Top 12 Performance Appraisal Methods in HRM | Traditional and Modern

Performance Appraisal Methods in HRM

What are the Methods of Performance Appraisal in HRM (Human Resource Management)? 

What I think Before knowing the Methods, firstly you should know what performance appraisal is and why the company gives performance appraisal to their employees. 

“A Performance Appraisal that is conducted effectively leads to greater employee morale, higher productivity, creating a positive culture and improved overall performance and effectiveness of an organization.”

Kumar Prakala says.

As it clears, Performance Appraisals play a very important role in improving the productivity, morale of the employees. 

If You are working hard. There is nothing wrong in expecting for the appraisals. 

Everyone wants growth in their career right?

You as a student wants to get hired in a big corporate or to start your own dream company. 

Your teacher wants themselves to get promoted to an Associate Professor from Assistant Professor. 

In the same way, if you are working in a corporate you also want the promotion so that you will become more motivated and focused towards the work. 

And What’s the better motivation than the money, right?     

This is where the Star borns- “Performance Appraisal” who helps those employees who are giving their best contribution to the company by providing them raise in salary and promotion also. 

I hope now You have understood the concept of Performance Appraisal. 

So, Let’s jump into the more clear meaning of Performance Appraisal. 

Meaning of Performance Appraisal

Performance Appraisal

Performance Appraisal is simply the process in which the firm firstly set some performance standards and communicate those standards to the employees. After this, the actual performance of the employees is evaluated and compare it with the standard one. Then, the firm assesses the performance and gives feedback to the employees.

There are various methods of performance appraisal in HRM out there. But the meaning remains the same.  

Now You would be thinking that performance appraisal is only done for the promotion of the employees right. 

But that’s not the case. There are so many other objectives which the firm keep in mind while deciding the performance appraisals.

Objectives of Performance Appraisal

Objectives of Performance Appraisal in HRM
  • Compensation Decision- While deciding the performance appraisal, the first and foremost objective of an organization is to make a fair compensation structure. No matter what performance appraisal methods are used by the HR Team or the evaluators. If someone works better, they should get more money.
  • Promotion Decision- The Next objective of Performance Appraisal is to make promotion decisions. Every employee wants a promotion. But how the Firm will evaluate who works better or who deserves to be promoted. Hereby different methods of performance appraisal, it becomes easy for the firm to make the promotion decision.
  • Training and Development Decision- Training and Development Decision is one of the important objectives of performance appraisal. There can be two reasons for taking such a decision. Firstly, Training is given to those employees are not capable to adapt to the new work technology. Secondly, Development Decisions are given to those employees who need to acquire some skills by which they can better contribute to the company.
  • Feedback- It’s always not necessary that performance appraisal will give you a promotion. So many times it gives you the feedback so that in future you will get promoted. Through the Performance Appraisal Methods, the evaluator accesses your performance during the twelve months and gives you the necessary feedback.
  • Counselling the Poor Performers- There will be so many employees who are not able to meet the performance standards. For those, counselling programs are conducted to understand the reasons why they are able to achieve the standards. There can be so many reasons behind it, either due to issues in personal life or work-life balance and a lot more.

Performance Appraisal Methods in HRM

The Methods and Techniques of Performance Appraisal are divided into two main categories- Traditional and Modern Methods of Performance Appraisal.

Methods of Performance Appraisal in HRM

Firstly, Let’s talk about the Traditional Methods of Performance Appraisal in HRM.

Traditional Methods of Performance Appraisal

  • Confidential Report Method – This Method is used by the Govt. Organizations to tell the strengths and weakness of the employees. As its name states, the feedback is given confidentially to the employees. This Method of Performance Appraisal is prepared at the end of the year. The Supervisors prepare the report of their respective department. The only limitation of this method is that it doesn’t provide any feedback to their employees.
  • Ranking Method- In this method, employee performance is compared with the other employees in the same department. As per their performance, the evaluator assigns them the rankings from 1 to 5. Although, it’s a good method of performance appraisal. But it can’t be applied to those companies where the workforce size is less.
Ranking Method
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  • Paired Comparison Method- In the Paired Comparison Method of Performance Appraisal, the firm makes a pair of employees. The pair of employees are compared with the other pair of employees in the organization. The Comparison is done on the various basis- Punctuality, Discipline, Traits, Achievements and lot more. For Example- If there are 4 employees in an organization- A, B, C and D. The pairs will be made in such a way- A-B, A-C, A-D, B-C, B-D and C-D.
Paired Comparison Method
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  • Grading Method- Grading Method is another popular traditional method of performance appraisal. In this method, the performance of employees is evaluated by the raters or evaluators. The results of performance are given on the basis of grades like for A+ Grade- Excellent Performance, A Grade- Good Performance, B Grade- Average, C Grade- Poor or not bad. 
  • Essay Evaluation Method- In the Essay Method of Performance Appraisal, there is a performance evaluator or employer who writes an essay description of the employees. The Essay includes all their plus, negative points, work performance, relation with the other employees, management etc. 
  • Critical Incident Method- In this method, a lot of effective and ineffective behaviour is recorded in the organization by the evaluator in case of critical incident or cases. The Evaluator gives the incident to the employees which are subjective in nature. It is evaluated that how employees react to that critical incident or situations. According to the reaction or response of the employees, the employer rates the performance. 
  • Forced Choice Method- In this method, the Employer choose only one category and check the positive and negative ratings of that situation. It is given in the form of the survey questionnaire. For Example- In case of achieving the targets, there are so many components to check the performance that is- Always achieve the target, Always fails to achieve the target, Rarely fails to achieve, Average Performance.
Methods and Techniques of Performance Appraisal in HRM
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  • Checklist Method- In the Checklist Method of Performance Appraisal, the employer prepares the checklist to evaluate the employee’s performance. The answers to the questions in the assignment are Yes or No. According to the checklist, the employer rates the performance. For Example- Is Employee punctual, Is Employee achieves the target at the time, Is Employee follows the company policies and rules, Is Employee has good relation with other superiors and subordinates and lot more.
Checklist Methods of Performance Appraisal
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  • Field Review Method- In this method, the rater or the employer goes on the field and check the employee work and asks the questions. As per their on-time response, the evaluator rates their performance. The Limitation of this method is that so many times employees are not able to give their best when someone is checking over them. 

Modern Methods of Performance Appraisal

  • Management by Objective (MBO)- This is a very famous method given by Dr Peter F Drucker which he has mentioned in their book “Principles of Management”. In this method, firstly we set the organizational and departmental goals, define the expected results, check the performance and then provide the feedback. 
  • Behaviour Anchored Rating Method- This Method is a combination of Critical Incident Method and Rating Method. In this method, firstly the rater or evaluator checks the specific incidents and their response to the situation. From the no. of incidents, the evaluator gives the rating scale to the incidents which help in evaluating their performance. 
Behaviorally Anchored Rating Method
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  • 360 Degree Feedback Method- 360-degree Performance Appraisal Methods refers to collect the performance information from the multiple parties including one’s subordinates peers, superiors and customers. The major advantage of this method is that the employee gets feedback from various sources which leads to an unbiased decision. As an employee, you have to tell about the positive and negative points of the other employee. But it doesn’t give any problem to you because the result of this feedback comes in a summarized form without mentioning any name. 

Methods of Performance Appraisal PPT and PDF

Check out the PPT of the Performance Appraisal Methods in HRM

If You want to get the PDF Notes of Performance Appraisal Methods, I would suggest you check out my complete Human Resource Management Notes in which I have covered all Topics of Human Resource Management at very economical pricing. Click here to get Human Resource Management Notes. 

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