Modern performance appraisal methods

 

Modern performance appraisal methods

With the right performance appraisal method, organizations can enhance employee performance within the organization. A good employee performance review method can make the whole experience effective and rewarding.

 

1.        Management by Objectives (MBO)

Management by objectives (MBO) is the appraisal method where managers and employees together identify, plan, organize, and communicate objectives to focus on during a specific appraisal period. After setting clear goals, managers and subordinates periodically discuss the progress made to control and debate the feasibility of achieving those set objectives.

At the end of the review period (quarterly, half-yearly, or annual), employees are judged by their results. Success is rewarded with promotion and a salary hike whereas failure is dealt with transfer or further training. This process usually lays more stress on tangible goals and intangible aspects like interpersonal skills, commitment, etc. are often brushed under the rug.

 

Steps to implement a successful MBO program

1.  Every manager must have 5-10 goals expressed in specific, measurable terms
2.  manager can propose their goals in writing, which will be finalized after review
3.  Each goal needs to include a description and a clear plan (list of tasks)to accomplish it
4.     Determine how progress will be measured and how frequently (minimum quarterly)
5.    List down corrective actions that will be taken if progress is not in accordance with plans
6.     Ensure that goals at each level are related to the organizational objectives and levels above/below

Do you know?

Retail giant Walmart, uses an extensive MBO participatory approach to manage the performance of its top, middle, and first-line managers.

 

2.        360-Degree Feedback

360-degree feedback is a multidimensional performance appraisal method that evaluates an employee using feedback collected from the employee’s circle of influence namely managers, peers, customers, and direct reports. This method will not only eliminate bias in performance reviews but also offer a clear understanding of an individual’s competence.

Advantages of using 360-degree feedback

•        Increase the individual’s awareness of how they perform and the impact it has on other stakeholders
•         Serve as a key to initiate coaching, counseling, and career development activities
•         Encourage employees to invest in self-development and embrace change management
•       Integrate performance feedback with work culture and promote engagement

·         Ideal for:
Private sector organizations than public sector organizations as peer reviews at public sector organizations are more lenient.

 

3.        Assessment Centre Method

The concept of assessment center was introduced way back in 1930 by the German Army but it has been polished and tailored to fit today’s environment. The assessment center method enables employees to get a clear picture of how others observe them and the impact it has on their performance. The main advantage of this method is that it will not only assess the existing performance of an individual but also predict future job performance.

 

4.        Behaviorally Anchored Rating Scale (BARS) 

Behaviorally anchored rating scales (BARS) bring out both the qualitative and quantitative benefits in a performance appraisal process. BARS compares employee performance with specific behavioral examples that are anchored to numerical ratings.
Each performance level on a BAR scale is anchored by multiple BARS statements which describe common behaviors that an employee routinely exhibits.

The first step in BARS creation is the generation of critical incidents that depict typical workplace behavior. The next step is editing these critical incidents into a common format and removing any redundancy. After normalization, the critical instances are randomized and assessed for effectiveness. The remaining critical incidents are used to create BARS and evaluate employee performance.

Advantages of using BARS:

•         Enjoy clear standards, improved feedback, accurate performance analysis, and consistent evaluation
•          Eliminate construct-irrelevant variance in performance appraisal ratings by emphasis more on specific, concrete, and observable behaviors
•          Decrease any chance for bias and ensure fairness throughout the appraisal process

Ideal for:

Businesses of all sizes and industries can use BARS to assess the performance of their entire workforce from the entry-level agent to C-suite executives

5. Human-Resource (Cost) Accounting Method

The human resource (cost) accounting method analyses an employee’s performance through the monetary benefits he/she yields to the company. It is obtained by comparing the cost of retaining an employee (cost to the company) and the monetary benefits (contributions) an organization has ascertained from that specific employee.

Advantages of the human cost accounting method:

•         Effectively measure the cost and value that an employee brings to the organization
•       Help identify the financial implications that an employee’s performance has on the organization’s bottom line

Ideal for:

Startups and small businesses where the performance of one employee can make or break the organization’s success.

Implementation of human resource cost accounting method:

•    Identify the gap between the market and the current package of an employee
•      Determine the monetary and non-monetary value that an employee brings to the table
•      List down the things that an employee achieved in the review period (increase in the subscriber count, improvement in revenue, number of new deals won, etc.,)