For companies to raise productivity and improve their results, the employee performance appraisal process is a must. But the question is what is performance appraisal in Human Resources?
Performance appraisals in HR is a process carried out on a yearly or quarterly basis in which an employee’s efficiency and productivity are evaluated against a specific set of goals.
Managing the performance of your workforce is a vital aspect. It determines their salary hikes and progress in the company but also because it effectively assesses their talents, strengths, and weaknesses.
HR managers aiming to foster a culture of open communication within the organization can reduce the uncomfortable conversations prior to performance evaluation dates.
By scheduling monthly 1:1 meetings or team collaboration sessions they can spark some early and meaningful conversations based on what employees truly need.
Another reason to manage performance is recognition among the employees. The desire for recognition increases by about 35% when objectives and aims become difficult, according to research from Gartner. The concerns are endless as it’s easy to get lost in a crowd of hundreds of employees.
Objectives of Performance Appraisals
The major objectives of performance appraisals is to assess and improve the performance of employees and increase their potential along with skill set and value to the organization.
The modern methods of performance appraisals are also good for setting employee objectives, deciding promotions, and every other business goals. When you’re conducting a session with modern methods of performance appraisals involved, do keep these ten objectives in mind to help assess the employees better.
- Training and Development
- Compensation Reviews
- Competency Building
- Improve Communication
- Evaluation of HR Programs
- Feedback and Grievances
- Measure and Improve Performance
- Improve employees future potential and values
Types of Performance Appraisals in HR
Managers aren’t the only ones that participate in an appraisal. It’s more like an exponentially rising curve where each vertex represents individuals, their colleagues, and supervisors who provide value to the performance evaluation process and assist them in progressing along the curve.
1. The 360-Degree Appraisal
Superiors can evaluate employee performance from multiple sources. Using just one-on-one feedback from the reporting manager is old school. 360-degree feedback creates transparent communication, boosts team performance, and promotes self-awareness.
The conventional appraisal techniques are quickly becoming old-school where just one-on-one feedback from the manager was accounted for. A 360-degree appraisal is a modern method of performance appraisal where the manager can evaluate an employee’s performance through multiple sources. Also called a multi-rater feedback. A 360 degree appraisal feedback allows an employee to receive feedback from not only managers or superiors but also peers, clients, and other staff members.
A 360 degree appraisal aids by clarifying the role, by defining potential appraisals, also helps in career planning, leadership, and team building.
2. General Performance Appraisal
A general performance appraisal is routine review of an employee’s operations and contribution towards a company. Through this regular check, organizations determine the count of employees who contributed the most towards the company’s success and reward them accordingly.
A general performance appraisal is a well-structured and timely process of measuring an employee’s work performance against the preset objectives of the job. General performance appraisal is a subjective evaluation of the employee’s strengths and weaknesses and future development potential.
3. Technological Performance Appraisal
Because the employees involved have specific skills, this appraisal technique emphasizes technical performance over any other component of job performance. They are evaluated based on their abilities and the activities that they do. That’s why the method is called technological performance appraisal.
Basically, an employee’s technical expertise, skills and capabilities are evaluated. The technical knowledge of the employee will be given importance over other skills and competencies when being evaluated for the technological performance appraisal process to identify how sound the employee technically is.
4. Manager Performance Appraisal
A manager’s performance should be evaluated as well, and this involves on-the-job performance and relationship management with prospects. In most cases, anonymous surveys are received, which are subsequently evaluated.
Manager performance appraisal is the assessment of a managers’ performance in the company. Manager performance appraisal is conducted to raise productivity to an optimum level. Organizations conduct these to help both managers and the company be aligned with each other and work towards organizational growth.
5. Employee Self-Assessment
Self assessment performance appraisal is a portion of a performance review that offers employees an opportunity to self-reflect and consider what their strengths and weaknesses are.
Although employee self assessment appraisal isn’t all that effective since employees feel they can’t grade themselves accurately. In this method, the contrasts between the self-assessment form and the one filled out by the manager are reviewed.
They are important for both the professional and personal growth of the employees.
6. Project Evaluation Review
This strategy entails evaluating team members’ performance at the end of each project. It helps the team to grow as each project progresses.
Project evaluation checks the coherence between the project and the activities that took place to achieve the goal. The results are essential for the functioning of the monitoring system.
7. Sales Performance Appraisal
A salesperson is evaluated based on his or her ability to sell and the achievement of previously specified financial targets. Goals set for sales should be practical, and the manager and employees in charge should map out strategies to achieve them.
You can identify the best strategy for your business by the number of different positions within it, the amount of time you have to devote to the performance review process, and the goals you want to achieve.
8. Paired comparison
In a paired comparison system, the manager compares employees with others within the department. Each employee is compared and the higher performer is given a score.
In this modern method of performance appraisal employees are arranged into pairs, and then compared. The idea behind this method is to give the employers an idea about work competencies of the employees on the basis of skill, the time required to execute tasks, knowledge, etc.
9. Grading system
In a grading appraisal method, managers usually use a numerical (1-5) or descriptive (poor to outstanding) scale to mark an employee in accordance with some specific areas of their job. As they’re an easy way to evaluate and develop quantitative data, the rating appraisal method is quite popular.
10. The 720-degree feedback
A 720-degree feedback is a modern method of performance appraisal where a 360 degree appraisal is conducted twice. A pre and post-intervention practice that’s carried out for a qualified analysis and assessment of employee performance.
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Modern Methods of Performance Appraisals
Organizations can improve employee performance by using the ideal modern method of performance appraisal. A smart system for reviewing employee performance can make the entire experience more successful and satisfying.
To keep employee performance appraisals from turning into meaningless jargon, HR managers should redesign their traditional performance appraisal methods and experiment with one of these six modern methods of performance appraisal.
Here’s a closer look at the most popular modern methods of performance appraisals:
1) Management by Objectives (MBO)
Management by objectives (MBO) is an appraisal process in which managers and employees collaborate to create, plan, organize, and communicate goals to focus on during a specified appraisal period. Following the establishment of clearly defined goals, managers and employees meet regularly to discuss their progress and explore the possibility of reaching those targets.
You can use this performance appraisal method to link organisational goals with employee goals efficiently. Analyzing objectives using the SMART goal setting method can determine whether the aim you’re setting is specific, measurable, attainable, realistic, and time-sensitive.
Employees are evaluated based on their performance at the end of the review period (quarterly, semi-annually, or annually). Progress is awarded a promotion and a raise, while failure is dealt with through transfer or additional training. This procedure typically emphasizes quantifiable goals, while intangible factors such as communication skills, devotion, etc. are sometimes overlooked.
Tips To Implement:
- Every manager should have 5-10 goals that are specific and quantifiable.
- Managers can write down their objectives, which will then be approved after evaluation.
- Each goal must include a summary as well as a plan in place to achieve it.
- Decide how frequently progress will be monitored.
- Make a list of necessary steps to be taken if performance does not meet expectations.
- Make certain that the goals at each level are aligned with the organizational objectives.
2) 360-Degree Feedback
360-degree feedback is a multifunctional performance appraisal system that assesses an individual by collecting input from the employee’s close circle, including managers, colleagues, clients, and direct reports. This strategy will not only reduce the bias in performance evaluations but will also provide a clear picture of an individual’s ability.
This appraisal method has five essential components, which are as follows:
Employees can use self-appraisals to assess their performance and identify their strengths and flaws. However, if self-evaluations are conducted without standardized procedures, they can turn to be unfair.
b) Managerial reviews
Managers conduct performance evaluations as part of the traditional methods of performance appraisals. These appraisals must contain individual employee reviews provided by managers and senior managers.
c) Peer reviews
As hierarchies are removed from the organizational picture, peers gain a unique view of the employee’s performance, making them the most appropriate appraiser. These evaluations aid in determining an employee’s ability to work effectively with others, take on initiatives and be a trustworthy contributor. Peer friendship on the other hand, may wind up affecting the final results.
d) Subordinates Appraising manager (SAM)
This upward appraisal component of 360-degree feedback is a critical and delicate phase. From a managerial standpoint, subordinates have the most distinctive insight.
e) Customer or client reviews
The client component of this phase might comprise internal customers such as product users from the organization. Even external clients who deal with individual employees on a routine basis.
Customer feedback can help better assess an employee’s performance; however, these external parties frequently do not notice the impact of methods or policies on an employee’s productivity.
- Improving an individual’s knowledge of their performance and the impact it has on other individuals.
- Assists in initiating mentoring, counseling, and professional development activities.
- Encourages people to invest in their development and adapt to change.
- Embed regular feedback into the workplace culture to increase engagement.
3) Assessment Centre Method
Employees can have a clear image of how others perceive them and their influence on their performance by using the assessment center method. The key advantage of this method is that it assesses an individual’s current performance and predicts future work performance.
The method’s main disadvantage is that it is a time-consuming and expensive procedure that is hard to regulate.
- Increasing a participant’s knowledge, speeding up their mental process, and increasing employee efficiency
- It is adaptable to diverse roles, capabilities, and company needs.
- Provides information about the employee’s personality traits.
Tips To Implement:
- Identify the elements of effective performance using job analysis.
- Determine which performance indicators can be evaluated using this assessment center method.
- In the evaluation process, classify significant and relevant candidate behavior.
- Find assessment methods that can extract optimal behavioral information.
- Assessors and reviewers should receive extensive training.
- Maintain a performance record system for every individual.
- Examine records and, if necessary, reward or teach employees.
4) Behaviorally Anchored Rating Scale (BARS)
In a performance appraisal system, behaviorally anchored rating scales (BARS) bring forth theoretical and practical benefits. BARS compares employee performance to specified behavioral traits that are numerically rated.
Each performance level on a BAR scale is supported by several BARS statements that explain common behaviors that an employee shows regularly. These statements serve as a yardstick for comparing an individual’s performance to preset standards relevant to their function and employment level.
- Having clear criteria, better feedback, precise performance assessment, and consistent evaluation is a plus.
- Minimizing construct-irrelevant variance in employee performance ratings with a greater emphasis on specific, tangible, and verifiable actions
- Eliminating the possibility of biases and ensuring fairness throughout the performance appraisal process.
- BARS can be used by businesses of all sizes and sectors to evaluate the performance of their entire staff.
Tips To Implement:
- The first stage in developing BARS is to generate critical incidents that illustrate normal workplace behavior.
- The next step is to modify these critical incidents into a uniform structure and remove any redundancies.
- Following normalization, the critical instances are randomized, and their efficiency is evaluated.
- The other critical incidents are used to generate BARS and assess job performance.
5) Psychological Appraisals
The hidden potential of employees is determined through psychological appraisals. This strategy is intended to analyze the future performance of an employee rather than their previous work.
These assessments investigate seven key elements of the employee’s performance: communication skills, thinking abilities, intellectual characteristics, leadership qualities, personality traits, emotional intelligence, and other relevant skills.
It is a pretty slow and intricate process, and the quality of results depends greatly on the individual who manages the procedure.
- Gather quantifiable, objective data not only about an employee’s performance but also about their potential.
- Provide a stage to shine and demonstrate their potential to introvert or shy employees.
- Psychological appraisals can be used in large organisations for various purposes, including leadership training, team building, resolving conflicts, and more.
6) Cost Accounting Method
The cost accounting approach evaluates an employee’s performance by examining the monetary benefits that he or she provides to the organisation. It is calculated by comparing the expense of maintaining an employee (cost to the company) with the financial benefits (contributions) derived from that employee.
When cost accounting methods evaluate an employee’s performance, criteria such as unit-wise average service value, quality, overhead costs, interpersonal communication, and more are considered. The disadvantage of the cost accounting method is that it is highly dependent on the cost-benefit analysis and the reviewer’s recall power.
- Determining the cost and value of an employee’s contribution to the company.
- Managing the overall impact of an employee’s performance on the company’s bottom line.
- Useful for startups and small enterprises where one employee’s performance can make or break the company’s success.
Tips To Implement:
- Determine the disparity between the market and an employee’s existing compensation package.
- Measure the monetary and non-monetary impact of an employee’s contribution.
- Make a list of the employee accomplishments.
Selecting a modern method of performance appraisal that aligns well with your firm is a crucial step. It indicates your attitude toward your employees and how concerned you are about their wellbeing. Organizations worldwide are investing in Performance Management Software to track, measure, and evaluate their entire workforce and their performance at one place.
Select the best performance review method that aligns with your workforce and organization. The next phase is to effectively execute it to address important performance gaps and solve critical issues that influence employee performance.