Performance Appraisal is a systematic approach to evaluating the performance of employees to understand the capability of the employees’ and ascertain the training and development needs.

Performance Appraisals helps in improving employer-employee relations in the workplace. It initiates a continuous flow of communication between employer and employees.

In this article, we give an overview of 29 different methods of performance appraisal, where are they applicable, the advantages and disadvantages.

There is no best method since each one of them has advantages and disadvantages. Make sure you pick well for your organization based on its culture, and strategy.

Trait-Focused Performance Appraisal

What it is?

Employees are assessed on key personality/work traits such as Discipline, Reliability, Ownership etc by their Supervisors. The evaluation is based on a simple rating scale, ranging from Outstanding to Needs Improvement. Typically, all employees are evaluated on the same set of attributes.

Example of assessment

“Does John reply to a customer complaint within time with the right tone and actionable response?”

Where is this applicable?

This type of performance appraisal is effective in teams/departments where employees are required to do a similar set of tasks with high efficiency like a BPO or a Customer Support department. This is also an effective tool in organizations where employees are expected to align to a set of values or work traits.

Advantages

It’s a simple evaluation format and helps communicate to employees on what are the key attributes they need to possess to do well in their work. It also helps in putting forth a spirit of competitiveness amongst employees, as they strive to belong and deliver better results.

Disadvantages

The evaluation is completely based on a qualitative assessment by the Supervisor and thus exposed to risks of all bias related to subjectivity, recency and personal relationships.

Behavior-Focused Performance Appraisal

What it is?

This type of performance appraisal assesses employee actions to evaluate key behavior.

Various rating scale options are available – (a) sliding rating (ranging from poor to excellent), (b) forced choice (With options like poor, average, good, etc), (c) forced choice with comments allowing for Supervisor descriptive inputs, and (d) behaviorally anchored where supervisors rate Pass or Fail on specific employee actions.

Example of assessment

“Does John reply to a customer complaint within time with the right tone and actionable response?”

Where is this applicable?

This appraisal type is applicable where job descriptions are typically well defined and employees are required to deliver as per expected service levels. This may not be very effective where job responsibilities are dynamic and employees are expected to play multiple roles across functions and teams.

Advantages

With descriptions of various behavior properly defined for a specific performance aspect, supervisors can be more accurate in terms of their assessment rather than in a completely subjective and generic rating system approach. Further, with the opportunity to add narratives, Supervisors are required to articulate the assessment and thus provides more clarity in the performance appraisal.

Disadvantages

Research has shown that this rating system is not devoid of the disadvantages of the common appraisal types.

Unstructured Method

What it is?

This type of performance appraisal is completely based on narratives, without any specific attributes to be assessed or objective rating scales. Questions are asked in an open-ended format and the Supervisor is required to respond as per his/her subjective assessment.

Example of assessment

“How is John as an employee?”

Where is this applicable?

This appraisal type can be applicable in organization setups that either do not or cannot have any appraisal process in place. In such organizations, this appraisal type can be introduced as a soft option.

Advantages

It is the simplest to design and implement and can also be useful to evaluate the assessment capabilities of the Supervisor.

Disadvantages

Since the assessment is completely subjective, the method may not be reliable as it’s exposed to risks of all bias related to subjectivity, recency and personal relationships.

Straight Ranking

What it is?

This type of performance appraisal compares employees and ranks them from top to bottom.

Example of assessment

“Rank employees on a resolution of customer complaints”

Where is this applicable?

This appraisal type can be applicable in departments/functions where all employees are performing a specific task for which the key performance indicators are standard across the board.

Advantages

It is a quick and simple method to find the best and worst performers in a team.

Disadvantages

It is difficult to rank employees that are in the middle. This is again a subjective assessment type open to the risks of bias of the Supervisor/Manager.

Paired Comparison

What it is?

This type of performance appraisal compares employees on a one on one basis on a specific trait. The number of times an employee is chosen better decides the final ranking.

Example of assessment

“Between John and Jane, who is more reliable?”

Where is this applicable?

This appraisal type can be applicable in deciding on which employees to promote amongst a set of potential candidates.

Advantages

It is a systematic approach to evaluation and helps rank employees uniformly.

Disadvantages

If the number of employees to compare is high, then this method may become too exhausting for the assessor and thus evaluation may be prone to human errors.

Grading  Method

What it is?

This type of performance appraisal has specific grades defined with characteristics that need to be demonstrated for an employee to be allocated that grade.

Example of assessment

“Grade employees across Outstanding, Satisfactory and Needs Improvement wherein the employee may be graded Outstanding if he/she has demonstrated the following characteristics ….”

Where is this applicable?

This appraisal type can be applied in government/semi-government organizations where performance is assessed based on a holistic perspective.

Advantages

With clear definitions for each grade, the Supervisor is provided enough guidance to be able to grade an employee judiciously.

Disadvantages

The evaluator may rate most employees high.

Checklist Method

What it is?

This type of performance appraisal has Yes/No questions for appraisers with questions pertaining to the employee’s work and behavior.  Each question has weightage based on the priority of the aspect being assessed. There are no rating scales to be used by the Supervisor. On completion of the assessment, the responses are collated by HR and an overall performance score is calculated for each employee. To ensure appraiser consistency, similar but worded differently questions are sometimes asked twice as part of the assessment.

Example of assessment

“Is John interested in his job role?”

Where is this applicable?

This appraisal type can be applicable in organizations that have a simple structure with few job roles and well defined job-competency maps.

Advantages

It definitely eases the burden on the appraiser to rate or grade based on a scale. The appraiser can rather focus on the question and the related attribute to be evaluated for the employee. Thus, appraiser bias or human errors may be reduced.

Disadvantages

If there are a large number of job roles in an organization, creating questionnaires specific to each role, defining the scoring rules, maintaining consistency in scoring to ensure comparable scores across job roles, etc become quite a tedious planning and operational overhead.

Management By Objective

What it is?

This type of performance appraisal was formulated by Peter Drucker. In this process, the first step is a collaborative Goal Setting exercise between employee & Supervisor with clear definitions of responsibilities and expected results. There is a periodic review to track progress, identify performance gaps, training needs, and course corrections.

Example of assessment

“Hire 25 graduate engineers for the Production department by July 2018”

Where is this applicable?

This appraisal type can be applicable in organizations where employees perform varied job roles and require a collaborative approach with Supervisors to attain their work objectives.

Advantages

If followed in the right spirit, MBO can be quite effective in employee engagement as it helps the employees know what is expected of them and how their contribution leads to overall success for the organization. With the periodic review, the Manager also gets an opportunity to communicate regularly with the employee in a constructive setup that eliminates expectation mismatch and promotes organizational alignment.

Disadvantages

There are several disadvantages – MBO can be quite time-consuming. Moreover, there is the possibility of conflict with Managers setting exceedingly high goals while employees aiming for lower targets. Also, if objectives are not measurable, then the process fails as progress review and assessment will be extremely subjective.

Psychological Appraisals

What it is?

This type of performance appraisal assesses the employee’s aptitude, emotional balance, analytical skills, and other psychological attributes. The appraisal is done in the form of detailed interviews, tests and supervisor discussions.

Where is this applicable?

This appraisal type is best applicable to identify employees for fast track or future leaders for the Management Cadre.

Advantages

These types of appraisal are useful to identify training & development needs of and suitable job roles for employees.

Disadvantages

Since the approach is in-depth, the process can be time-consuming and costly in terms of organizational resources.

360-Degree Appraisal

What it is?

This type of performance appraisal involves inputs from seniors, colleagues, juniors and also, customers and partners. It is used to assess an employee’s competencies, aptitude & behavior.

Where is this applicable?

This appraisal type is best applicable to identify development & training needs for employees.

Advantages

Since this type of appraisal collects inputs from all key work associates of an employee, the accuracy of the feedback is expectedly higher compared to other performance appraisal types.

Disadvantages

The method is still a subjective assessment and open to the risks of bias based on personal rapport, recency or competition.

Numerical Rating Scale

What is it?

This type of performance appraisal assesses an employee’s performance by taking specific job-related behavior such as attendance, punctuality, discipline, readiness etc. into account. A numeric score is given for each of the criteria. If employees do not meet a minimum score, they are sent for training.

Where is this applicable?

This type of appraisal is best suited for new employees/freshers where the organization wants to find out the training needs for newcomers.

Advantages

This method is quite easy to use and can be implemented in any type of organization irrespective of size, job function etc. It requires very less effort to set up and requires no formal training.

Disadvantages

The rater can be biased with some of his favorite employees.

Critical Incidents

What is it?

In this method, critical incidents that an employee was engaged with are listed, prioritized and then rated based on a checklist, indicating good or bad.

Where is this applicable?

This type of appraisal is best suited where employees are subject to responding to critical emergencies and crisis, like a Hospital or Fire Department.

Advantages

When things are normal, employees can be expected to operate quite similarly. But in a crisis or criticality, its how the employee responds to it and performs the expected duties is what determines the effectiveness of performance.

Disadvantages

This method is completely subjective and thus open to the risks of bias and prejudice. Also, it is extremely time taking as the evaluators have to write down the critical incidents regularly.

Job Results

What is it?

In this method, the expected results of a job are compared with actual performance. Typically, there will be an expected target to achieve or maintain and this will be benchmarked against the actual numbers.

Where is this applicable?

This type of appraisal is useful in appraising measurable goals like say, No of Units sold, Volume of manufactured units etc.

Advantages

With clear-cut expected job results and simple comparison with actual performance, there is very little left to the subjectivity of the evaluator’s opinions.

Disadvantages

Not all work that an employee does can be determined to have job results that can be quantitatively measured, like say, improve interdepartmental communication or employee happiness.

Essay Method

What is it?

In this method, the rater describes the performance of an employee by writing a descriptive essay where he describes the strengths, weakness, capability etc. of an employee.

Where is this applicable?

This type of appraisal is useful in appraising employees in the academic industry, where the research that a faculty does is being appraised by the evaluator.

Advantages

This method is free from complex structures and formats hence easy to implement.

Disadvantages

This method may be time-consuming since the rater has to write a description for each employee. It also lacks quantitative data and the length of the description may vary for each employee.

General Performance Appraisal

What is it?

This type of performance appraisal is based on constant communication between employee and manager, right through the review period. In the end, the actual performance is tracked against the goals that were set, feedback is exchanged and goals for the next session are set.

Where is this applicable?

This type of appraisal is best suited where employee and manager work in close coordination, the Manager is responsible for a smaller team and possibilities of One-on-One between employee and manager is quite high.

Advantages

Since communication is at the basis of this appraisal, it results in very effective performance discussions between employee and manager right through the year without any chance for misunderstanding or expectations mismatch.

Disadvantages

This may be overwhelming for the Manager if he/she is responsible for a large team of people.

Technological/Administrative Performance Appraisal

What is it?

This type of performance appraisal assesses the technical performance aspects of an employee.

Where is this applicable?

This is applicable to assess the performance of the technical department of an organization.

Advantages

The rater can focus on a specific skill set, rather than open-ended performance parameters

Disadvantages

This method is restrictive and cannot be applied uniformly across the organization.

Manager Performance Appraisal

What is it?

In this method, the employees who are Managers are appraised of their managerial performance. This type of appraisal assesses job skills and well as people skills because the Manager not only is responsible for the overall work deliverables but also keep the employees motivated and happy.

Where is this applicable?

A Manager Appraisal is most applicable in a knowledge-based services industries where employees and Managers need to engage collaboratively and thus need to feed on each other’s feedback to improve and perform better.

Advantages

Managers getting feedback from those who actually work with them on a day to day basis helps tremendously.

Disadvantages

Reportees may not be completely honest in their feedback to the Managers for the fear of spoiling the relationship.

Employee Self-Assessment

What is it?

In this method, the employees are given the opportunity to scrutinize their own performance and assess their own strengths and weaknesses. In this way, they can find out their areas of improvement and make a list of their accomplishments over the year.

Where is this applicable?

A Self Assessment is typically applicable in any organization as the employee’s voice must be heard as part of the evaluation process.

Advantages

When employees are given the opportunity to self-evaluate they feel empowered. They realize that their opinions do matter and are taken into consideration during performance review discussions.

Disadvantages

An employee may not be able to evaluate himself effectively. He/she may overemphasize their contributions or downplay their success.

Project Evaluation Review

What is it?

In this method, job evaluation is done at the end of each project. After the assigned task is completed, employees are evaluated based on the performance of the latest task.

Where is this applicable?

This is relevant in project-based organizations where employees shift from one project to another and it makes sense to evaluate at the completion of the project, rather than at the end of the review period.

Advantages

This method helps to instill a regular feedback culture in the organization. Regular reviews allow to identify and address any deviation in work and deal with it before it gets out of control.

Disadvantages

Since there is no single Manager, feedback from one project manager does not always flow to the next project manager.

Sales Performance Appraisal

What is it?

In this method, sales targets are compared with actual performance. Typically, there will be an expected set of goals to achieve or maintain and this will be benchmarked against the actual numbers.

Where is this applicable?

This type of appraisal is useful in a sales-based organization where the main activity is selling.

Advantages

With clear-cut goals set and simple comparison with actual performance, there is very little left to the subjectivity of the evaluator’s opinions.

Disadvantages

Not all work that a Sales representative does can be linked to sales or financial performance.

Human Asset Accounting Method

What is it?

In this method, the individual employee’s performance is linked to the amount of revenue being generated, new deals won or average business size growth per customer.

Where is this applicable?

This type of appraisal is employed in startups where the imperative is to deliver or die.

Advantages

With a single point focus on financial performance, there is no room for misunderstanding between employee and management on what is expected. It helps to identify employees for promotion or exit.

Disadvantages

It may not be conducive to creating a good work environment, where employees are always on the pressure to deliver results or lose their job.

Journaling

What is it?

In this method, an employee is expected to maintain a document trail of his achievements throughout the year. This document is used in annual reviews.

Where is this applicable?

This type of appraisal is useful in appraising employees in the academic industry, where the research that employee does requires detailed journaling to be assessed by the evaluator.

Advantages

Well documented accounts of employee performance are more useful than performance reports leading up to only a couple of months before the review.

Disadvantages

This method is becoming outdated since automated feedback tools are preferred over traditional documentation.

Field review technique

What is it?

In this method, if a rater is suspected to be biased or higher than others, a review process is conducted to identify inter-rater differences, discuss and arrive at a common rating.

Where is this applicable?

This is not widely used by can be considered for evaluation of mission-critical positions or in decisions that are related to promotion or termination.

Advantages

The main advantage is the elimination of rating bias through human dialog.

Disadvantages

This method is extremely time taking & Managers can feel disturbed by other peers’ interventions.

Confidential records

What is it?

In this method, the assessment is done by the Supervisor with the objective to recommend for transfer and promotion. A structured form that collects information on employee’s strengths, weaknesses, achievements etc form the basis of this evaluation.

Where is this applicable?

This is typically how performance evaluations happen in govt agencies.

Advantages

There is no specific advantage as there are possibilities for manipulation and deceit.

Disadvantages

This method is completely subjective and thus open to the risks of bias and prejudice.

Cost accounting technique

What is it?

In this method, the individual employee’s performance is linked to the monetary value being generated. Here, the costs to maintain the employee and the value that the employee brings are compared.

Where is this applicable?

This type of appraisal is employed in startups where the imperative is to deliver or die.

Advantages

With a single point focus on monetary performance, there is no room for misunderstanding between employee and management on what is expected. It helps to identify employees for promotion or exit.

Disadvantages

It may not be conducive to creating a good work environment, where employees are always on the pressure to deliver results or lose their job.

Work Standards Approach

What is it?

In this method, a results-focused approach is employed to evaluate actual performance. Typically, a minimum is set that has to be achieved for an employee to be considered performing.

Where is this applicable?

This type of appraisal is useful in a sales or manufacturing based organization where evaluation targets can be set on quantities sold or produced.

Advantages

With clear-cut goals set and simple comparison with actual performance, there is very little left to the subjectivity of the evaluator’s opinions.

Disadvantages

Not all work that an employee does can be linked to volumes sold or produced. Aspects like communication, team skills do not get covered here.

Assessment Centers

What is it?

In this method, an offsite location brings together the employees to participate in simulations and games that will help assess managerial potential. Other than company senior executives, external consultants and psychologists are involved in this process.

Where is this applicable?

This type of appraisal is typically used to assess organizational leadership

Advantages

This method allows for accurate assessment, reduced bias and better approach towards identifying candidates for promotion and transfer.

Disadvantages

Other than being time taking and costly, it promotes an unhealthy atmosphere of competitiveness and insecurity.

Forced choice method

What is it?

In this method, a group of statements is to be rated by evaluators to be most applicable for the employee. Statements include both positive and negative ones that provide the perspectives for the rater to evaluate both these opposite aspects. Each statement has a weightage that is not revealed to the evaluator.

Where is this applicable?

This type of appraisal can be applicable to work positions where clear definitions of expected positive and negative performance can be defined.

Advantages

This method allows for objective assessment of employee performance, as the evaluator is asked to choose the statement most reflecting the employee’s performance.

Disadvantages

The real issue is that constructing a sequence of statements to be used for the evaluation of each of the employee performance aspects is extremely time-consuming.

Forced Distribution method

What is it?

In this method, Tiffin tried to eliminate the bias of managers to rate high on rating scales.

Where is this applicable?

This type of appraisal is useful wherever there has been past history of rating distortions.

Advantages

This method was brought about to take care of the bias of evaluators to mark employees on the higher end of the rating scale with the core objective of removing rater bias.

Disadvantages

Since rating statements have to be crafted that will let evaluators choose, that’s why there is the possibility of the statements being fundamentally wrongly constructed.

Conclusion

So, are you ready with the best method for your organization?

If not you can combine two or three methods from the above list to suit your organization.

Have more methods in mind? Let us know

Also, let us know in the comment section if you already have some combinations in mind.