Performance Appraisal Methods

Performance Appraisal Methods

“It is a systematic evaluation of an individual with respect to performance on the job and individual’s potential for development.”

Definition 2: Formal System, Reasons and Measures of future performance

“It is formal, structured system of measuring, evaluating job related behaviors and outcomes to discover reasons of performance and how to perform effectively in future so that employee, organization and society all benefits.”

Meaning of Performance Appraisals

Performance Appraisals is the assessment of individual’s performance in a systematic way. It is a developmental tool used for all round development of the employee and the organization. The performance is measured against such factors as job knowledge, quality and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation, judgment, versatility and health. Assessment should be confined to past as well as potential performance also. The second definition is more focused on behaviors as a part of assessment because behaviors do affect job results.

Performance Appraisals and Job Analysis Relationship

Job Analysis à Performance Standards à Performance Appraisals
Describe the work and personnel requirement of a particular job. Translate job requirements into levels of acceptable or unacceptable performance Describe the job relevant strengths and weaknesses of each individual.

Objectives of Performance Appraisals

Use of Performance Appraisals

1.    Promotions

2.    Confirmations

3.    Training and Development

4.    Compensation reviews

5.    Competency building

6.    Improve communication

7.    Evaluation of HR Programs

8.    Feedback & Grievances

4 Goals of Performance Appraisals

General Goals Specific Goals
Developmental Use Individual needs

Performance feedback

Transfers and Placements

Strengths and Development needs

Administrative Decisions / Uses Salary


Retention / Termination


Lay offs

Poor Performers identification

Organizational Maintenance HR Planning

Training Needs

Organizational Goal achievements

Goal Identification

HR Systems Evaluation

Reinforcement of organizational needs

Documentation Validation Research

For HR Decisions

Legal Requirements

Performance Appraisal Process

1.    Objectives definition of appraisal

2.    Job expectations establishment

3.    Design an appraisal program

4.    Appraise the performance

5.    Performance Interviews

6.    Use data for appropriate purposes

7.    Identify opportunities variables

8.    Using social processes, physical processes, human and computer assistance

Difference between Traditional and Modern (Systems) approach to Appraisals

Categories Traditional Appraisals Modern, Systems Appraisals
Guiding Values Individualistic, Control oriented, Documentary Systematic, Developmental, Problem solving
Leadership Styles Directional, Evaluative Facilitative, Coaching
Frequency Occasional Frequent
Formalities High Low
Rewards Individualistic Grouped, Organizational


Numerous methods have been devised to measure the quantity and quality of performance appraisals. Each of the methods is effective for some purposes for some organizations only. None should be dismissed or accepted as appropriate except as they relate to the particular needs of the organization or an employee.

Broadly all methods of appraisals can be divided into two different categories.

  • Past Oriented Methods
  • Future Oriented Methods

Past Oriented Methods

1.    Rating Scales: Rating scales consists of several numerical scales representing job related performance criterions such as dependability, initiative, output, attendance, attitude etc. Each scales ranges from excellent to poor. The total numerical scores are computed and final conclusions are derived. Advantages – Adaptability, easy to use, low cost, every type of job can be evaluated, large number of employees covered, no formal training required. Disadvantages – Rater’s biases

2.    Checklist: Under this method, checklist of statements of traits of employee in the form of Yes or No based questions is prepared. Here the rater only does the reporting or checking and HR department does the actual evaluation. Advantages – economy, ease of administration, limited training required, standardization. Disadvantages – Raters biases, use of improper weighs by HR, does not allow rater to give relative ratings

3.    Forced Choice Method: The series of statements arranged in the blocks of two or more are given and the rater indicates which statement is true or false. The rater is forced to make a choice. HR department does actual assessment. Advantages – Absence of personal biases because of forced choice. Disadvantages – Statements may be wrongly framed.

4.    Forced Distribution Method: here employees are clustered around a high point on a rating scale. Rater is compelled to distribute the employees on all points on the scale. It is assumed that the performance is conformed to normal distribution. Advantages – Eliminates Disadvantages – Assumption of normal distribution, unrealistic, errors of central tendency.

5.    Critical Incidents Method: The approach is focused on certain critical behaviors of employee that makes all the difference in the performance. Supervisors as and when they occur record such incidents. Advantages – Evaluations are based on actual job behaviors, ratings are supported by descriptions, feedback is easy, reduces recency biases, chances of subordinate improvement are high. Disadvantages – Negative incidents can be prioritized, forgetting incidents, overly close supervision; feedback may be too much and may appear to be punishment.

6.    Behaviorally Anchored Rating Scales: statements of effective and ineffective behaviors determine the points. They are said to be behaviorally anchored. The rater is supposed to say, which behavior describes the employee performance. Advantages – helps overcome rating errors. Disadvantages – Suffers from distortions inherent in most rating techniques.

7.    Field Review Method: This is an appraisal done by someone outside employees’ own department usually from corporate or HR department. Advantages – Useful for managerial level promotions, when comparable information is needed, Disadvantages – Outsider is generally not familiar with employees work environment, Observation of actual behaviors not possible.

8.    Performance Tests & Observations: This is based on the test of knowledge or skills. The tests may be written or an actual presentation of skills. Tests must be reliable and validated to be useful. Advantage – Tests may be apt to measure potential more than actual performance. Disadvantages – Tests may suffer if costs of test development or administration are high.

9.    Confidential Records: Mostly used by government departments, however its application in industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR) and may record ratings with respect to following items; attendance, self expression, team work, leadership, initiative, technical ability, reasoning ability, originality and resourcefulness etc. The system is highly secretive and confidential. Feedback to the assessee is given only in case of an adverse entry. Disadvantage is that it is highly subjective and ratings can be manipulated because the evaluations are linked to HR actions like promotions etc.

10.  Essay Method: In this method the rater writes down the employee description in detail within a number of broad categories like, overall impression of performance, promoteability of employee, existing capabilities and qualifications of performing jobs, strengths and weaknesses and training needs of the employee. Advantage – It is extremely useful in filing information gaps about the employees that often occur in a better-structured checklist. Disadvantages – It its highly dependent upon the writing skills of rater and most of them are not good writers. They may get confused success depends on the memory power of raters.

11.  Cost Accounting Method: Here performance is evaluated from the monetary returns yields to his or her organization. Cost to keep employee, and benefit the organization derives is ascertained. Hence it is more dependent upon cost and benefit analysis.

12.  Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of different methods that compare performance with that of other co-workers. The usual techniques used may be ranking methods and paired comparison method.

  • Ranking Methods: Superior ranks his worker based on merit, from best to worst. However how best and why best are not elaborated in this method. It is easy to administer and explanation.
  • Paired Comparison Methods: In this method each employee is rated with another employee in the form of pairs. The number of comparisons may be calculated with the help of a formula as under.

N x (N-1) / 2

Future Oriented Methods

1.    Management By Objectives: It means management by objectives and the performance is rated against the achievement of objectives stated by the management. MBO process goes as under.

  • Establish goals and desired outcomes for each subordinate
  • Setting performance standards
  • Comparison of actual goals with goals attained by the employee
  • Establish new goals and new strategies for goals not achieved in previous year.

Advantage – It is more useful for managerial positions.

Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-term goals rather than important and long-term goals etc.

2.    Psychological Appraisals: These appraisals are more directed to assess employees potential for future performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. It is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance. This approach is slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depend upon the skills of psychologists who perform the evaluation.

3.    Assessment Centers: This technique was first developed in USA and UK in 1943. An assessment center is a central location where managers may come together to have their participation in job related exercises evaluated by trained observers. It is more focused on observation of behaviors across a series of select exercises or work samples. Assessees are requested to participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which require same attributes for successful performance in actual job. The characteristics assessed in assessment center can be assertiveness, persuasive ability, communicating ability, planning and organizational ability, self confidence, resistance to stress, energy level, decision making, sensitivity to feelings, administrative ability, creativity and mental alertness etc. Disadvantages – Costs of employees traveling and lodging, psychologists, ratings strongly influenced by assessee’s inter-personal skills. Solid performers may feel suffocated in simulated situations. Those who are not selected for this also may get affected.

Advantages – well-conducted assessment center can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in assessment centers. The tests also make sure that the wrong people are not hired or promoted. Finally it clearly defines the criteria for selection and promotion.

4.    360-Degree Feedback: It is a technique which is systematic collection of performance data on an individual group, derived from a number of stakeholders like immediate supervisors, team members, customers, peers and self. In fact anyone who has useful information on how an employee does a job may be one of the appraisers. This technique is highly useful in terms of broader perspective, greater self-development and multi-source feedback is useful. 360-degree appraisals are useful to measure inter-personal skills, customer satisfaction and team building skills. However on the negative side, receiving feedback from multiple sources can be intimidating, threatening etc. Multiple raters may be less adept at providing balanced and objective feedback.

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  172. opwonya michael
    15th November 2014 at 2:13 pm

    as a business student and also an employee, it helpful indeed. thanks

  173. fred omondi
    16th November 2014 at 10:20 am

    nice information.its only here I found it.

  174. Anonymous
    17th November 2014 at 5:22 pm

    thanks for the informetion

  175. komala
    17th November 2014 at 11:14 pm

    this very good information but, we also need some information about process of performance appraisal.

  176. Anonymous
    21st November 2014 at 8:06 am


  177. Anonymous
    21st November 2014 at 6:42 pm

    Really Very Informative & useful Site.Thanks

  178. Anonymous
    22nd November 2014 at 2:04 am

    very good

  179. Anonymous
    24th November 2014 at 12:26 am

    its good

  180. Anonymous
    24th November 2014 at 3:56 pm

    great info

  181. saher
    24th November 2014 at 6:31 pm

    very useful. thanks.

  182. Bolden
    25th November 2014 at 6:30 pm

    thumbs high! great material for Human resources managers

  183. Anonymous
    29th November 2014 at 12:46 am

    gud, tx

  184. 29th November 2014 at 1:48 am

    good one…

  185. Anonymous
    30th November 2014 at 10:49 pm

    great inf. but any body help me regarding which appraisal technique use for different management level?

  186. 5th December 2014 at 11:12 pm

    Hello, just wanted to mention, I enjoyed this article.
    It was inspiring. Keep on posting!

  187. 7th December 2014 at 10:17 am

    Hi, after reading this amazing article i am as well glad to share my knowledge here with

  188. IMRAN
    7th December 2014 at 9:58 pm

    Can anybody elaborate and difference between Human Resource Management and Human Capital Management.

  189. donaldkig
    9th December 2014 at 9:15 pm

    Thank you for sharing your info. I really appreciate your efforts and I am waiting for your next post thanks once again

  190. donaldkig
    9th December 2014 at 10:02 pm

    Thank you for sharing your info. I truly appreciate your efforts and I am waiting for your further write ups thanks once again

  191. louiskovach
    10th December 2014 at 3:37 pm

    Hi, yup this post is in fact fastidious
    and I have learned lot of things from it concerning blogging.

  192. ashwini
    10th December 2014 at 3:49 pm

    Thnk u for DA inf

  193. lauramcmaster
    21st December 2014 at 2:01 am

    That is a really good tip particularly to those new to the blogosphere.
    Brief but very precise info… Thank you for sharing this one.
    A must read article!

  194. helene.estevez
    21st December 2014 at 9:14 am

    Having read this I thought it was very informative. I appreciate you spending some time
    and effort to put this content together. I once again find myself spending way too much time both reading and posting comments.
    But so what, it was still worth it!

  195. Aruni
    28th February 2015 at 4:24 pm

    This was very helpful for me thank u very much

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