There is no doubt that an employee’s performance is the foundation and primitive cause for any organization’s success. Many organizations invest their time, money, and energy in advanced performance appraisal methods. In this article, let’s take a close-run towards the various methods to access employee’s performance used by leading companies.
Table of Contents
What is Employee Performance Appraisal?
Performance appraisal is the process of documenting, evaluating, measuring, driving and developing employees’ performance in a systematic manner. In other words, it can be termed as an employee appraisal system, performance review, or performance management system.
Benefits of performance appraisal
Performance appraisal has three major benefits for both the employer and the employee.
1. Selection Process validation:
Performance appraisal helps the managers to validate the selection process and it also helps to recommend changes and improvements to be made in the existing process. A periodic review of the selected employee’s performancehelps to know the strength and weaknesses of the performance appraisal methods.
The employee appraisal system helps to identify the best performers and to compute their compensation package based on the merit system. It boosts the employee’s contribution to the company. On the other hand, the employees who lag behind in performance are identified and training policies and programs are framed accordingly.
3. Employee’s self-development
Self-development is one of the best benefits for an employee through positive feedback, promotions, rewards, and transfers. The performance appraisal methods help in identifying his area for improvement. Along with the manager, an employee can devise training programs to enhance his skills.
10 New Performance Appraisal Methods
When it comes to an Organisation’s success, predominantly it relies on the employee’s performance. There is a boundless number of performance appraisal methods available to evaluate, review, measure, and develop an employee’s performance. Let’s take a look at the 10 recent performance appraisal methods and how they benefit both the manager and the employee.
Performance Appraisal Methods
1. Management by Objectives (MBO)
Management by Objectives is the process of setting objectives by the organization, that leads the employees to set goals with proper alignment with the management. This process drives them to know their roles and responsibilities and work towards the future course of action. MBO measures the employee’s performance by how they achieve specific objectives. MBO is used widely across many organizations. Effective communication between the manager and the subordinates overcome the limitations of this appraisal method, where more focus is on the objectives and targets than the working culture and human elements.
2. 360-Degree Feedback
360-degree feedback, also known as multi-source feedback, is the process of gathering feedback from the supervisors, co-workers, peers, direct reporters, and also self-assessment. It helps to review the behavior and skills of each employee and explicitly the strength and weaknesses of the person. 360-Degree feedback is the best option for an organization when the employees work in cross-functional departments and teams. This performance appraisal method gets more effective when the peers deliver constructive feedback and the organization trains them to deliver it effectively.
3. Behaviorally Anchored Rating Scales (BARS)
Behaviorally Anchored Rating sales, termed as BARS evaluate the employee’s performance dimensions by comparing certain behavior statements usually on 5 point or 9 points scale. They guide the employee’s entire life cycle by providing a complete profile for each one of them. BARS tool is best used in the HR activities like Talent Acquisition, learning development, Employee Performance Management, Career Growth, Succession Management, and building culture. It is more applicable to the companies that have a group of employees doing a similar job and the same rating scale can be used to evaluate the performance.
4. Critical Incident Appraisal Method
A critical Incident appraisal is a method of collecting incidents from the managers or domain experts pertaining to the KPIs of the employee. It involves continuous monitoring of both positive and negative behavior and how it is exhibited. This method is more descriptive and has limitations to comparing the employee’s performance based on the decisions made in particular incidents.
5. Human Resource (cost) Accounting Method
The human resource/Cost Accounting method analyses the employee’s performance with the financial gain they bring into the company Vs their cost. It is effective in organizations where they have a perfect estimate of the employee and his contribution cost. Also, it is most useful in companies where performances are driven by the P & L statements.
6. Psychological Appraisal
The psychological appraisal approach attempts to evaluate employees based on predicting their future performance rather than focusing on their past performance. It is a unique method, where qualified Psychologists look for the personality traits, interpersonal skills, intellectual abilities, and leadership skills that play a vital role in future performance. This method is best used in reorganizing and promoting leaders to the next level of the organization chart.
7. Narrative appraisal method
A narrative appraisal is basically a written analysis in the form of easy analyzing an employee’s performance. These reports are more open-ended and stand out from the pre-defined questions. This appraisal is more individualized and qualitative in nature. Comparison between employees and managers expressive skills are major challenges in this method. This approach is suitable for company’s where employees tend to do more creative jobs and customized performance evaluation is preferred.
Performance Check-Ins appear similar to other performance appraisal techniques, but they are not. Performance check-Ins occur more informally, where managers tend to build rapport with their subordinates and they align each other to work towards the organization’s goals. Check-Ins happen in stipulated intervals (weekly, monthly, bi-monthly, or quarterly) and it is important to access the progress of the employee since the last Check-In. It is the best method for an employee to devise his long-term goals by allocating time and space with his manager for a discussion to improve his performance throughout the year.
9. Competency Assessment
Competency Assessment is the measurement of someone’s capabilities against the job requirements. The assessment is carried out on the identified tasks and skills that are considered to be critical to performing the role successfully. The employee’s skill and proficiency are compared with the target standards and fill the gaps if they lag behind. This method emphasizes only a specific set of competencies and not every activity performed in the job.
10. Checklist Appraisal
Checklist Appraisal consists of a list of statements, that can be evaluated with answers “yes” or “No”. The assessment statements are both positive and negative about the workplace habits, employee’s job skills, etc., Unlike the descriptive or narrative method, the Checklist appraisal technique is the easiest and the quickest form for assessment. This performance appraisal method is suitable when the feedback list covers a lot of areas and also allows the manager to honestly answer whether the employee’s traits fit in for the job or not.
Performance appraisals software plays a vital role in understanding the employees and keeping them motivated through proper recognition and awards. These tools also help managers and leaders to align with employees to set development objectives and gather regular feedback from them.
The appraisal is important to understand the top-performing employees of any organization. Identifying our High potential employees helps us understand the retention methods and plan succession for the high performers. This also helps to eliminate non-performing employees.
The increment is the output of the appraisal process. Organizations decide the rating parameter for their employees and allocate the increment budget based on that. The performance rating decides the increment an individual shall get for that specific year.
Employee appreciation is an ongoing activity, it helps managers to keep the team motivated. Appreciations contribute to positive work culture. Whereas appraisal is done in regular intervals and measures the performance deliverables of an employee. Appraisals are linked with increments and promotions. Whereas, appreciation is linked with rewards.
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