6 PRACTICAL ASSESSMENT METHOD

The employee performance appraisal process is crucial for organizations to boost

employee productivity and improve their outcomes. Performance appraisals are an
annual process where an employee’s performance and productivity is evaluated
against a predetermined set of objectives.

Performance management is super important, not only because it is the determining

factor in an employee’s wage rise and promotion but also because it can evaluate an
employee’s skills, strengths, and shortcomings accurately.

However, the performance appraisal is rarely put to good use since existing
performance appraisal methods fail to internalize employee performance results. To
prevent performance appraisals from becoming nothing more than empty
buzzwords, HR managers need to revamp their existing process and try
implementing one of the six modern performance appraisal methods that are listed
below.

Six modern performance appraisal methods

With the right performance appraisal method, organizations can enhance employee
performance within the organization. A good employee performance review method
can make the whole experience effective and rewarding.

Here’s a close look at the six most-used modern performance methods:

1. Management by Objectives (MBO)

Management by objectives (MBO) is the appraisal method where managers and

employees together identify, plan, organize, and communicate objectives to focus on
during a specific appraisal period. After setting clear goals, managers and
subordinates periodically discuss the progress made to control and debate on the
feasibility of achieving those set objectives.

This performance appraisal method is used to match the overarching organizational

goals with objectives of employees effectively while validating objectives using the
SMART method to see if the set objective is specific, measurable, achievable,
realistic, and time-sensitive.

At the end of the review period (quarterly, half-yearly, or annual), employees are
judged by their results. Success is rewarded with promotion and a salary hike
whereas failure is dealt with transfer or further training. This process usually lays
more stress on tangible goals and intangible aspects like interpersonal skills,
commitment, etc. are often brushed under the rug.
 Incorporating MBO into your performance management process

To ensure success, the MBO process needs to be embedded in the organizational-

wide goal setting and appraisal process. By incorporating MBO into the performance
management process, businesses can improve employee’s commitment, amplify
chances for goal accomplishment, and enable employees to think futuristically.

Ideal for:

Measuring the quantitative and qualitative output of senior management like

managers, directors, and executive (business of any size)

Common reason for failure:

Incomplete MBO program, inadequate corporate objectives, lack of top management

involvement

Steps to implement a successful MBO program:

1. Every manager must have 5-10 goals expressed in specific, measurable terms
2. Manager can propose their goals in writing, which will be finalized after review
3. Each goal needs to include a description and a clear plan (list of tasks) to accomplish it
4. Determine how progress will be measured and how frequently (minimum quarterly)
5. List down corrective actions that will be taken if progress is not in accordance with plans
6. Ensure that goals at each level are related to the organizational objectives and levels above/below

Did you know?

Retail giant Walmart, uses an extensive MBO participatory approach to manage the
performance of its top, middle, and first-line managers.

2. 360-Degree Feedback
 360-degree feedback is a multidimensional performance appraisal method that
evaluates an employee using feedback collected from the employee’s circle of
influence namely managers, peers, customers, and direct reports. This method will
not only eliminate bias in performance reviews but also offer a clear understanding of
an individual’s competence.

This appraisal method has five integral components like:

1. Self-appraisals

Self-appraisals offer employees a chance to look back at their performance and

understand their strengths and weaknesses. However, if self-appraisals are
performed without structured forms or formal procedures, it can become lenient,
fickle, and biased.

2. Managerial reviews

Performance reviews done by managers are a part of the traditional and basic form
of appraisals. These reviews must include individual employee ratings awarded by
supervisors as well as the evaluation of a team or program done by senior
managers.

3. Peer reviews

As hierarchies move out of the organizational picture, coworkers get a unique

perspective on the employee’s performance making them the most relevant
evaluator. These reviews help determine an employee’s ability to work well with the
team, take up initiatives, and be a reliable contributor. However, friendship or
animosity between peers may end up distorting the final evaluation results.

4. Subordinates Appraising manager (SAM)

This upward appraisal component of the 360-degree feedback is a delicate and

significant step. Reportees tend to have the most unique perspective from a
managerial point of view. However, reluctance or fear of retribution can skew
appraisal results.

5. Customer or client reviews

The client component of this phase can include either internal customers such as
users of product within the organization or external customers who are not a part of
the company but interact with this specific employee on a regular basis.

Customer reviews can evaluate the output of an employee better, however, these
external users often do not see the impact of processes or policies on an employee’s
output.

Advantages of using 360-degree feedback:

 Increase the individual’s awareness of how they perform and the impact it has on other stakeholders
 Serve as a key to initiate coaching, counselling, and career development activities
 Encourage employees to invest in self-development and embrace change management
 Integrate performance feedback with work culture and promote engagement

Ideal for:
Private sector organizations than public sector organisations as peer reviews at
public sector organizations are more lenient.

Common reason for failure:

Leniency in review, cultural differences, competitiveness, ineffective planning, and

misguided feedback

Did you know?

Top private organizations like RBS, Sainsbury’s, and G4S are using 360-degree,
multi-rater performance feedback to measure employee performance.

3. Assessment Centre Method

The concept of assessment centre was introduced way back in 1930 by the German
Army but it has been polished and tailored to fit today’s environment. The
assessment centre method enables employees to get a clear picture of how others
observe them and the impact it has on their performance. The main advantage of
this method is that it will not only assess the existing performance of an individual but
also predict future job performance.

During the assessment, employees are asked to take part in social-simulation

exercises like in-basket exercises, informal discussions, fact-finding exercises,
decision-making problems, role-play, and other exercises that ensure success in a
role. The major drawback of this approach is that it is a time and cost intensive
process that is difficult to manage.

Advantages of the assessment centre method:

 Enhance a participant’s knowledge, boost his/her thought process, and improve employee efficiency
 Can be tailored to fit different roles, competencies, and business needs
 Offer an insight of the employee’s personality (ethics, tolerance, problem-solving skill, introversion/extroversion, adaptability,
etc.)

Ideal for:

Manufacturing organizations, service-based companies, educational institutions, and

consulting firms to identify future organizational leaders and managers.

Guidelines to implement assessment centre practice:

1. Use job analysis to determine the components of effective performance
2. Identify performance metrics that can be measured using this assessment center
3. Classify meaningful and relevant candidate behavior in the assessment process
4. Find assessment techniques that can ideally elicit ideal behavioral information
5. Spot assessors and assessee’s excluding immediate supervisors
6. Provide thorough training to assessors and reviewers
7. Maintain a system of performance records for each candidate
8. Review records and reward employee or provide training accordingly

Did you know?

Microsoft, Philips, and several other organizations use the assessment centre
practice to identify future leaders in their workforce.

4. Behaviorally Anchored Rating Scale (BARS)

Behaviorally anchored rating scales (BARS) bring out both the qualitative and
quantitative benefits in a performance appraisal process. BARS compares employee
performance with specific behavioral examples that are anchored to numerical
ratings.
Each performance level on a BAR scale is anchored by multiple BARS statements
which describe common behaviors that an employee routinely exhibits. These
statements act as a yardstick to measure an individual’s performance against
predetermined standards that are applicable to their role and job level.

The first step in BARS creation is generation of critical incidents that depict typical
workplace behavior. The next step is editing these critical incidents into a common
format and removing any redundancy. After normalization, the critical instances are
randomized and assessed for effectiveness. Remaining critical incidents are used to
create BARS and evaluate employee performance.

Advantages of using BARS:

 Enjoy clear standards, improved feedback, accurate performance analysis, and consistent evaluation
 Eliminate construct-irrelevant variance in performance appraisal ratings by emphasis more on specific, concrete, and
observable behaviors
 Decrease any chance for bias and ensure fairness throughout the appraisal process

Ideal for:

Businesses of all sizes and industries can use BARS to assess the performance of
their entire workforce from the entry level agent to c-suite executives
 Common drawbacks of BARS:
1. High chance for subjectivity in evaluations
2. Hard to make compensation and promotion decisions
3. Time-consuming to create and implement
4. Demands more from managers and senior executives

5. Psychological Appraisals

Psychological appraisals come in handy to determine the hidden potential of

employees. This method focuses on analyzing an employee’s future performance
rather than their past work. These appraisals are used to analyze seven major
components of an employee’s performance such as interpersonal skills, cognitive
abilities, intellectual traits, leadership skills, personality traits, emotional quotient, and
other related skills.

Qualified psychologists conduct a variety of tests (in-depth interviews, psychological

tests, discussions, and more) to assess an employee effectively. However, it is a
rather slow and complex process and the quality of results is highly dependent on
the psychologist who administers the procedure.

Specific scenarios are taken into account while performing psychological appraisal.
For instance, the way in which an employee deals with an aggressive customer can
be used to appraise his/her persuasion skills, behavioral response, emotional
response, and more.

Advantages of psychological appraisals:

1. Extract measurable, objective data about not just an employee’s performance but also potential
2. Can be deployed easily when compared with other performance appraisal methods
3. Offer introverted or shy employees a platform to shine and prove their potential

Ideal for:

Large enterprises can use psychological appraisals for an array of reasons including
development of leadership pipeline, team building, conflict resolutions, and more.

Common reasons for failure:

Absence of proper training, lack of trained professionals to administer reviews, and

nervousness or anxiety of candidates can skew results.

Did you know?

Ford motors, Exxon Mobil, Procter & Gamble use psychological appraisals to test the
personality and performance of their employees.

6. Human-Resource (Cost) Accounting Method

Human resource (cost) accounting method analyses an employee’s performance

through the monetary benefits he/she yields to the company. It is obtained by
 comparing the cost of retaining an employee (cost to company) and the monetary
benefits (contributions) an organization has ascertained from that specific employee.

When an employee’s performance is evaluated based on cost accounting methods,

factors like unit-wise average service value, quality, overhead cost, interpersonal
relationships, and more are taken into account. Its high-dependency on the cost and
benefit analysis and the memory power of the reviewer is the drawback of human
resources accounting method.

Advantages of the human cost accounting method:

 Effectively measure the cost and value that an employee brings to the organization
 Help identify the financial implications that an employee’s performance has on the organization’s bottom line

Ideal for:

Startups and small businesses where the performance of one employee can make or
break the organization’s success.

Implementation of human resource cost accounting method:

1. Identify the gap between the market and the current package of an employee
2. Determine the monetary and non-monetary value that an employee brings to the table
3. List down the things that an employee achieved in the review period (increase in the subscriber count, improvement in
revenue, number of new deals won, etc.,)

A future-focused employee performance appraisal

method
Choosing the right performance appraisal method is more critical than ever since it
reflects what you think of your employees and how much you care about employee
morale. Once you’ve found an ideal performance review method for your needs, the
next step is implementing it properly to eliminate critical performance gaps and
address pressing issues that impact ROI.