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06 November, 2022
A COMPLETE GUIDE TO PERFORMANCE APPRAISALS
When it comes to assessing the overall productivity and performance of the employees in the workplace, companies often use performance appraisal techniques to analyze and review job performance, usually at the end of the financial year. Though being a one-time event, its eagerly anticipated by the pool of employees and their managers. In this blog post, we summarise what performance appraisal means, the basic objectives behind conducting it and define various methods of appraisals to help you gain insights into the potential of employees.
WHAT ARE EMPLOYEE PERFORMANCE APPRAISALS?
The success of any organization is built upon the pizzazz of the entire manpower working hard to the best of their abilities. Performance appraisal is an ideal chance for employees to envisage theircareer development, including training and other requirements. The systematic evaluation of an individual concerning his or her performance on the job and his or her potential for development is known as performance appraisal. It is identified as a managerial process in which employees' job performance is measured to a few predetermined criteria such as projects, and job responsibilities on which employee has worked and has contributed to the organization. It is sometimes known as ANNUAL REVIEW or PERFORMANCE REVIEW.
OBJECTIVES OF PERFORMANCE APPRAISAL
For an organization to efficiently conduct performance appraisals, it might be helpful to state and consider the goals behind the why of the appraisal framework. They can be understood as follows:
1. PROMOTION- employee performance reviews aid supervisors to sketch the promotion programs for their employees. In such cases, inefficient workers showing a weak rate of performance can be demoted or dismissed.
2. EMPLOYEE DEVELOPMENT- the very aim of performance appraisal is to improve and increase the potential of employees to add to the value of the company. Superiors frame training policies and programs for their employees, only then can the employees assess their strengths and weaknesses thereby lowering their odds of layoff.
3. COMPENSATION- a careful assessment of employee performance helps companies to chalk out just compensation packages for employees' hard work. All organizations believe in pay for performance, so they need this mechanism to provide more pay to those with outstanding work performance.
4. FEEDBACK- the ultimate goal of performance appraisal is to provide employees with a proper feedback and a plan of action for the next review period. The employees must learn how well he/she did during their term of employment.
5. MOTIVATION- Another objective of performance appraisal is that it serves as a motivational tool because it helps judge the gap between actual and desired performance during a given period.
Related: Role of employee motivation in the workplace.
7 MODERN METHODS OF PERFORMANCE APPRAISAL
1. Management by Objective (MBO)- it is the appraisal method where managers and employees together identify, plan, organize, and communicate goals. After setting SMART goals, managers and subordinates periodically discuss the contributions made toward goal achievement and the progress made to control and debate the feasibility. This method is slightly expensive and time-intensive.
Ideal for: businesses of all sizes, evaluation is made for top managerial designations like chief operating officers, executives, directors, etc.
2. 360-Degree Feedback- generally, once-a-year performance appraisals don’t work. The employees need ongoing communication as a tool to detect the overall work performance with team leaders and managers. Thus, a continuous process, like 360-degree feedback, can help employees stay motivated. This is one of the most widely used appraisal methods. In 360- degree feedback every employee in an organization collects feedback from his/her bosses, customers, suppliers, and peers and also does a self-evaluation. It offers a vivid picture of employee efficacy in terms of work. But if this method is not handled properly, it can also suffer from the subjectivity of the appraiser.
Ideal for: businesses of all types, especially the private sector companies.
Assessment Center Method- assessment center method tests employees in a social-stimulation criterion. This concept was introduced way back in 1930 by the German army but it has been polished and tailored to fit the current business scenario. Herein, the employees are asked to participate in situational exercises like role-playing, work groups, informal discussion, brainstorming, etc. that evaluate their success in a future job role. While this method gives an insight into the worker’s personality (his ethics, tolerance, problem-solving skills, introversion/extroversion, adaptability, etc.), it can also breed unhealthy completion among the workforce.
Ideal for: manufacturing, service sectors, educational institutes, and consulting firms.
4. Behaviourally Anchored Rating Scale (BARS)- this modern method of employee appraisal brings out both the qualitative and quantitative benefits in a performance appraisal process. Bars compare employee performance with specific behavioral examples that are anchored to numerical ratings. Bars provide clear standards, improved feedback, and consistent evaluation as a yardstick to measure employee performance levels.
Ideal for: small and large businesses; helps evaluate entry-level to top management performance.
5. Psychological Appraisals- this method comes in handy when trying to determine the hidden potential of employees. It majorly focuses on analyzing an employee’s future performance rather than their past work. Companies employ qualified psychologists to conduct a variety of tests such as in-depth interviews, physiological tests, discussions, and more to identify an employee's emotional, intellectual, and other related aspects. This method can be a rather slow and complex process and the quality of results can be sometimes inconsistent because it depends on the psychologist who administers the whole process.
Ideal for: large enterprises involving a multitudinous workforce.
6. Human Resource Cost Accounting Method- also known as the Human Resource accounting method, it is used to analyze an employee’s performance through the economic output her/she yields from the company. It is ascertained by comparing the cost of retaining an employee (cost to company) and the monetary benefits (contributions) an organization has obtained from that specific employee. When evaluating performance based on this method, several factors: unit-wise average service value, quality, overhead cost, interpersonal relationships, etc. are taken into account.
Ideal for: start-ups and small business owners.
7. Balance Scorecard- it connects the strategic part of an organization and its operational elements. It makes sure that the mission, vision, and core values of the organization are well reflected in the objective, initiatives, and measures taken by the employees. It is mainly used to communicate the goals of the enterprise and align the routine work of employees with organizational strategy. This method proves useful to provide feedback about employees’ performance and outcomes.
Ideal for: extensively used in business and industry, non-profit organizations, and governments worldwide.
The Bottom Line
Traditional performance appraisal techniques have mostly been derelict by more than a third of companies in the U.S. Therefore, companies use modern performance appraisals that are devoid of personal biases and prejudices and pave way for the development of both the organization and individual employees.
