Performance Appraisal and Modern Methods of Performance Appraisal
Performance appraisal refers to the methodical assessment of the employees’ performances, with proper identification of their abilities and channelizing them towards better productivity and development. This review of the performances is done to bring out the strengths and weaknesses of employees to use them effectively in the future.
The modern methods of performance appraisal are stated below:
Assessment Centre Method
Behaviorally Anchored Rating Scale (BARS) Method
Human Resource Accounting Method
Psychological Appraisal Method
Management by Objectives
360 Degree Method
720 Degree Method
A Detailed Analysis of the Modern Techniques of Performance Appraisal
Assessment Centre Method:
As a part of the Assessment Centre Method, employees’ performances are evaluated to bring out their potentiality, further allowing a systematic placement in key departments. The interpersonal abilities, intellectuality, career setting goals, motivation and the ability to plan and organize are determined through this process.
Behaviorally Anchored Rating Scale (BARS) Method:
BARS method helps in determining the key areas in the performance of an employee, suggesting areas of improvement to build the steps to achieve goals. As a part of the performance management, employees have a predefined behaviour recorded with the organization for effective performance. This method of appraisal analyzes the present behaviour of an employee in comparison with the predefined one. This makes the employees aware of their deviations and required improvements.
Human Resource Accounting Method:
This method takes employees as assets evaluating their performance in monetary terms. Performance appraisal is analyzed based on the cost incurred and contributions provided by the employees, where contribution should remain higher than the expenditure incurred on the employees.
Psychological Appraisal Method:
As a part of this method, psychological tests are conducted to determine the prospects of the employees instead of their past work analysis.
Management by Objectives:
The MBO method originally proposed by Peter Drucker is implemented for setting goals for ultimate success. Setting smart enough goals can analyze the performances in line with the predetermined goals for better productivity. Douglas McGregor added to the concept defining the confined reach of the traditional methods setting goals examples for the organization as a whole.
360 Degree Method:
In the 360 Degree Method, an employee’s performance evaluation surveys are conducted on colleagues, managers, subordinates and customers keeping their identities anonymous.
720 Degree Method:
This system includes a synchronized method of appraisal where a 360-degree appraisal is combined with in-time feedback followed by further evaluation for setting goals smart and achieving them.
What is a SMART Goal?
The characteristics of a SMART goal are:
S- Specific
M- Measurable
A- Achievable
R- Relevant
T- Time-Bound
In all modern methods of performance appraisal, setting goals is essentially done keeping SMART elements in mind. Why should this be limited to the professional field? Setting goals in life should also be done giving SMART elements the topmost priority. Only then, one can achieve them and learn from them effectively.
Steps in Goal Setting
Setting goals is important. The following are the various steps in setting goals:
Mutual discussion and agreement between the management with the employees bringing out the best suitable roles for the employees.
By setting goals smartly, employees define their objectives for the following year or a span of certain years.
The employee consults with the manager on devising the plans.
The manager at regular intervals evaluates the progress of performance of the employees.
Evaluating the outcomes after the predefined time period in accordance with the organizational goals.
The appraisal is followed by a new plan of action defining the steps to achieve goals.
Limitations of Goal Setting
Setting goals for employees examples require setting goals in life in line with their organizational goals. However, there are limitations of goal setting in organizations as discussed below:
Such steps to achieve goals can be applied only in organizations bringing out definite outcomes. This is not applicable in the case of blue-collar workers.
It is a time-consuming procedure requiring patience and effective coordination, without which hindrances might occur.
This is better applied only in the case of executives in the high levels who have established better communications with the low-level ones in devising new ideas and plans.
Setting goals is not a favourite for the operator workers who refrain from taking up initiatives.
FAQs on Modern Methods of Performance Appraisal
1. What are the key modern methods of performance appraisal used in organisations today?
Modern organisations utilise several forward-looking methods to evaluate employee performance. The primary methods include:
- Management by Objectives (MBO): A collaborative process where managers and employees set specific, measurable goals together. Performance is then evaluated based on the achievement of these objectives.
- 360-Degree Feedback: A comprehensive method that gathers feedback from an employee's superiors, peers, subordinates, and sometimes even customers to provide a holistic performance view.
- Assessment Centres: This method uses situational exercises like business games, in-basket exercises, and role-playing to assess an employee's potential for future roles, not just their current performance.
- Behaviorally Anchored Rating Scales (BARS): This technique combines the benefits of narrative feedback and quantitative ratings by using specific behavioural examples to anchor points on a rating scale.
2. How does the 360-Degree Feedback method provide a more complete view of an employee's performance?
The 360-Degree Feedback method provides a more complete performance picture by moving beyond the traditional top-down review. It collects confidential, anonymous feedback from a full circle of sources who interact with the employee. This includes their manager, peers, direct reports, and even external stakeholders like customers. By gathering these multiple perspectives, the method helps identify blind spots, reduces personal bias from a single rater, and provides a well-rounded view of an employee's skills, behaviours, and impact on the entire team.
3. What is the main principle behind Management by Objectives (MBO), and why is it considered effective?
The main principle of Management by Objectives (MBO) is its emphasis on participation. Instead of goals being set by managers alone, they are jointly determined and agreed upon by both managers and employees. It is considered effective because this collaborative process increases employee commitment and motivation. Since employees have a say in their objectives, they have a clearer understanding of what is expected and a greater sense of ownership over the results. This aligns individual goals with organisational goals, making performance reviews more objective and results-oriented.
4. How do modern performance appraisal methods fundamentally differ from traditional methods?
Modern and traditional performance appraisal methods differ fundamentally in their focus, approach, and objective.
- Focus: Traditional methods (e.g., Graphic Rating Scales) focused on rating personality traits and past performance. Modern methods focus on an employee's future potential, development, and achievement of objective goals.
- Approach: Traditional methods were typically a top-down, one-way communication from a manager. Modern methods, like 360-Degree Feedback, are multi-source and promote a two-way dialogue.
- Objective: The primary objective of traditional methods was often evaluative—to judge and determine pay or promotion. Modern methods aim to be developmental—to identify strengths, weaknesses, and opportunities for growth. They are a crucial component of the overall staffing function in HRM.
5. Can you provide a simple example of how a Behaviorally Anchored Rating Scale (BARS) works?
Certainly. Imagine evaluating a 'Teamwork' competency for a software developer. A BARS scale would not just use numbers (1-5) but would anchor each number with a specific, observable behaviour. For example:
- 5 (Outstanding): Proactively mentors junior developers and actively helps other teams to resolve technical blockages.
- 3 (Meets Expectations): Reliably completes assigned tasks, shares information when asked, and participates constructively in team meetings.
- 1 (Needs Improvement): Often works in isolation, withholds information, and is unwilling to help colleagues with their tasks.
6. How does an Assessment Centre evaluate an employee's potential beyond their current job performance?
An Assessment Centre evaluates potential by simulating future job challenges. Instead of just reviewing past work, it puts candidates through a series of exercises observed by trained assessors. These may include:
- In-basket exercises: Candidates are given a set of memos, emails, and tasks to prioritise and act upon, testing their organisational and decision-making skills.
- Role-playing: Simulating a challenging conversation with a subordinate or a client to assess interpersonal and problem-solving skills.
- Group discussions: A leaderless group is given a problem to solve, revealing a candidate's leadership, persuasion, and teamwork abilities.
7. What are the primary advantages of using modern appraisal methods in an organisation?
The primary advantages of implementing modern performance appraisal methods are centred on objectivity, development, and strategic alignment. Key benefits include:
- Increased Objectivity: Methods like MBO and BARS rely on measurable goals and specific behaviours, reducing the influence of personal bias in evaluations.
- Employee Development: The focus shifts from judging past mistakes to identifying future potential and creating development plans, which boosts employee morale and skills.
- Improved Communication: Techniques like 360-Degree Feedback open up channels for constructive dialogue between employees, their peers, and managers.
- Strategic Alignment: By linking individual objectives to departmental and organisational goals (a key feature of MBO), these methods ensure that every employee's efforts contribute directly to the company's success.
