4 Types of Performance Appraisal Methods a Company can Adopt

October 7, 20211:00 pm19432 views
4 Types of Performance Appraisal Methods a Company can Adopt
image souce: irina griskova via istockphoto

Performance appraisal is a crucial part of an employee’s career as it helps them assess their career progression within an organization. This is a process where supervisors, senior managers, and employees discuss the said employee’s performance over a certain period and evaluate salary to consider some raises. The business world is evolving, so is the appraisal method – meaning that performance appraisal in 2021 might be entirely different from the one in 2016.

Essentials of Performance Appraisal

Performance appraisals evaluate employee’s performance and help employers decide if the talent deserves a promotion, salary hike, or whether they will continue to serve in the same position for a longer period of time. Communication made by the management with the employee during the performance appraisal is an opportunity for intensive two-way communication to state expectations clearly and provide constructive feedback. Among the points that should be included in the discussion is regarding employee’s strengths and weaknesses. By offering evaluation and feedback on these areas, HR leaders demonstrate a commitment to support employee’s personal growth to thrive in a competitive workforce. 

If you’re looking for insight on how to conduct employee review during the era of COVID-19, here are 4 types of performance appraisal methods you can adopt on your own.

1 . Management by Objectives (MBO)

Management by objectives (MBO) is a method in which managers and employees collaborate to identify, plan, arrange, and communicate goals to focus on during a particular appraisal period. This method aims to effectively match overall policy company goals with individual goals. The MBO method usually applies the SMART principle, which stands for Specific, Measurable, Achievable, Realistic, and anchored within a Time Frame. To be effective, the MBO process must be integrated into the overall goal-setting and appraisal process of the company. This method is effective for businesses of all sizes and is frequently used to assess the quantitative and qualitative output of senior management, including managers, directors, and executives.

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2 . 360-Degree Feedback

360-degree feedback is a comprehensive performance appraisal method that analyzes an employee by collecting input from the person’s close circle. This can include supervisors, colleagues, clients, and department heads. This method will reduce prejudice in performance evaluation as well as providing clear knowledge of an employee’s actual competences. There are five kinds of approaches for this method: self-appraisals, managerial reviews, peer reviews, Subordinates Appraising Manager (SAM), and client reviews. Employees are more aware of how they perform and the influence it has on other stakeholders when they receive 360-degree feedback. This method of appraisal is commonly used in private companies.

3 . Psychological Appraisals

The psychological appraisal is useful in determining employees’ potential value that lies beneath the surface; something related to psychological qualities. This method also examines an employee’s future performance, not just their previous or current performance. These appraisals are being used to assess seven key aspects of an employee’s performance: interpersonal skills, cognitive capacities, intellectual qualities, leadership skills, personality traits, emotional management, and other related skills. To accurately analyze employees, qualified psychologists perform a range of tests like in-depth interviews, psychological exams, dialogues, and more. When doing psychological assessments, specific situations are addressed. For example, how employees cope with a hostile client may be used to assess their persuasion skills, behavioral responses, emotional reaction, and other abilities. The drawback of this method is that it can be time-consuming and difficult to carry out, with the quality of findings being highly dependent on the psychologist. 

4 . Human-Resource (Cost) Accounting Method

Human resource (cost) accounting examines employees’ performance in terms of the monetary advantages they can provide to the organization. It is measured by comparing the cost of keeping an employee (cost to the company) with the monetary benefits gained from a specific employee. When evaluating a performance using this approach, elements such as unit-wise average service value, quality, overhead cost, interpersonal connections, and others are considered. This method is suitable for startups and small companies where an individual employee’s performance may greatly affect the company’s effectiveness and bottom line. Meanwhile, the disadvantage of this method is its reliance on cost-benefit analysis and the reviewer’s recalling ability.

Performance appraisal does more than simply determine an employee’s salary increase and promotion; it also analyzes employees’ competencies, strengths, and weaknesses. Choosing the most suitable performance appraisal method is more crucial than ever because it relates to how much you value employee morale and growth. After determining which appraisal method is best for your company’s needs, the final stage is to efficiently implement it in order to solve major performance gaps and tackle key issues that influence ROI.

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