Performance evaluation of employees is important for the growth of both the employees and the organization. Performance appraisal forms one of the most crucial processes of an organization as it ensures that each employee is given a fair opportunity to grow according to their potential which in turn improves the organization’s performance on the whole.
What is a performance appraisal?
In simple terms, performance appraisal is a way to evaluate an employee. It is a systematic and periodic method of measuring an employee’s performance in his present job role and his potential for a higher one. This appraisal is usually carried out by the employee’s manager or supervisor against a set of predefined attributes, such as technical know-how, skills, attitude and many more.
A performance appraisal is used by managers to place the right person for the right job and also discover the contribution made by each employee and reward the high achievers. The appraisal is usually followed by constructive and actionable feedback given to the employee which helps him to grow in his career.
The performance appraisal methods mainly assess the core competencies valued by the organization and the competencies required by the employee for his specific job role.
Benefits of performance appraisal
Performance appraisal methods provide both qualitative and quantitative assessment of employees. This information can prove to be of immense value for an organization if obtained using accurate methods and used wisely.
Broadly speaking, performance appraisal serves two purposes. One is for the organization to assess the value and productivity that employees contribute in terms of the overall organizational goals. Second, it serves the employees by helping them to develop in their respective job roles and progress in their career.
Let us now go through some more key benefits it has to offer.
Benefits for organization:
- Performance evaluation can help the management to identify areas where improvement is required to enhance productivity and work quality of employees.
- It can observe behavioral traits of employees and address behavioral issues before they impact team productivity.
- The organization can implement training programs for employees on the basis of the feedback received from appraisals. This can support employees in career development.
- Reward and encourage high-performing employees to contribute even more by recognizing their efforts and talent.
- Strategic decisions such as employee layoffs, promotions or filling roles internally can be made objectively and in an unbiased manner.
Benefits for employee:
- The insights and feedback gained from employee assessment can determine the weak areas of an employee. Support can then be imparted to him in the form of additional training or personal guidance.
- The appraisal helps in the recognition of an employee’s achievements and contributions in the organization.
- It also helps managers to take important decisions regarding employees, such as promotion or bonus.
- The feedback received from an appraisal makes the employee feel a sense of belongingness in the organization. He gets motivated to make efforts as he feels that his manager is invested in his development.
- Performance appraisal can lead to open and detailed discussion about an employee’s long-term goals.
Performance appraisal process
Even though there are several performance appraisal methods, there is a common process to conduct any kind of performance review. Since the goal of a performance appraisal is to give constructive feedback and not come across as critical and offensive, it is important that appropriate language, tone of voice and behavior are used in the process.
Briefly, the performance appraisal process comprises the following steps:
- Human resources (HR) facilitates the process by training and assisting managers and supervisors in conducting appraisals.
- The first step is to establish an assessment method.
- Required skill sets, competencies and job expectations need to be decided for each job role against which the employee’s performance is assessed.
- After the appraisal is done, a one-on-one interview is set up between the manager and employee to discuss the review and decide on the future course of action.
- A signed-off version of the performance review is stored in the database.
- The insights obtained from these reviews are used by human resources for larger organizational purposes like succession planning, layoffs, reporting, etc.
Methods of performance appraisal
Performance appraisal offers several benefits to an organization as well as its people. However, these reviews are effective only when they are correct and as accurate as possible. This is why it is important to understand which appraisal method is being employed to evaluate an employee.
There are some traditional and some modern appraisal methods used by organizations. The modern methods are considered to be more objective, detailed and accurate as compared to the traditional ones.
Traditional performance appraisal methods
- Ranking method
This is one of the oldest methods where an employee is compared to all other employees based on a set of parameters. This way all the employees are ranked in order of the most to the least productive. Even though it is simple and less time-consuming, it does not give very accurate results, particularly when the number of employees is high.
- Essay appraisal
As the name suggests, in this appraisal method, a manager writes a detailed essay about an employee’s performance and behavior. It is like a written report on the employee, addressing aspects such as the employee's contribution, strengths and limitations. This method gives immense freedom of expression and critical analysis to managers and works quite well if the team is small. However, the accuracy of this review relies entirely on how good the managers are at written communication.
- Critical incidents method
This method assesses an employee on the basis of certain behaviors or critical incidents. Critical incidents are incidents that can affect a job function either positively or negatively. The respondent chooses whether an employee’s specific behavioral trait leans towards good or bad. This method is behavior focused but it is difficult to keep track of the employee’s behavior patterns for the entire review period.
Modern performance appraisal methods
- Management by objectives (MBO)
MBO is the most commonly used employee-based appraisal method. It involves setting the goals and objectives to be achieved by the manager in collaboration with employees. The goals are tracked and the progress is reviewed together at periodic intervals. There are mainly four aspects to this method:
- Goal setting: The manager and employees set goals to be achieved.
- Performance standard: This is the standard which needs to be met to achieve these goals.
- Comparison: A comparison is done between what is achieved and what was expected after a certain point of time to determine if the team is on the right track or needs to speed up.
- Periodic review: The manager and the employee together review the employee’s performance and discuss improvements.
MBO is widely accepted because it involves employees in such major decisions such as goal setting. This makes them personally invested in the achievement of those goals and boosts their motivation to work towards those goals. This gives them a sense of belongingness as their role is clearly defined in the whole scheme of things.
- 360-degree feedback
This is another effective method of performance appraisal where an employee is assessed by collecting feedback from a number of people who have worked closely with him. Those people can be an employee’s peers, subordinates, managers and clients. A self-evaluation by the employee is also a part of this assessment. This appraisal method gives a well-rounded feedback from multiple perspectives, giving a holistic assessment of the employee. However, since so many stakeholders are involved, this method becomes time-consuming and sometimes the respondent’s personal bias can affect the accuracy of the results.
- Behaviourally anchored rating scales (BARS)
This method evaluates an employee based on specific behavioral traits that relate to job performance. Each statement or behavioral trait is followed by more statements which describe the extent to which the employee displays that particular trait. The best thing about this method is that it considers an employee’s intangible traits and maps them on a quantifiable scale. It, thus, provides both qualitative and quantitative data about an employee. These anchored rating scale bars are meticulously constructed to eliminate any subjectivity or bias. However, a lot of time goes into administering this evaluation.
These are a few of the performance appraisal methods to put your employees and organization on the growth trajectory. This can be a lot to process for organizations which are new to this or do not have enough resources to implement these evaluation methods.
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