Types of Performance Appraisal Methods

Everything you need to know about the types of performance appraisal methods.

Performance appraisal is a long standing, phenomena undertaken by the organisations for the purpose of placement and promotion etc.

Naturally they had their methods of evaluating the performances. Now-a- days the scope of performance appraisal is widened and it has become a tool for human resource development.

Different methods of performance appraisal are practiced by different organisation on the basis of the purpose of such an appraisal.

Some methods are result oriented, some judge employee’s behaviour, and some suit objective appraisal.

These methods try to explain how management can establish standards of performance and device ways and means to measure and evaluate the performance of employees. It is a choice of management. It has to choose a method which suits it best.

The types of performance appraisal methods can be grouped in two main categories:- A. Traditional Methods B. Modern Methods.

The traditional and modern methods of performance appraisal can be studied under the following heads:

Traditional methods of performance appraisal are:-

1. Confidential Report 2. Essay Method 3. Critical Incidents Method 4. Checklists 5. Forced Choice Method 6. Ranking Method 7. Graphic Rating Scales

8. Paired Comparison Method 9. Forced Distribution Method 10. Field Review Method 11. Group Appraisal Method 12. Man-to-Man Comparison 13. Work Standard Method 14. Self-Appraisal Method.

Some of the types of modern methods of performance appraisal:-

1. HR Accounting Method 2. Assessment Centre 3. Behaviourally Anchored Rating Scales (BARS) 4. Management by Objectives (MBO) and 5. 360-Degree Appraisal.

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Types of Performance Appraisal Methods: Traditional and Modern Methods

Types of Performance Appraisal Methods – 2 Main Categories: Traditional and Modern Methods

Numerous methods are used by organizations for performance appraisal, and these methods can be grouped into two categories.

These methods differ in the source of traits or qualities to be evaluated or judged; coverage of the persons to be rated, such as executives, workers or line managers; and the degree of precision required in the evaluation.

Method # 1. Traditional:

Traditional methods consist of the oldest techniques used for performance appraisal. These methods are based on the trait-oriented approach. In this category, evaluation is done based on established standards of traits or qualities of employees. The examples of such traits are personality, attitude, initiative, judgment ability, versatility, leadership, commitment, domain knowledge, and punctuality.

The appraisal techniques included in the traditional methods are explained in the following points:

i. Confidential Report:

Represents the traditional method of appraising the employees’ performance on their job and is mostly used by government organizations. This is a descriptive report usually prepared at the end of the year by the immediate reporting authority of the employee being appraised. It highlights the strengths and weaknesses of the employee, without giving any feedback or suggestion to the employee. Thus, this method does not help an employee in self-improvement, as the feedback is kept confidential and not discussed with the concerned employee.

ii. Essay Method:

Denotes the form of appraisal where the appraiser has to write an essay or a brief narration about the performance of an employee being appraised. Usually the appraiser has to write about the positives and negatives of the concerned employee. Sometimes, in the essay method, the manager answers the already prepared questions in a brief manner, stating the strong and weak areas of the employee.

This method reveals a great amount of information about the employee. The main demerit of this method is that essays are quite subjective and have the chances of bias. A supervisor may write biased essays if they do not like an employee.

iii. Critical Incidents Method:

Uses job-related critical incidents that represent either effective or ineffective performance of an employee. The HR manager, along with the reporting manager, prepares a list of critical incidents. Managers keep a written record of effective and ineffective behavior of the employees while performing their work. For instance, on a particular day, an employee refuses to help their fellow workers. At the end of the stipulated period, these recorded critical incidents are used in the evaluation of the employee’s performance.

iv. Checklists:

Contain a set of objectives or descriptive questions, which the appraiser has to answer in the form of yes or no. If the appraiser feels that a particular listed trait is applicable to the employee, he/she ticks the item; otherwise leaves the item blank. Each question carries a specific weightage. After the checklist is filled, the scores are multiplied with the weightage and a final score is calculated.

Examples of the questions asked in the checklist are, is the employee regular/punctual for his/her work?; does the employee take initiative or show keen interest in suggesting new ideas to the organization?; does the employee help his/her colleagues? The demerit of this method is that the superior may be biased towards the subordinate due to which rating may also suffer.

v. Forced Choice Method:

Requires the appraiser to select from a set of descriptive statements about an employee. These statements are given in the form of pairs; both statements of the pair denote the opposite ends, one is favorable and the other is unfavourable. The appraiser has to select the one that is applicable to the concerned employee.

The worker gets an overall plus score and rating if the positive factors override the negative ones.

vi. Ranking Method:

Refers to the easiest method of ranking the employees’ performance on their jobs. The ranking of an employee is done against that of the other employees. Managers rank all the employees from highest to the lowest or from best to worst. Generally, evaluators select the top and bottom ranking employees; and thereafter, select the next highest and lowest; and then move towards the middle range of employees.

The main demerit of this method is that it only ranks employees from highest to lowest. This method does not specify the areas of improvement required in employees or the areas where they have performed efficiently. Moreover, different employees possess varied traits; thus, it becomes difficult to rank them on the same ground. This means that making comparisons between employees becomes tougher due to their different behavioral characteristics.

vii. Graphic Rating Scales:

Refer to the most widely used method of appraising employees. It allows the appraiser to represent each trait of an employee on a five-point scale, such as good, outstanding, satisfactory, fair, and unsatisfactory. In this rating scale, an appraiser has to indicate the degree to which the employee possesses such traits.

The values assigned by the appraiser are totalled and the aggregate score is obtained. Depending on the points obtained by the appraisee, the appraiser decides the position of the appraisee on the five-point scale. Parameters on the rating scale may be initiative, regularity, adaptability, and quality of work. This method is quite common, simple, and easy to use.

viii. Paired Comparison Method:

Denotes the method in which the appraiser compares each employee with the other employees, one at a time. For example, there are five employees named A, B, C, D, and E. Performance of A is first compared with the performance of B and a decision is made about whose performance is better. After this, performance of A is compared with C, D, and E in that order.

This is repeated for other employee within the selected group. The number of comparisons may be calculated with the help of a formula, which reads as-[N (N-1)]/2, where N stands for the number of employees to be compared. If there are 20 employees, the number of comparisons will be [20(20-1)]/2= 190. After the comparison, the results are summarized in a tabular format, and a rank is created from the number of times each person is considered to be superior.

ix. Forced Distribution Method:

Operates under an assumption that the employees’ performance level conforms to a normal statistical distribution. In the forced distribution method, clustering a large number of employees around a high point on a rating scale may result in errors. This method seeks to overcome the issue of compelling the appraiser to distribute the rates on all points on the rating scale. Let’s discuss an example, the following distribution might be assumed to exist -excellent 10%, good 20%, average 40%, below average 20%, and unsatisfactory 10%.

One major weakness of this method is that it is based on the assumption that each employee’s performance level always conforms to a normal distribution. Such a method is not applicable in various situations, such as in organizations that have done an excellent job of selection and retention of only the good performers. In such a situation, the forced distribution method would be unrealistic, as well as demoralizing for the employees.

The error of central tendency may also occur, as the appraiser resists from placing employees in the lowest or the highest group. In addition, the appraiser may face difficulties while justifying the rates that have been assigned to a particular employee as well as the reason of placing that employee in a particular group. Furthermore, the forced distribution method is not feasible for a small group of highly skilled employees.

x. Field Review Method:

Denotes the method in which appraisal is done by someone outside the assessor’s own department, usually someone from the corporate office or the HR department. The outsider reviews the employees’ records and holds interviews with employees and their superiors. Managers use this method for making promotional decisions. Field reviews are also useful when comparable information is needed from employees in different units or locations.

xi. Group Appraisal Method:

Represents the appraisal method where a group of evaluators assesses the performance of the employees. This group may comprise a mix of the immediate reporting authority (or reporting manager) of the employee, other managers having close contact with the employee’s work, head of the department, and an HR expert.

The group determines the standards of performance for the job, measures actual performance of an employee, analyzes the causes of poor performance, and offers suggestions for improvements in future. The advantage of the group appraisal method is that it is simple yet more thorough. Due to multiple evaluators, personal bias is minimized during appraisals. However, this method is very time consuming.

Method # 2. Modern:

Traditional methods require restructuring in synchronization with the changing organizational structures. Thus, modern appraisal methods are now used in most of the organizations. Modern appraisal methods include various techniques.

The appraisal techniques that are categorized in the modern appraisal methods are explained in the following points:

i. HR Accounting Method:

Measures the effectiveness of Human Resource Management (HRM) activities and tries to value human resource as assets and not as expenses. This method finds the relative worth of employees in terms of money. It measures the cost incurred on employees in the form of recruitment, training, development, and compensation.

In addition, it measures the contributions of the employees in terms of productivity. The performance of employees is measured as a difference between their contribution to the organization and the cost incurred by the organization on the employees. If this difference is positive, their performance is considered to be positive, otherwise negative.

ii. Assessment Centre:

Represents the method of appraising employees, which was first applied in German Army in 1930. This method is widely used by various business and industrial houses. In the assessment centre approach, employees are required to complete a range of tests and exercises, which are similar to the activities that they might encounter on their jobs. Each assessment centre consists of 6-12 participants from various departments.

These participants spend two or three working days together in the assessment center, away from their jobs. The exercises used in this method include case studies, role plays, in- basket exercises, group discussions, and management games. These exercises represent situations that require the use of managerial skills and behaviors, which these employees will actually need while performing their jobs.

The basic idea behind this method is that the employees can predict the best way in which their future job performance can be carried out. A team of experts/assessors observes and evaluates the employees, as they perform these activities. The scores of all the assessors are totaled to get a final ranking.

The major dimensions in which the employee’s performance is assessed are interpersonal skills, leadership abilities, stress handling ability, planning and organizing abilities, and decision-making skills. The evaluation based on this approach is helpful in identifying the training and development needs and assessing whether an employee is fit for promotion or not. The data from assessment centers help an organization to plan, acquire, and develop the competencies that it will require in future.

iii. Behaviourally Anchored Rating Scales (BARS):

Denotes the combination of traditional rating scales method and the critical incident method. A BARS rating form consists of a certain number of dimensions, such as customer service skills, job knowledge, and interpersonal skills. Each BARS is usually in the form of a seven or nine point (in behavioural terms) vertical scale.

Point one on the scale represents unfavorable job performance and the highest scale point represents favorable job performance. About six or seven incidents for each performance dimension are used as, behavioural anchors. The final BARS instrument consists of a series of vertical scales, positioned according to its value. Although this method is job-specific, it is time consuming and expensive.

iv. Management by Objectives (MBO):

Follows a unique approach that requires employees to establish goals for themselves. Peter Drucker first introduced this concept in 1954. It is a participative process that allows the employees to set objectives in consultation with their superiors. At the end of the year, employees discuss these goals with the superiors to know their progress towards the goals. Several organizations, such as Ernst and Young and PricewaterhouseCoopers, use the MBO approach for performance appraisal.

This mutual goal setting approach has led to greater employee satisfaction, enhanced motivation level, and greater job commitment. Since the goals are set together by superior and subordinates, the subordinates clearly perceive and understand how they have to contribute towards these goals.

The actual results at the end of the year are compared with the expected results, and feedback is provided to the concerned employee about the actual progress. This informs the employees where things went wrong, how they could meet their targets next time, and where they have performed in an outstanding manner.

MBO ensures the following merits:

a. Enhances employee commitment, since goals are set mutually

b. Results in higher motivation and loyalty

c. Notifies the employees about their contribution to the overall organizational performance.

The demerits of MBO are as follows:

a. Consumes a lot of time

b. Generates conflict between superior and subordinate sometimes while setting targets mutually.

v. 360-Degree Appraisal:

Provides the organization a more comprehensive picture of an employee’s performance. This approach has been popular since the 1990s. In this process, an employee is appraised based on feedback received from various parties, such as customers, superiors, subordinates, colleagues, suppliers, and self. Big corporations, such as SBI, Infosys, Wipro, Aditya Birla group, and Thomas Cook, use this method of appraisal for evaluating their employees.

These ratings are anonymous; thus, a more honest evaluation of employees’ performance is possible. In addition, feedback received from multiple sources helps the employees in their self-development. Self-appraisal gives the employees a chance to judge themselves, their strengths, weaknesses, and achievements. Superior appraisal is the form of appraisal where the superiors evaluate the employees. Subordinate appraisal helps in knowing leadership, communication, and empathetic skills in the superior. Peer appraisal helps to determine the skills such as team spirit and co-operative attitude in an employee.

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Types of Performance Appraisal Methods – Used for Measuring and Evaluating Performance of Employees

Performance appraisal is a long standing. Phenomena undertaken by the organisations for the purpose of placement and promotion etc. Naturally they had their methods of evaluating the performances. Now-a- days the scope of performance appraisal is widened and it has become a tool for human resource development.

Different methods of performance appraisal are practiced by different organisation on the basis of the purpose of such an appraisal. Some methods are result oriented, some judge employee’s behaviour, and some suit objective appraisal.

These methods try to explain how management can establish standards of performance and device ways and means to measure and evaluate the performance of employees. It is a choice of management. It has to choose a method which suits it best. There are several methods of performance appraisal.

They can be grouped in two categories:

1. Traditional methods of Performance Appraisal.

2. Modern methods of Performance Appraisal.

1. Traditional Methods of Performance Appraisal:

These methods are based on personal qualities of the employees like knowledge, capacity, judgment, initiative, attitude, loyalty, leadership etc. These methods are being practiced from the time when concept of performance appraisal was recognized and accepted.

These methods are:

i. Unstructured method

ii. Straight ranking method

iii. Man-to-man comparison method

iv. Paired comparison method

v. Grading method

vi. Graphic rating method

vii. Forced choice description method

viii. Checklist method

ix. Free form essay method

x. Critical incident method, and

xi. Field review method.

i. Unstructured Method of Appraisal:

In this method appraisal is made by some superior. He generally observes the performer and at times discusses with him. There are no specific rating structures with him .Generally the appraiser describes his impression about the qualities, ability, attitude, aptitude and other personal traits of the performer. The appraiser does not have any standards to rate the performer. Only his impression is the appraisal.

Naturally there is every possibility of personal bias that may shadow his impression. Secondly the appraiser does not have anything to compare with, Many times the appraiser may be conservative in comparison with other appraisers. This in turn may peep from his appraisal, such an appraisal can be undertaken for subjective appraisal only.

ii. Straight Ranking Method:

This is slight improvement of the above method. Under this a bit of specification is adopted. It is the employee who is to be evaluated and the job entrusted to him are taken an entity. His performance on the job is evaluated and a grade is allotted to him.

These grades may be from “Best” to “worst”. But again the personal bias may play its role in ranking. One appraiser has to evaluate a number of employees. Thus he might not be able to be fair for every entity for it is tedious job. As in the first method, there are no specific standards to compare in this method also. This method lacks in systematic procedure also.

iii. Man-to-Man Comparison Method:

Under this method some important factors are selected for evaluating a person. These facts may relate to initiative, presence of mind, leadership etc. (As this method was adopted by the American army during world war. I, the factors / qualities they selected then, related to Army performance) after this some persons having uppermost rank in the qualities, were selected as “keymen”.

The appraiser had to develop the scale for each factor. All others were compared with these key men and their performances were ranked. This method of appraisal was suitable for objective appraisal. But then developing the scale and locating key-men was a difficult task. Secondly the key men selected may not be the best and thus comparison would not be fair.

iv. Paired Comparison Method:

This is an improvement in the man-to-man comparison method. Here also comparison is the base for ranking. But this comparison is not with the best or one person. In this method performances of all members of a group are compared within themselves, e.g.

A group performing the same or same type of job has six members B, C, D, E, F and G. Performance of each of these six persons is compared with the performance of remaining five. Every time a rank is given. Finally the plus points scored by each of the members decide the rank of that member.

Most important thing in this is that, only two person are compared at a time with each other. Numbers of decisions are determined with the help of the formula where “n” is the number of employees to be compared.

Then those results are tabulated and ranks are given to each of the members.

This method is more reliable. But it becomes very difficult to compare the performance with each other i.e. comparison of one with all the remaining if the group consists of large number of employees.

v. Grading Method:

This method is based on technique of gradation. These grades are, generally “A’ for best or outstanding. ‘B’ for very good, ‘C’ for good, ‘D’ for average, ‘E’ for poor and so on. Performance of every performer is compared with the above grades and a commensurate grade is given to every employee. Thus, this gives equal justice to everyone.

These grades are decided by the experts considering the qualities such as knowledge, judgment, analytical ability, leadership quality, self-expression etc. that are expected to be possessed by the employees. Most important thing regarding the establishment of grades is that they should be well defined and should not have ambiguity and overlapping in adjacent grades. These grades must be decided in advance and not during the course of evaluation.

vi. Graphic Rating Method:

This method is aimed at evaluation the employees from two angles. First is evaluation of his personality and his qualities that are useful for his performance at the job and the second, his way of performing the job. Personal qualities and characteristics include leadership, industriousness, attitude, co-operation, interest, creativity, loyalty, decision making ability, analytical ability, dependability etc.

Whereas his qualities towards his job include responsibility, quality of work, achievement of targets, versality, relations with fellow employees and supervisors as well as superior etc. The evaluator has to give rating on all the qualities on a continuous scale. Rating given by the evaluator is further tabulated and overall ranking is done. Of all the methods discussed above this method is standardised and quantitative. It is very simple to understand and also to use.

Though this method is one of the good methods it has some demerits also.

They are-

(1) This method is arbitrary and highly subjective. It gives a chance to evaluator to use his discretion.

(2) It is assumed that all the qualities and characteristics on which evaluation is made are equally important for any type of job.

(3) It seldom happens that everyone would possess all the qualities at high level. The result is an employee may get high score on some characteristics and very low on some. This naturally puts him on average scale.

(4) Since this is arbitrary there is every possibility of favouritism as well as dislikes of the evaluator towards some employees.

vii. Forced Choice Description Method:

The basis of evaluation is the predetermined statements. These statements are positively as well as negatively related to efficiency and personal traits, each aspect of evaluation is given equal importance while preparing them. These are further grouped. The evaluator has to choose some of the statements (atleast two) and evaluate the employee. This restricts the evaluator to stick to more objective evaluation.

There are little chances of his being subjective. Thus the evaluator cannot mark ‘good’, ‘average’ or ‘poor’ as these words or remarks do not give actual ranking. It is, therefore, named as forced choice method of evaluation.

The statements which are generally used are-

(i) Good work organiser

(ii) Shows patience and slow learner

(iii) Dishonest or disloyal

(iv) Careful and regular

(v) Avoids work

(vi) Hard working

(vii) Co-operate with fellow workers

(viii) Does not take interest in jobs, and

(ix) Aptitude for learning.

The evaluator has in mark plus (+) sign for positive assessment and ‘zero’ for negative. This method was first used by American Army in World War II.

viii. Checklist Method:

A checklist enumerating expected qualities and behaviour towards work by the employee is prepared. The evaluator is provided with such a checklist. He has to evaluate the employee on the basis of this checklist. He has to check whether the characteristics mentioned in the list are possessed by the employee or not. If he finds the characteristic he has to put a ‘tick mark’ against that item.

If he does not find he has to leave it blank. A separate copy of the check list is supplied to the evaluator for each employee to be evaluated by him. After job of checking is over he has to submit it to the higher authorities or personnel department. The tick marks are them counted and tabulated to come to final ranking.

If this procedure is followed it will mean that all the characteristics mentioned in the checklist have equal importance and weightage for the job. But this is not true. In order to overcome this drawback due weightage is given to the characteristics on the basis of importance. Naturally when marked on the list, this mark carries its weightage and desirable evaluation can be done.

Some of the characteristic that may appear on the check-list are:

(i) Is employee punctual?

(ii) Is he interested in job?

(iii) Does he keep cool while working?

(iv) Does he respect his superior?

(v) Is he cordial with his subordinates?

(vi) Does he maintain the machines in order?

(vii) Is he obedient?

(viii) Does he possess the knowledge of job?

Alike other methods this method too suffers with evaluator’s bias. As check lists differ from job to job, it involves more expenditure and consumes more time. Providing weightage to the characteristics is also not easy.

ix. Free Form Essay Method:

All the qualities that are required to be evaluated during performance appraisal are assessed by the evaluator not on quantitative basis but by describing them in the form of an easy and in his own words.

For this the evaluator, either observes or discusses or goes through the results given by the employee and forms his opinion. Main qualities he is required to give stress upon, are knowledge, skill, interpersonal relations, temperament, quality and cost aspects, needs for future development, behaviour with the superior, interest in performing job etc.

The evaluator tries to give his best description in his essay type report. But then his limitations in expression, ability, his bias, knowingly unknowingly affect his report i.e. appraisal.

x. Critical Incident Method:

Behaviour of almost all persons in normal conditions or while doing routine job is almost alike. But there is always a change in behaviour when any critical incident takes place. This method of performance appraisal gives more stress on the behaviour of the employees on such critical incidents.

Such incidents may occur often during the performance of job or otherwise. Expected such incidents are listed in a note book. These are known as key incidents. The evaluator has to closely observe the behaviour of employee on such key incidents. He notes down his observation in the note book.

The evaluator has to see whether the employee becomes upset over the work resists or cooperates with other co-workers, suggests any improvement in the methodology etc. The evaluator is required to note not only the negative points but also the positive points with same weightage. Most important for the evaluator is that he has to note down factual observations and not his judgement or opinion on the employees behaviour.

This method too has its drawbacks. Firstly the negative behaviour comes to forefront and thus becomes noticeable whereas positive behaviour is taken as routine and usual and thus is not noticeable. This ultimately affects the ranking of the employee.

Generally negative points are remembered while positive points go out of memory and the therefore not noted or are postponed to be noted. This postponement is often forgotten. This method is based on close observation by the evaluator which the employees generally do not like.

xi. Field Review Method:

All the above methods are useful for small organisations where number of employees is small as they involve person to person appraisal. If such methods are applied to large organisation with high member of employees, they will consume very long period and large expenses.

It has, therefore, become imperative to cut short the area of operation of performance appraisal. As such the supervisors of groups are interviewed instead of direct involvement of the group members. But then this becomes more tactical. Like other methods, initiative and primary work of such appraisal is undertaken by the human resource department.

This department prepares a questionnaire containing questions to be asked to the supervisors regarding the members of his group. This is prepared by experts and handed over to evaluators who, in turn, memories them, these evaluators now interview the supervisors and extract from his everything possible about the members of his group.

The evaluator records all the answers. The record is then, placed in the personal file of the employee. The questions are related to the weakness, strength, ability, co-operative nature, interest in the job etc.

But again personal bias of the supervisor towards some members may affect his answers. Secondly this method evolves two supervisory staff members at a time. It, therefore, is more expensive.

2. Modern Methods of Performance Appraisal:

The traditional methods have some common and some have their own defects. An effort to evolve a method of performance appraisal which would be free from these defects was required to be made. A serious thought was given to this idea Contrary to olden days performance appraisal is now a days, aimed at human development.

It is not restricted to just evaluate the performance. Finding out the drawbacks in concerned employees is mainly included in this. Thus, not only, the performance is evaluated but deficiencies are located, their reasons are probed and corrective measures are taken by way of arranging development programmes, keeping in view all these, following methods have been evolved and developed.

i. Performance Appraisal by Target Setting Approach of Management by Objective:

Management by objective (MBO) is a system of management. Under this system targets for a specific period, generally a year, is fixed. Various groups are entrusted with the jobs to be performed to target. Thus it becomes the responsibility of the entire group including superiors. Subordinates are taken into confidence. The jobs are analysed and methods of performing them are discussed.

A common conscientious is arrived at by involving the subordinates in the process of decision making. This creates a feeling of self- respect in the subordinates which is ultimately converted in achievement of targets. External controls are brought to a minimum level.

On the other hand, internal motivation is raised to maximum level. Naturally performance of jobs to achieve target comes under the control of subordinates. The performance is evaluated on the basis of achievement of targets.

In this method, the target or goal is fixed with agreement between supervisors and workers. Then they discuss the contents of the job. They locate key areas of results. Reasonable objectives are then fixed for the year.

This motivates the workers and external control over the performance is hardly needed because the workers are party to setting up targets. Thus it is not forcibly loading the workers by targets but willing acceptance of them. The performance is rated on the basis of achievement of targets i.e. objectives.

This method is developed by Peter Drucker. This is sufficiently good method of objective performance appraisal. But this, too, has its limitations.

They are:

i. This method can well be adopted by the organisations who accepted the MBO system.

ii. Setting up of targets depends on the nature of activities under taken by the organisation. Not all the organisations can set targets because of multifacedness of their activities. This method is not useful for such organisations.

iii. MBO approach, though, looks good it is a time consuming approach. Discussion, thinking, adjustments of the targets consumes lot of time and the effective time is reduced. This may affect achievement of target. If appraisal becomes impossible when span of supervision is large.

iv. More emphasis is given on finding of the areas in which training is required for development. Thus other purposes of performance appraisal are given less importance.

v. Participation of workers in decision making is an important feature of this method. Lower level workers may not be capable of making decisions. They are generally inclined to obey orders. Thus this method cannot be totally adopted for evaluating the performance of lower level workers. But it is most useful method of performance appraisal of middle level employees and executives.

ii. Behaviourally Anchored Rating Scale (BARS) Method:

As is evident from the name itself it is a method which has a rating scale. This rating scale is prepared by identifying effective as well as ineffective critical areas of performance behaviour for getting results.

Identified such critical areas are knowledge, judgment, human relations, skills, conscientiousness, operation of register skill, organisational ability, skill of monetary transactions and observational ability, while preparing such a rating scale due weightage is given to these areas in relation with the jobs to be performed. As this rating scale is prepared identifying critical behavioural areas it is known as Behaviourally Anchored Rating Scale (BARS) method.

The evaluator is given this scale. He closely observes the performance of the employees specially in these critical areas and gives them marking or comparing the performance with the rating scales. Finally the performance is evaluated.

This is a recently developed method. “Quality can be judged only on comparison with the best.” is the underlining principle in this. Thus quantitative measurement is possible in this method and therefore it is more scientific and validly dependable. Rather this is a recently developed method of performance appraisal.

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Types of Performance Appraisal Methods – Traditional and Modern Methods (With Evaluation)

A. Traditional Methods of Performance Appraisal

1. Ranking Methods:

A number of methods are used to rank employees for appraisal purposes.

These include:

(i) Simple ranking,

(ii) Paired comparison, or

(iii) Forced distribution.

(i) Simple Ranking Method:

Under the simple ranking sys­tem of performance appraisal, subordinates are rated on an overall basis with reference to their job performance. All employees are judged on the same factors, and ranks are given on the basis of each employee’s level of efficiency in relation to others in the group. In this way, the best is placed first in the rank, and the poorest occupies the last rank. This is similar to preparing ranks of various examin­ees in an examination.

(ii) Paired Comparison Method:

Under the paired compari­son method, each member is compared with all others in the work group, but the comparison is made with only one member at a time. Thus, in a group of four persons (A, B, C, and D), the rater will have to make six comparisons— namely, A and B, A and C, A and D, B and C, B and D, and C and D. The number of times each member is preferred over another is recorded. These numbers determine the ranks of members. Obviously, the number of rank orders would be N (N-1)/2, where N denotes the number of members in a group.

(iii) Forced Distribution Method:

It is a method to evaluate employee performance according to a pre-determined distribution scale. Generally, the rater has to place his/her employees on a five-grade level. One end of the scale represents the best job performance, whereas the other end represents the poorest job performance.

The rater is asked to allocate approxi­mately 10 per cent of the employees to the best end of the scale, 20 per cent in the next category, 40 per cent in the middle category, 20 per cent in the bracket next to low, and 10 per cent in the low bracket.

Evaluation of the Ranking Methods:

The biggest merit of the ranking format is its low cost, little time and effort, and simplicity. Moreover, by forcing raters to specify their best and worst performers, employment decisions, such as pay raises and promotions, become much easier to make. However, ranking formats are plagued with several weaknesses; because the rating stan­dards for judging performance are vague or non-existent, the accuracy and fairness of the rat­ings can be seriously questioned.

Moreover, ranking methods do not specify what an employee must do to receive a good rating and, thus, they fail to adequately direct or monitor employee behaviour. Finally, rank order can be misinterpreted, leading to morale and motivational prob­lems. For example, an employee may be ranked the lowest in his/her group, but may be a mem­ber of an outstanding group and performing at a very acceptable level. In another group, the lowest-ranked employee may indeed be performing at a sub-standard level. Organizations using ranking formats cannot compare the performance of employees from different departments fairly.

2. Graphic Rating Scale Method:

The graphic rating scale, also known as the linear rating scale, is probably the most widely used performance appraisal tool. There are many versions of the graphic rating scales, but all concentrate on specific employee behaviours or characteristics as they relate to work performance. In this technique, a printed appraisal form is used for each employee (appraisee). This form contains a number of employee qualities and characteristics to be evaluated by the appraiser.

The typical qualities are – quality and quantity of work, cooperative- ness, analytical ability, decisiveness, initiative, emotional stability, and so forth. The list of factors may be expanded or contracted keeping in view the company’s requirement for the different cat­egories of employees and their job requirements. The rating for each factors may be done on the basis of numbers (1, 2, 3, 4, 5, etc.) or descriptions (excellent, very good, average, poor, etc.).

The central idea behind this score/scale rating is to provide the appraiser with a continuum represent­ing varying degrees of a particular quality or characteristic being appraised. The assigned values for each trait are then totalled. The total of the points (numbers or descriptions) obtained by an employee on all the rating factors constitutes the rating score of that employee. In this manner, rating scores are obtained for all employees under appraisal.

Evaluation of the Graphic Rating Scale Method:

Many organizations use graphic rating scales because they are practical and cost little to develop. As traits are defined in advance, there is less ambiguity in this technique of evaluation. However, graphic rating scales do present a number of problems. This method poses a heavy burden on the rater who must report the performance of the subordinates on scales involving a number of degrees (4-5) on a number of factors.

Moreover, it is difficult to decide about the relative weightage of different factors. Determining the worth of an employee on the basis of the total score is also questionable. A very high rating on attendance, for example, does not in any way compensate for a low rating on job knowledge.

3. Critical Incidents Methods:

With the critical incidents appraisal method, the superior keeps, for each subordinate, a running record of uncommonly good or undesirable examples (or ‘incidents’) of that person’s work-related behaviour. The example of an uncommonly good incident could be an employee’s staying late to correct machine malfunctioning that was causing a high number of rejection in output—correcting problems related to completion of special projects in time.

The example of an uncommonly undesirable incident could be an employee’s failure to follow safety procedures, thereby causing heavy damage to machinery. Such incidents are recorded system­atically under different categories duly provided in a specifically designed notebook. Immediate recording of these incidents seems to be most appreciable; otherwise the superior may forget them. At the end of the rating period, these recorded critical incidents are used in the evaluation of the employee’s performance.

Evaluation of the Critical Incident Method:

The biggest positive feature of this technique is that it measures behaviours which are critical to the effective performance of the job. Using critical incidents facilitates the feedback process by providing the employee with concrete examples of actual behaviours which should be continued, modified, or eliminated. If the proper maintenance of the record of critical incidents is effected, it provides real clues for judging the fit between the employee and his/her job.

Although the critical incidents technique appears to overcome many of the subjectivity problems associated with other appraisal systems, it has serious limitations too. Some workers knowing that their superior is documenting their behaviours become anxious and hostile. Others tend to hide those behaviours which they feel will adversely affect their reviews.

In either case, the end results are distorted performance reviews. At times, negative incidents are more noticeable than positive ones. Besides, it has been observed that most of the time, the employees have neither positive nor negative incidents. If the critical incident does not happen, it will be difficult to rate an employee.

4. Checklist Methods:

The checklist method requires the evaluator to review a list of several behav­iours, traits, or job characteristics and to indicate which statements best exemplify employee performance. If the rater believes strongly that the employee possesses a particular listed trait, he/ she checks the item; otherwise, the item is left blank. A score is developed by tallying the positive checks.

For greater sophistica­tion, organizations may use the following types of checklist methods:

(i) Weighted Checklist Method:

Under a weighted checklist, each item/statement receives a numerical value (weights) based on its perceived importance to successful job perfor­mance. Those items that are deemed more important are assigned higher weights. Workers’ scores on the appraisal are determined by summing the scores of the items checked by the raters.

(ii) Forced Checklist (or Forced-Choice) Method:

Under this method, the rater is forced to choose between descriptive statements of seemingly equal worth describing the person in question. Statements are chosen of both the sides (favourable as well as unfavourable). For example, raters may have to choose between two highly desirable traits, describing the employee as ambitious or dependable. Or, the raters may have to choose between describ­ing the employee as shirker or undependable. Only one of the statements in each pair is correct in identifying the better performance, and this scoring key is kept secret from the raters. The final rating is done on the basis of all sets of statements (positive as well as negative).

Evaluation of the Checklist Methods:

The biggest advantage of using checklists lies in its sim­plicity and feedback benefits. Generally, evaluators are required to make simple yes/no or true/ false responses on checklists, and, consequently, time is used economically, and a greater number of items can be included on the checklists. These features provide employees with a large amount of relevant performance feedback.

Checklist methods, however, are not problem-free. Because it is important that the items in the list be relevant to the job, it may be necessary to develop differ­ent lists for different job categories. The process of weighting, in the weighted checklist method, is difficult and requires professional assistance.

Likewise, in the forced checklist method, creating equally attractive and unattractive items requires professional assistance. The result is an excep­tionally time-consuming and expensive rating procedure. Supervisors, often, are not sure what the items measure, and they have difficulty in interpreting the results. This hinders the develop­mental counselling aspects of the appraisal process.

5. Essay Method:

In its simplest form, the rater writes a free-form essay describing the subordi­nate’s performance in a number of broad categories. Some categories that can be included in these forms are – job knowledge and potential of the employee; employee’s understanding of the company’s programmes, policies, objectives, etc.; employee’s promotability; overall appraisal of the employees performance; employee’s relations with co-workers and superiors; and so forth.

The assumptions behind the usage of essay technique is that an honest and informed statement from someone who knows an employee well is fully as valid as more formal and more compli­cated methods. Sometimes, however, essay appraisals supplement other appraisal methods rather than substituting for them.

Evaluation of the Essay Method:

This approach gives the appraiser flexibility by not requiring attention to a specific set of factors. The essay provides a good deal of information about the employee, which provides a useful feedback to the employee for further improvement in job performance. On the other hand, because of the method s open-endedness, it is difficult to com­pare essay appraisals made by different supervisors.

The method is also dependent on the writing skills of the supervisor, and is a time-consuming procedure. It is also not free from subjectivity. The employees who are more loyal to the supervisors may be evaluated more favourably than the other employees. The essay technique is best used in small organizations or small works units, where the purpose is to develop the employees’ skills and behaviour.

6. Field Review Method:

In the field review method, an employee is not appraised by his/her direct superior but by a trained, skilled representative of the HR department. The HR representative appraises the employee on the basis of his/her records of job-related traits such as level of output, absenteeism, etc. The HR representatives also conduct interview(s) of the employee to ascertain more job-related information.

Finally, the HR representative seeks specific information about the employee’s direct performance from the employee’s direct supervisor. Based on this infor­mation, the HR representative prepares a report. Finally, the HR representative meets with the employee’s supervisor for finalizing the employee’s appraisal report.

In this meeting between the HR representative and the employee’s direct supervisor, attempts are made to identify areas of disagreement about the employee’s work-related behaviour and performance standards used for performance appraisal. The final appraisal report is used by the organization to take decisions about the employee’s pay raises, promotion, or transfer, etc.

Evaluation of the Field Review Method:

Since an expert handles the appraisal process, in con­sultation with the employee’s supervisor, the ratings are more reliable. However, the use of HR experts makes the process tedious and expensive.

7. Work Standard Method:

In this technique, instead of asking the employees to set their own per­formance goals, the enterprises establish work and staffing targets for employees. These are aimed at improving productivity. When realistically used, the appraisal can be made more objective and accurate. To be effective, the standards must be fair and visible.

Hence, a good deal of time is spent in observing employees on the job, simplifying and improving the job, where possible, and attempting to arrive at realistic output standards. The use of this techniques make performance interviews less threatening than the use of personal and more subjective standards alone.

The serious limitation in this technique appears to be a problem of comparability. If people are evalu­ated on different standards, how can the rating be brought together for comparison purposes, when decisions have to be made on promotions or salary increases. For these purposes, some form of ranking is necessary.

8. Self-Appraisal and Peer Group Evaluation Method:

Appraisal is said to be more effective if it is conducted either by the appraisee or by a colleague of equal rank without any authority to impose sanctions. It analyses issues more critically when subordinates fear the career conse­quences of admitting mistakes.

In the self-appraisal, the subordinates are concerned with their own action/performance, how and what do they feel about their performance, the adequacy or otherwise of the training they have received, and the perceptions of key objectives and future aspirations.

They identify their own strengths and failures. Inherent in such an identification are suggestions which the organization might use utilizing employees’ talents, skills, and acquired experiences—an exercise noted to be difficult by the employees. The main problem with the self-appraisal is that many people are quiet incapable of analysing themselves.

It might require skilled and detailed guidance by someone already competent in the appraisal technique. The virtue of this technique lies in the fact that the employees are compelled to think carefully about the adequacy of their contribution, about barriers preventing improved performance, and about their relationship with higher levels of authority.

B. Developmental/Modern Appraisal Methods:

Modern appraisal methods assess two categories of employ­ees’ performance attributes, namely, behaviours and results. Trait appraisals involve subjective judge­ment about employee characteristics related to performance.

Behavioural appraisal, while still subjective, (i) focuses more on the observable aspects of performance and (ii) rates prescribed behaviours that can help ensure all parties understand what the ratings are really measuring. The result appraisals tend to be more objective and focused on goal achievement. Based on the behaviours and results, several techniques of performance appraisal have been developed and are widely practiced by the organizations.

Some of them are discussed here:

(1) Behaviourally Anchored Rating Scales:

The Behaviourally Anchored Rating Scales (BARS) method of performance appraisal focuses on specifically prescribed job-related performance behaviours of employees, rather than their general descriptions or traits. Where the job cannot be precisely measured, attempts are made to relate the job with the behavioural traits that help in its performance.

The typical BARS include seven or nine performance behaviours, each measured by a seven- or nine-point scale. For each performance behaviour, some standard statements are provided that reflect the varying levels of performance. These are then put on the scales in BARS. The rater can then presumably make a precise judgment as to where the employee fits on the continuum of a poor to outstanding performance.

Evaluation of BARS:

The BARS method of appraisal—a modification of the traditional rating scales and critical incidents methods—attempts at reducing rater bias and error by anchoring the rating with specific behavioural attitudes based on information from job analysis. Because its development involves a number of employees and supervisors, it lends credibility to the evaluation process by requiring critical, in-depth study of the characteristics necessary for successful job performance.

Moreover, by providing all levels of employee with easily understandable behavioural characteristics, BARS appears to enhance the feedback process. Despite its advantages, many organizations do not employ BARS because of the time and the cost involved in developing this system. A specific deficiency of BARS is that the behaviours used are activity-oriented rather than results-oriented.

(2) Management by Objectives:

Management by Objectives (MBO) is a comprehensive management approach which is adopted for performance appraisal as well as for organizational development. When MBO is used for performance appraisal, its primary focus is on developing a set of objectives that are clear, specific, and reachable. These objectives are then used as performance criteria for evaluating the performance of indi­viduals.

Generally, the MBO process is as follows:

(i) The subordinate and supervisor jointly determine the goals to be accomplished, and the level of per­formance necessary for the subordinates to satisfactorily achieve the goals. This is taken into account during appraisals.

(ii) During the appraisal period, the supervisor and the employee update and alter goals as necessary due to changes in the business and the environment.

(iii) Both the supervisor and the subordinate decide if the goals were met by the employee and discuss if not, why. The cause of deviation is taken into consideration such as strike, mar­ket changes, or labour dispute.

(iv) The new goals and performance objectives are determined by the supervisor and the subordinates for the next period based on performance levels.

Evaluation of MBO:

Perhaps the greatest benefit of MBO is that it provides an objective, performance- based method of appraisal. What is most unique about the MBO procedure is that goals and objectives are determined before the appraisal period begins. This gives employees direction before the appraisal begins.

Thus, the MBO process is developmental in defining the direction employees should take and the expected level of achievement. The disadvantage of the MBO procedure is that time and effort that must be spent by both the supervisor and the subordinate in the appraisal process.

(3) Assessment Centre:

An assessment centre is a comprehensive programme (not a place) in which mul­tiple assessment techniques are used to evaluate a candidates managerial potential. The assessment centre technique typically involves a few days of situational testing of a candidate in an environment that is free from the normal pressures of the workplace.

In assessment centres, line executives, supervisors, and/or trained psychologists evaluate candidates as they go through the required exercises that simulate real-life problems that they would confront on the job. Some of the exercises may involve group interactions, while others may be performed individually. Based on a list of descriptive dimensions of the actual job, the situational testing exercises include the use of assessment techniques such as interviews, in-basket and problem-solving exercises, leaderless group discussions, business games, and presentations.

For example, candidates might be required to analyse a practical financial problem, make an individual presentation of their results, and then participate, say, in a one-hour leaderless group discussion that requires a written consensus solution.

The evaluators spend considerable time discussing the results and reaching a consen­sus decision on how candidates are to be rated on a number of work-related dimensions such as creativity, leadership, decisiveness, resistance to stress, decision-making skills, and communication ability.

Evaluation of the Assessment Centre Technique:

An important benefit of the assessment centre pro­gramme is that it improves the chances for making successful promotional decisions, particularly from non-managerial to managerial positions. Since evaluators know the position requirements intimately and are trained to perform the evaluation process in an objective manner, the performance ratings may find favour with majority of the employees.

An important component of the assessment centre programme is the feedback session in which scores and rating are explained to the appraisee by the professionally trained raters. This help in minimizing participants’ frustration stemming from a lack of information about results.

The assessment centre technique, however, is expensive to design and administer. Blind acceptance of assessment data, without considering other information on candidates past and current actual job performance, is not advisable.

(4) 360-Degree Feedback Appraisal:

The term 360-degree appraisal, also known as multi-rater feedback/appraisal, multisource feedback, full- circle appraisal, and group performance review, was coined in the US in 1998. To overcome the drawback of higher subjectivity in traditional appraisal methods, many enterprises started using ‘upward feedback method’ wherein sub­ordinates provide feedback on their managers and supervisors.

This idea was further modified to ‘peer feedback,’ where each team member informs how he/she perceives his/her colleague’s performance. The 360-degree feedback appraisal method is an extension of ‘peer feedback’ concept; it incorporates upward, downward, and lat­eral feedbacks.

Through such a feedback, efforts are made to eliminate subjectivity in evaluation, as many people rate an employee on a fairly extensive list of attributes. Thus, the term 360 degree implies that everyone around is involved in evaluating the performance. Unlike traditional methods, only superiors do not evaluate the subordinates rather literally everyone around gives the feedback.

The premise behind this technique is that the people who work closely with an employee see his/her behaviour in vari­ous settings and circumstances that a supervisor may not see. Lepsiger has defined 360-degree feedback as a process of collecting perception about a person’s behaviour from the people, boss(es), col­leagues, fellow members in the team, direct reports, suppliers as well as internal and external customers.

Today, 360-degree feedback has become a popular appraisal method worldwide. By now, nearly all fortune 1000 companies have already implemented it. The increasing affordability of this method has allowed many small to mid-sized companies to undertake 360 degree for individuals and groups within their organization. Many progressive organizations in India namely Wipro, NUT, Motorola, etc. widely use this method. Companies prefer this method as they receive a broader and more accurate perception on their employees from multiple sources.

Advantages of the 360-Degree Appraisal:

i. It provides individuals an opportunity to learn how different colleagues perceive them, leading to increased self-awareness.

ii. It encourages self-development.

iii. It increases the understanding of the behaviour required to improve personal and organizational effectiveness.

iv. It promotes a more open culture where giving and receiving feedback is an accepted norm.

v. It increases communication within the organization.

vi. Managers often use the 360-degree appraisal to support their requirement for management development training. The 360-degree appraisal report shows which areas of management devel­opment training to focus on.

vii. It can be a powerful trigger for change.

Limitations:

The 360-degree feedback is widely accepted as an effective performance tool, but if it is not managed properly then it does more harm than benefit. As with any performance feedback process, it (360-degree system) can provide you with a proudly supportive organization-affirming method for promoting employee growth and development.

Or in the worst cases, it saps morale, destroys motivation, enables disenfranchised employees to go for the jugular, or plot a scheme revenge scenario. It can increase posi­tive and powerful problem solving for customers or set people off on a journey to identify the guilty, the feedback provider, who rated their performance less than perfect.

For developing a 360-degree feedback system, certain preconditions are required. These include preparing the organization for such a system, developing an appropriate process for the organizational needs and objectives, generating enthusiasm among key decision makers and participants, ensuring that participants have the skills to support the process, providing an orientation-briefing, coaching partici­pants in one-on-one meetings, and providing organizational summary data.

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