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What is Performance Appraisal? Everything to know

Last updated:
2nd Mar, 2023
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What is Performance Appraisal? Everything to know

Most companies employ performance appraisal as a standard practice to pave the path to business success. It is referred to as a quarterly or annual assessment of employee performance in the context of the company’s objectives. It aims to succeed both employees and the company. The outcomes of a performance appraisal method help the company determine promotions to be provided to employees and identify key areas where they need improvements.

In other words, it is an objective practice of evaluating the employee’s performance and encouraging them to improve it. It identifies their strengths and weaknesses and guides them accordingly. You can consider it the process of acquiring, investigating, and recording the details about the employee’s relative worth to the organisation.

The appraiser (usually a manager or a supervisor) will provide the employee with positive, actionable feedback depending on the assessment. Consequently, the employees gain enough guidance to hone their skills in their job.

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Let’s look at the key objectives of performance appraisal in HRM:

Objectives of Performance Appraisal

The common objectives of performance appraisal in HRM are discussed below.

  • To provide reliable feedback to employees on their performance.
  • To guide employees on their weaknesses and convert their weaknesses into strengths.
  • Discern an employee’s training and development requirements.
  • Define criteria used to provide organisational rewards.
  • To work as a benchmark for decisions about salary increments, promotions, bonuses, disciplinary actions, etc.
  • Facilitate the opportunity for organisational analysis and development.
  • To establish flawless communication between employer and employee.
  • To authenticate human resource policies and selection techniques to fulfil regulatory requirements.
  • To boost employee performance via coaching, counselling, and development.
  • To encourage employees via support and recognition.
  • To take a concrete decision such as what should be the percentage of hike in the salary of an employee based on the work done by them.
  • To educate employees and understand their existing performance and the scope of improvement.
  • To provide approval to those employees who were later hired and are working on their probation period.

Performance Appraisal Methods:

1) 360-degree feedback

This is one of the best methods of performance appraisal in HRM because it comprehensively analyses the employees’ performance, as implied by its name. It entails feedback from the employee, manager, other team members, and sources. It focuses on leadership and character capabilities.

It considers inputs from various sources before conversing face-to-face with the employee. Moreover, this method rates each employee as per their job done in the context of the assigned job description. The ability to provide an enlarged picture of an employee’s performance adds to the popularity of this method. One drawback of this method is that it risks allowing performance appraisal by outside sources who may not be acquainted with how to provide positive feedback.

2) Behavioural checklist

This method provides a “Yes” or “No” checklist based on a set of characteristics. If a supervisor considers that the employee has a trait, a “Yes” is ticked.  On the other hand, if they find that the employee has not demonstrated a trait, a “No” is ticked. The checklist is left blank if they are uncertain.

The two greatest benefits of this method are its simple format and focus on work-centric behaviours and tasks. Its drawbacks are that it doesn’t feature a detailed investigation of employees’ performance and how they fulfil the organisational goals.

3) Graphic Rating Scale Method

This method assesses employees’ quantity and quality of work on a graphic scale. The scale depicts various units of a specific characteristic or behaviour related to an employee’s work performance.

It is based on a set of criteria that a manager uses to assess an employee’s performance. The criteria are subjective; hence, a measured score can be calculated after each review.

One of the benefits of this method is that it considers various criteria ranging from job duties to behavioural characteristics. Another benefit is that an employee appraisal’s outcome can be balanced due to the weighted system.  The drawback is that it may be difficult to distinguish between a good and a poor result. The managers must clearly explain the rating system.

This method’s example is assessing a trait like job-specific knowledge on a range (like average, excellent, or unsatisfactory) or a number basis (1,2,3, and so on). The company’s requirements determine the list of criteria to be appraised.

4) Critical Incidents Methods

This method states that the evaluator rates the employee based on critical incidents and the employee’s behaviour during such incidents.

This method’s advantage is that it weighs both positive and negative traits. Hence, it provides an unbiased review of the employee’s performance. This method’s drawback is that the supervisor needs to list the critical events and the employee behaviour whenever they happen.

An example of a positive trait includes working overtime to fix a device. An example of a negative trait includes damage to a device owing to noncompliance with safety practices.

 5) Essay Appraisal Method

It proves to be one of the best methods of performance appraisal in HRM when a company plans to assess employees’ performance considering the myriad of performance criteria. Its alternate name is the “Free Form Method”.

It describes the employee’s performance considering various traits of the employee. The superior judge these traits and includes them by supporting relevant evidence and examples. In this method, the evaluator may occasionally be unbiased when evaluating the employee’s performance.

 6) Self-evaluation

In this method of appraisal in HRM, employees individually carry out their performance assessment based on a set of criteria.

One of the benefits is that it allows employees to stay organised for their performance appraisal. Another benefit is that it comprehensively discusses the employee’s performance. This method’s drawback is that it is subjective, so employees may rate themselves either too low or too high.

 Performance Appraisal Best practices

The following practices can help a company achieve the best performance appraisal in HRM:

  • Train employees and managers on how to receive constructive and negative feedback on a specific performance trait.
  • It enables managers to notify employees about their performance and expected improvements. Hence, it must be effective and concise.
  • Track every step in the performance appraisal process by supporting all relevant documents (like performance review recommendations, performance review templates, etc.).
  • Incorporate KPIs (key performance indicators) in your company’s objective. It helps you to self-assess the employees’ performance and ensure that you deliver the expected results.
  • Note down employees’ traits that need improvements.
  • Ensure that the employees understand how well they meet organisational objectives while working on their performance review. You can accomplish this by providing an actionable plan for each objective in the review and deducing solutions by discussing with the team.
  • Define measurable objectives and specify the expected outcomes if the employees don’t fulfil those objectives.
  • Make sure the staff can discuss their performance on an ad-hoc basis and not just annually.
  • Encourage employees by ensuring that training and development will be offered when needed.

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Performance appraisal is crucial to conduct, both for the organisation and the individual, irrespective of the company’s type and size. It helps the company determine the employees’ performance and potential. Moreover, it guides them to improve their performance by offering monetary benefits for their contribution and training sessions to further strengthen their skills. The choice of the appropriate performance appraisal method helps a company to effectively achieve its proposed objectives.

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Frequently Asked Questions (FAQs)

1What’s the difference between traditional and modern performance appraisal methods?

Traditional methods usually evaluate an employee’s historical performance. They emphasise evaluating employee personality characteristics like initiative, reliability, and leadership potential. On the other hand, modern methods significantly evaluate job achievements, irrespective of the employee’s personality characteristics. These methods are considered less biased approaches.

2What are the key purposes of a performance appraisal?

i) It assists employees in defining objectives. (ii) It motivates high-performing employees. (iii) It guides underperforming employees. (iv) It facilitates raises and promotions. (v) It creates a plan for new hires. (vi) It enhances organisational performance. (vii) It defines overall training requirements. (viii) It prepares a paper trail.

3Which method of performance appraisal is best?

360-degree appraisal is the best method of performance appraisal. It involves the collection of the employee’s feedback by the individuals who interact with them. The individuals can be their peers, superiors, subordinates, and customers. It is the best performance appraisal method because it is a comprehensive method that provides a detailed view of an employee. Moreover, the feedback is typically collected by a questionnaire planned for this purpose.

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