Performance appraisal is a critical process that enables companies to motivate employees and increase their productivity. Apart from salary increments and promotions, this process enables businesses to precisely assess the strengths and weaknesses of their employees. In recent years, various performance appraisal methods have been introduced to make it easier for HR managers to conduct the appraisal process.

​It is crucial to remember, that not all methods are equally effective. As a result, it is essential to select the appropriate methods for your organization’s needs. This article will go through six effective performance assessment approaches that are perfect for today’s workforces. You may use these methods to measure your workers’ performance and help them understand their full potential. These methods can also support to establish an environment of continual development and learning, which is vital for organisations to remain sustainable in today’s rapidly changing workplace.

What is Performance Appraisal?

​Performance appraisal is a quarterly or annual evaluation of employees’ performance towards the company’s goals and objectives. Performance appraisal generally involves providing feedbacks, identifying areas of improvement, setting goals, and defining expectations. It can be used to acknowledge employees who are performing well and identify the needs for any training or support. Ultimately, performance appraisal is a tool for companies to handle and improve the performance of their employees.

6 Modern Methods of Performance Appraisal

1. Objectives and Key Results (OKR)

​OKR (Objectives and Key Results) is a dynamic appraisal method that promotes organisational alignment, agility, and creativity. Unlike traditional performance evaluation systems, OKR emphasizes on creating ambitious and aspirational goals that motivate people to strive for greater success. These goals are paired with measurable key results that provide a clear path to achievements. For example, a software developer might have an objective to launch an innovative product feature and key results could include metrics such as increasing user engagement by 20% within three months or achieving a customer satisfaction rating of 4.5 out of 5 within six months.

​OKR fosters a transparent culture by allowing workers to see how their individual goals contribute to the organisational goals. It also encourages adaptation by allowing goals to be changed and updated on a frequent basis to reflect shifting priorities and market conditions. OKR encourages workers to unleash their full potential and produce real impact by prioritising objectives, transparency, and adaptability.

2. Management by Objectives (MBO)

​Management by objectives is a method in which both the employees and managers identify, plan, organize, and communicate together to achieve objectives during a specific period of time. It involves setting relevant, achievable, measurable, and time-bound goals for employees, and evaluating their performance based on the achievement of those goals. This method aims to align employees’ goals with their company’s objectives to ensure that employees are working towards achieving them.

​This method provides employees with a clear understanding of their duties and responsibilities and assists them in prioritising their work in accordance with established goals. Employees are also motivated because they are more involved and have a feeling of direction and purpose in their job. It helps the organization to easily measure their employees’ performance as the goals set are measurable and time-bound.

3. 360-Degree Feedback

​360-degree feedback collects feedback regarding employees’ performance from various sources like their peers, managers, subordinates, and customers. This method involves setting up a questionnaire that includes different aspects of an employee’s job like productivity, communication skills, teamwork, and customer service. Then these questionnaires are distributed to different sources who mark the employee performance on the basis of their experience of working with them. The feedback collected is then compiled and presented to the employee for further discussion.

​The biggest advantage of this method is that it eliminates the chances of biases in performance reviews and provides a balanced view of an employee’s performance. It also helps an employee to understand their strengths and weaknesses from different perspectives. This method allows an organization to build a feedback-rich culture, foster open communication, and increase employee engagement within the organization.

4. Behaviorally Anchored Rating Scale (BARS)

​Behaviorally anchored rating scale (BARS) is a performance appraisal method that rates an employee on the basis of their performance as well as specific behavioral patterns. BARS is a comparatively more objective method as it involves classifying specific behaviors or performance indicators that are necessary to the job. For example, an organization creates a rating scale that includes specific behaviors that can be measured for successful customer support such as “Listening actively to customers’ needs and concerns” and “Proactively offer solutions”. Now the employee will be evaluated based on each behavior through rating and how frequently they demonstrate the behavior.

​This method is considered as one of the most effective performance appraisal methods as it considers both qualitative and quantitative forms of measurement. However, creating a BARS system can be expensive, time-consuming, and requires careful attention to ensure that behavioral anchors are relevant and valid for the particular job.

5. Assessment Centre Method

​Assessment centre method includes a series of simulations and exercises designed to evaluate an employee’s skills, competencies, and performance in a particular job. During the assessment, employees are ordered to take part in exercises and simulations like role-playing, informal discussions, decision-making problems, and other exercises to evaluate employees’ skills. This method can be adjusted according to the need, role, position, or goals to give insights regarding employees’ personalities and capabilities in different areas.

​This method provides a more accurate assessment of an employee’s potential for future success in the organization. Its result can be helpful while making a decision on whether to promote an employee to a higher position or not.

6. Psychological Appraisals

​Psychological appraisal is a performance appraisal method that is used to assess employees’ psychological traits like motivation and attitude. The aim of this method is to gain a deeper understanding of an employee’s strengths, weaknesses, and potential to be successful at their job role. Qualified psychologists conduct various tests like in-depth interviews, discussions, psychological tests, and more to assess employees effectively. Specific situations are taken into consideration using psychological appraisals. Like measuring how an employee deals with an aggressive client by using their persuasion skills, emotional response, behavioral response, and more.

​By using psychological appraisal, organizations can identify how an employee fits into organizational culture. They can also help to identify potential areas for development and provide insights into how an employee’s psychological characteristics can affect their job performance.