An employee works 9 to 5 in the organization. His/her efforts contribute to the effective business of the organization. In return for his/her commitments, he/she gets monetary compensation. However, the exchange of commitments and monetary remuneration is not limited to just a mere barter system. The organization must consider the factors that contribute to in excelling the career of the employees, which determine what values employees are creating for the organization, and all these things are reviewed on a timely basis which we call the performance appraisal.
Performance appraisals are the timely evaluations and reviews regarding employees’ strengths and weaknesses, employees’ relative worth to the organization, employees’ expectations towards the organization, and career development aspects of the employees. Performance appraisals are also called performance evaluations, performance reviews, development discussions, and employee appraisals as well. Performance appraisals not only help in the evaluation of the employees but deliver sagaciousness on their contribution, and efforts, find out the issues within the employees, working conditions, and many more.
Effective performance appraisal techniques suffice dual objectives for both organizations and employees in many ways.
For organizations: Extrapolating the employees’ contributions, efforts, and devotion towards the organization, discovering the CAN DOs by management for improving the working environment and workplace policies, launching effective skill and career development programs and training for the employees, forming tactical plans and making strategic decisions for meeting the employees’ expectations towards the organizations.
For employees: Recognizing whether one’s knowledge and efforts have contributed towards reaching organizational goals and objectives, understanding the areas of improvement, reaching out the opportunities for promotions and bonuses, required training and coaching sessions, availing oneself to discover the areas of perfection, and refinements, initiating colloquies with supervisors for long-term goals.
Performance appraisals are the structured method of assessing the job performance of employees with foreordained job or organization expectations that involve a series of analyses of an individual’s strengths and weaknesses, relative worth to the organization, and future potential for the acclivity of the organization. These appraisals are done periodically with the objectives of boosting the employees’ productivity and enhancing the results of the inputs. Appraisals can also be considered as a determining factor for the rise in remuneration of the employees. Employees need to showcase their full potential to engender better outcomes after the performance appraisals.
Whether it be hospitals, manufacturing companies, corporate organizations, or financial institutions, the performance appraisals are done. These appraisals are tectonic for both employees and organizations as these programs help in:
i) Efficient human resource planning
ii) Easing Recruitment and Selection
iii) Investing in training and development programs
iv) Assisting in designing compensation programs
v) Discovering the lack of workplace facilities
vi) Unveiling the deviation between expected and actual outcomes
vii) Identifying Employee potentialities and facilitating promotions
viii) Downsizing employees if required and enhancing poor performers
There has been the application of traditional performance appraisals techniques like Q and A sessions, interviews with supervisors in the traditional way, and many more such as:
- Confidential report
- Ranking method
- Grading system
- Essay method
- Forced choice method
- Field review method
- Checklist metal and others
Nowadays, organizations use advanced performance appraisal techniques for better results. Some of the widely accepted performance appraisal techniques for enhancing employee development are enumerated below:
As the name suggests, the performance appraisal technique is a circular and multi-dimensional appraisal method or process in which the information or confidential and anonymous feedback is collected from the employees’ circle who work around them, namely, managers, peers, suppliers, work colleagues, and even customers too. This appraisal technique offers a deep understanding of individual behavior, and competencies eliminating bias in better performance reviews.
This technique is also known as multi-source feedback, full circle feedback, or group performance review. This appraisal technique constitutes major components enumerated as:
i) Self-appraisals
ii) Superior/Managerial reviews
iii) Peer/Colleague reviews
iv) Subordinates Appraising Managers (SAM)
v) Customer or client reviews
vi) Suppliers
This kind of appraisal technique is ideal for private-sector organizations. Those organizations that use 360-degree performance appraisal are considered as Assessee which invites the respondents and the respondents have to submit their assessment along with assessments by organizations and then the feedback is generated through mentors or trainers regarding behavior and core competencies.
As the technique sounds, this appraisal technique is the process of identifying, organizing, and communicating objectives by both managers and employees for the right direction to meet the unified objectives during a specific appraisal period. When employees get to understand what the goals and objectives of an organization are, they can dedicate full effort to their performance. After the agreement of both management and employees, they begin their activities for the feasibility of achieving the objectives.
The concept of MBO was first introduced by Peter F Drucker in 1954 in “The Practice of Management” using the SMART method (Specific, Measurable, Achievable, Realistic, and Timely), this appraisal technique is used to match the organizational goals with employees’ objectives. Within the stipulated time frame, the employees need to deliver their best knowing the objective of an organization and they are awarded with promotion or a salary hike in case of better performance whereas transfers or extra training are provided to the poor performers. In this method, KRAs are designed for each employee based on their individual interest, specialization, and academic qualifications. Retail giants like Walmart use this approach. As the employees are provided with benchmarks and targets at first, they are clear about their goals and they devote their best for best outcomes.
It is the process of measuring the employees’ performance by comparing with the specific established behavior examples that are anchored in numerical ratings. This technique uses behavior “statements” for measuring the performance of employees that are designed to add both qualitative and quantitative information to the appraisal process. Every organization expects a certain kind of behavior from the employees to meet the organizational goals and objectives and such specific behaviors are established for grading in this technique. Each performance level on a BAR scale is anchored by multiple BARS statements that demonstrate common behaviors rather than routine behaviors of employees. To measure the individual behavior for an individual position, there is a high degree of accuracy relative to the performance. The BARS statements act as the gold standard to measure the employees’ performance against predestined standards applicable to their job positions.
The BARS process works like this:
Step 1: Generating critical incidents or instances showcasing the typical workplace behavior
Step 2: Editing these incidents into a common format and removing the redundancies if required
Step 3: Initiating normalization, randomizing the critical instances, and assessing them
Step 4: Using the remaining critical incidents to create BARS and evaluate the employees’ performance
For example, in the case of the rating of Customer Service Representative (Call Center Jobs), a level 4 rating might assume that the customer service rep has answered the phone call with a friendly or formal greeting after 1 to 2 rings whereas a level 6-rating may represent that the rep has answered the phone call with correct company greeting just after 1 ring only.
This appraisal technique refers to the process of analyzing the employees’ performance through the monetary benefits that the employee can deliver to the organization. This method is used by comparing the cost of retaining that employee and the monetary compensation that the employee is offering to the organization.
Comparison between the Cost of the Company and Contribution by the Employee
In this method of appraisal, overhead cost, unit-wise average service value, interpersonal relationships, and client relationships are taken into account. Startups and small businesses use this kind of approach where even a single employee’s performance can lead to the ultimate success or failure of the business or organization.
The assessment center method enables the employees to get a clear understanding of others’ observations of them and the impact of the observation on their performance. This method was first introduced back in 1930 by the German army. Employees need to represent their participation in social-simulation exercises such as:
- Informal discussions
- Decision-making problems
- Fact Discovery exercises
- In-basket exercises
These exercises may be the plus points to ensure success in their respective roles and the stages of assessment go like this:
i) Pre-Assessment Stage: Objectives of reviewing, finding out competencies and reviewers, designing the simulation exercises, choosing a rating method
ii) Assessment Stage: Explaining the purpose and policies, using a competency-exercise matrix, conducting exercises and discussions, noting down strengths and weaknesses
iii) Post-assessment Stage: Collecting feedback from reviewers, evaluating the validity of results, sharing of feedback with employees, and providing extra training if required.
This type of technique is ideal for manufacturing organizations, service-based companies, educational institutions, and consulting firms. According to one article on Kissflow, giants like Microsoft, and Philips use this approach.
This technique is also a popular method of appraisal to analyze the employees' future performance rather than past performance. This method is undertaken by qualified psychologists who run a variety of tests like in-depth interviews, psychological tests, discussions, and more to analyze the employees’ interpersonal and leadership skills, cognitive abilities, intelligence, intellectual traits, emotional quotient, hidden skills, and many more.
This technique is used for the allocation of employees to their best level knowing their best skills and potential for contributing towards the organization.
How does Performance Appraisal assist the HR departments?
To advance in their career, performance appraisal techniques help the employees to understand the deficiency of required training and development programs. These techniques act as a comparing tool to understand how a company's limited budget is distributed to give raises to the employees on what basis and points. The good performers are awarded and the poor performers are provided with further training. The management and employees both can understand the areas of improvement, the need for training and investment as well as the strategies to enhance employees’ wellbeing and organizational benefits.
There are different approaches to performance appraisals such as Negotiated Appraisal, Project Evaluation Review, Critical Incidents Method, 720-degree feedback, and many more. An organization must ensure what kind of performance appraisal is best suitable for both employees and the organization. Once the organizational needs, size, and employees’ attitudes are catered to, the best technique for the organization needs to be implemented for the elimination of critical performance gaps that impact the ROI of both the organization and employees.