves setting specific, measurable, and achievable employee goals. The employees and their managers jointly set these objectives at the beginning of a performance cycle. The employees then work towards achieving these goals throughout the year, and their performance is evaluated based on how well they meet these objectives.

MBO is an effective performance appraisal tool because it provides clarity and focuses on what is expected of the employees. It helps align individual goals with the company’s objectives and enhances employees’ motivation and engagement.

Behaviourally Anchored Rating Scale (BARS)

Behaviourally Anchored Rating Scale (BARS) is a performance appraisal method that combines traditional rating scales and critical incident methods. BARS involves defining specific behaviors required for successful job performance and rating employees’ performance against these behaviors.

BARS is another effective performance appraisal method because it provides a clear and specific evaluation of employees’ performance, making it easier for them to understand their strengths and weaknesses. Additionally, BARS are less susceptible to bias since it is based on specific behaviors and not just general impressions.

360 Degree Feedback

360-degree feedback is a performance appraisal method that gathers feedback from multiple sources, including employees, supervisors, peers, and subordinates. The feedback is usually collected through questionnaires, and the employees receive a report highlighting their strengths and areas for improvement.

360-degree feedback is an effective performance appraisal method because it provides a comprehensive and well-rounded evaluation of employees’ performance. It also helps in identifying blind spots and areas for improvement that may not be apparent to the employees themselves.

Forced Distribution Technique

The Forced Distribution Technique is a performance appraisal tool that assigns employees to predetermined categories based on performance. The categories are usually top performers, average performers, and low performers. The distribution of employees across these categories is predetermined, and managers must place employees into these categories based on their performance.

The Forced Distribution Technique is an effective performance appraisal method because it helps identify top and low performers, making it easier to identify high-potential employees and those who need improvement. However, this method can demotivate employees, especially if forced into a low-performance category due to the predetermined distribution.

Psychological Appraisal

A psychological appraisal is a performance appraisal tool that involves assessing employees’ personality traits, attitudes, values, and interests to determine how well they fit into their job roles. This method can include interviews, questionnaires, and other psychological assessments.

A psychological appraisal is an effective performance appraisal method because it provides insights into employees’ motivations and behaviors, helping identify their strengths and weaknesses. However, this method requires trained professionals to conduct the assessments, making it more expensive and time-consuming than other performance appraisal methods.

Human Resource Accounting Method

HRA involves measuring the value of an employee’s skills, knowledge, and potential contributions to the organization as assets. This appraisal method can assist companies in identifying the strengths and weaknesses of their employees, providing feedback for improvement, and making strategic decisions regarding human resources management. By valuing employees as assets, the HRA method helps organizations evaluate their return on investment and improve overall organizational performance.

Project Evaluation Review

Project Evaluation Review (PER) is a performance appraisal method that assesses an employee’s contribution to a project. This method involves analyzing the employee’s performance based on the project’s objectives, tasks, and outcomes. The PER method helps identify improvement areas and recognize the employee’s achievements and contributions to the project’s success.

What is the Appropriate Timing for Conducting a Performance Appraisal?

Performance appraisals should be conducted regularly to assess an employee’s job performance and contributions. They typically occur within a specific period and involve reviewing goals, objectives, skills, and accomplishments. The timing of performance appraisals may vary depending on the organization’s policies. Still, they are generally scheduled periodically to provide feedback, identify areas for improvement, and make decisions regarding promotions, salary adjustments, and employee development.

Choosing the Right Performance Appraisal Method for Your Organization

Choosing the suitable performance appraisal method for your organization is critical to ensuring the approach aligns with your company’s objectives and culture. When selecting a performance appraisal method, it’s essential to consider both traditional and modern techniques. Traditional methods, such as graphic rating scales or ranking methods, may still suit some organizations. 

However, modern methods, such as 360-degree feedback or MBO, offer more comprehensive and insightful employee performance evaluations. Ultimately, the chosen method should align with the organization’s goals, culture, and job requirements while providing accurate and actionable employee feedback. 

Adopting a combination of traditional and modern methods can help ensure a balanced and practical approach to performance appraisals.

Frequently Asked Questions

What is the appraisal method in HRM?

The appraisal method in HRM is a process that evaluates employees’ performance based on their job requirements and performance expectations. The appraisal method helps organizations identify employee strengths and weaknesses, set performance goals, and provide feedback to improve employee performance.

What are the four purposes of performance appraisals?

The four purposes of performance appraisals are to improve employee performance, identify training and development needs, provide feedback for career development, and reward high-performing employees.

How often should performance appraisals be conducted?

Performance appraisals should be conducted at least once a year. However, the frequency of performance appraisals can vary depending on the organization’s requirements and the employees’ roles and responsibilities. Some organizations conduct performance appraisals more frequently, such as quarterly or bi-annually, for employees in positions that require frequent feedback and coaching.