The most basic problem is that performance appraisals often don’t accurately assess performance.

W. Edwards Deming

Ideally, performance appraisals should help organizations understand how well their employees are contributing to the overall growth. But, a staggering 82 percent of the companies reported that performance appraisals are not worth their time and effort.

The focus is now shifted to modern performance appraisals and continuous performance management. Organizations are reinventing performance management and experimenting with hybrid performance appraisals techniques that work well for their business, culture and HR practices. Digital HR empowers them with advanced software tools to collect feedback data from all levels that bring necessary clarity and insights to deliver better performance management.

The main objective of Performance management is driving employee engagement, employee development and business growth. The main objective of performance appraisal is to make conclusive decisions on pay revision and promotion of employees. Both are interconnected as employee development includes both acquiring new skills and getting salary hike and moving to new job positions. With the redesign of employee performance management, organizations adopt modern appraisal methods to measure and evaluate employees’ performance.

Modern Performance Appraisal Methods

The most widely used modern performance appraisal methods are:

• Management by Objectives (MBO)
• 360 Degree Feedback
• Attribute Focused Appraisals
• Behaviorally Anchored Rating Scale (BARS)

Management by Objectives (MBO)

Peter Drucker introduced ‘Management by Objectives and Self Control’ in 1954. This goal-setting approach is the basis of all modern-day paradigms such as SMART goals, Balanced Scorecard and OKR based performance appraisals.

In this MBO method, managers and employees together identify common goals, define areas of responsibility, results expected from each employee and use these measures as guides to business operations and evaluate the contribution of employees.

MBO method endorses the modern-day managerial practice of coordination between managers and reports to plan, execute, guide, review and control the business operations.

In the performance appraisal context, MBO is implemented in four main steps

1. Defining the goals of each employee
2. Determine the functional parameters such as required resources, timelines, etc.
3. Comparing the actual metrics with target
4. Periodic reviews to analyze the outcome

Advanced performance management software helps organizations execute these steps efficiently.

In the first step, managers and employees jointly establish goals for a specific period. Generally, in goal setting the top-down approach is followed and individual employee goals are aligned with business objectives. In this method, employees get clarity on what is expected of him and how his efforts are transformed in achieving business growth.

In the second step, functional parameters are identified and milestones are set. It helps to determine the necessary resources, duration, dependencies and other factors that influence the achievement of goals. Employees and managers are better prepared to set forth the journey of reaching the target.

In the third step, actual and targeted metrics and milestones are compared. It helps discover whether the employee is on the right track or deviated from the established goals. The comparison enables managers and employees to do introspection on the progress. If it is on-track, they can analyze the favorable factors that can be leveraged to enhance the progress further. If deviations are found, they can explore what needs to be done to bring it back on track.

During periodic reviews, managers and reports can share constructive feedback to improve the overall progress. They can deliberate on how to improve future performance and achieve the goals within the agreed timeframe.

Employees feel more involved in this process and highly satisfied with the transparent appraisal parameters. It improves collaboration between managers and reports. The performance appraisal is based on performance metrics and verifiable results.

360-Degree Feedback

As the name suggests, 360-degree feedback consists of getting employee feedback from persons above, below and working alongside him. In the case of employees working in customer service or with clients, feedbacks from external stakeholders can also be taken. 360-degree feedback helps us get a collective unbiased understanding of the employees’ performance and competencies. Variations of 360-degree feedback method are widely used in major business corporations.

The main components in 360-degree feedback include

1. Self-appraisal
2. Appraisal by superiors
3. Appraisal by peers
4. Appraisal by subordinates
5. Appraisal by external stakeholders

Self-appraisal helps us know what employees feel they are good at or where they need to improve, their aspiring career path, etc. Managers and seniors give constructive feedback that helps accelerate employees’ development and bring perspective into their aspiring career path. Feedback from subordinates highlights how well the employees are guiding and motivating the juniors, their working style, etc. Peers can shed light on employees’ collaborative nature, their inter-personal skills and work commitment.  External stakeholders usually have a word or two about quality of service, timely delivery, etc.

We might miss to identify our strength or weakness. 360-degree feedback helps us to overcome the blind spots and understand us better from a collective view. For organizations, it gives an all-inclusive portrayal of an employee – their potential, performance level, interpersonal skills, leadership qualities and collaboration. Also, it helps companies eliminate raters’ bias creeping into the performance reviews.

Behaviorally Anchored Rating Scale (BARS)

The BARS method evaluates employees on behaviors that are specific to the employees’ job position. The most important job responsibility or key tasks are identified. For each task determine the probable behaviors which are anchored to quantitative ratings. These anchor points are collected using Critical Incident Techniques (CIT). The employees’ behavior on each task is assessed and the corresponding rating is given.

For instance, the BARS of the first response task of the customer support team handling the support tickets might look like this.

5 – Exceptional Performance: Send the first response within 15 mins with the accurate solution

4 – Excellent Performance: Send the first response within 15 mins with the timeframe to fix the problem

3- Competent Performance: Send the first response within 15 mins

2 – Marginal Performance: Send the first response within the day

1 – Unsatisfactory Performance: Didn’t send the first response

BARS approach is benefitted by the combination of both qualitative and quantitative data. It is individualized, fair and easy to evaluate.  The evaluation is based on the behavior and performance of the employees.  Employees can learn his performance standard and what needs to be done to improve their performance.

Attribute Focused Appraisals

This appraisal method focuses only on employees attributes such as reliability, punctuality, adaptability, team player, etc. Usually, a questionnaire or checklist is prepared with rating scale range and an option to provide feedback. This type of appraisal is more suited to assess employees in non-skilled jobs where the impact of individual performance is very less. Self and managers’ rating and feedback are sought on each attribute and overall rating is calculated. Attribute focused appraisals are highly prone to rater’s bias as there are no defined measures available to validate the manager’s rating.

All performance appraisal approaches have inherent pros and cons. HR teams need to dig deeper to zero in on the right approach that suits the business and serves their purpose. The appraisal methods you choose should assess the employees’ performance fairly, provide you valid data that aids in making compensation revision and job promotion decisions and most importantly should give employees clarity on areas they need to improve.

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