Performance management is ever-evolving, and selecting the right performance appraisal method can be quite challenging. As per Gartner, 81% of HR leaders are looking to change their organization’s performance management system. Traditional methods of performance appraisals are being replaced by modern methods to increase the utility of performance management and help businesses achieve better outcomes. The release states that “one of the key reasons for failed performance management initiatives is increasing demands placed on outputs of the process.” To help you develop a seamless and efficient performance management system, we have outlined various types of performance appraisal methods to address the challenges that come with a modern workforce. 

Management by Objectives (MBO)

Management by objectives is one of the most commonly used methods for appraising performance. It entails employees, in collaboration with their managers, developing goals and objectives that they will work towards in a defined period of time. There are four major aspects of management by objectives method: 

  • Goal setting is the most critical step of this method. It is recommended to keep the objectives realistic but aspirational so that the employee is able to perform his duties in line with the expectation and contribute to the organizational growth without feeling too overwhelmed. 
  • Performance standard is another vital element that includes managers defining parameters required to achieve the goals set up for each employee.
  • Marking completion of goals achieved in the pre-defined timeframe and drawing a comparison between actual and expected performance helps managers with the review process. 
  • Periodic review is essential to assess performance and discuss the scope of improvements so that employees are able to fulfill their goals efficiently. A manager can also award ratings for goals that have been completed. 

Management by objectives or MBO is a looped feedback model that can be used organization-wide to measure both qualitative and quantitative output. Here’s what you need to consider while implementing an MBO model. 

  • Define organizational goals and corporate objectives (an activity for the top management)
  • Have your managers translate these goals to break down and define at least 5-10 short-term and long-term departmental or team goals
  • Have your employees define their goals in sync with the team or department goals
  • Ensure the goals (defined on all levels) are based on measurable terms
  • Determine a progress map and establish a review frequency 
  • List action items for completion of goals and objectives 

Behaviorally Anchored Rating Scale (BARS)

BARS includes numerically rating certain employee performance behavioral characteristics based on qualitative and quantitative aspects. Each of these characteristics has a performance level attached to it and consists of multiple BARS statements that indicate common behavior patterns exhibited by employees. This performance appraisal method allows you to determine standards for each role at various levels in the organization which can be used to measure an employee’s performance as per the requirements of their role. 

Although this method is recommended to eliminate constructively irrelevant variables, it can be difficult to implement. One of the challenging aspects can be defining the standards of workplace behavior and identifying critical incidents that can make up the base of review for employee performance. This is how you can implement a BARS model – 

  • Start by identifying critical incidents that affect the job role of employees on each level of the organization 
  • Create a database of these critical incidents and form various performance dimensions 
  • Based on these dimensions ascertain the impact that each dimension will have on the particular job role and mark a rating in line with this 
  • Define a vertical scaling system required to measure the effectiveness of employees 

Assessment Center Method

The assessment center method for appraising performance is not entirely a new concept but a better, more refined, version of the one that was used by the German Army back in the 1930s. It has since been remodeled to better fit the current landscape of operations and provide employers with tangible inputs to measure the performance of their employees. It is also considered ideal because it enables the employees to understand how they are being observed and how the parameters impact their performance. 

The assessment center method primarily entails social-simulation exercises that ensure success in the given role. For example, discussions, decision-making exercises, role-play exercises, fact-based exercises, and such. Here are the stages of the assessment center method – 

  • Pre-assessment: This stage includes setting up objectives for the review, finding competencies and review metrics, designing the simulation exercises, and choosing a rating method 
  • During assessment: It is imperative to note that all participants must be made aware of the purpose and policies of the assessment. While conducting the assessment, the review must initiate the discussions and take note of the strengths and weaknesses of each participant
  • Post-assessment: Since one reviewer or manager will be conducting several assessments, it is important to collate the information and reviews. Once you have the data ready, evaluate the results and share feedback with the employees accordingly.

Psychological Appraisals

Psychological appraisals entail seven major components – interpersonal skills, cognitive abilities, intellectual ability, leadership skills, emotional quotient, personality traits, and achievement tests. It is imperative to have the assessments conducted by a qualified psychologist. This can be considered a drawback as the results of the evaluation will significantly depend on the psychologist conducting the assessments. 

During psychological appraisals, there are certain scenarios that are played out with each employee performing a specific job role. For example, if the evaluation is being conducted for sales associates, their response in dealing with an aggressive customer will allow you to gain insight into their persuasion skills, emotional response, behavioral response, product intimacy, and more. 

Human Resource Accounting Method 

Human resource cost accounting method is a little different from other methods of performance appraisal; It is an analysis of employees’ performance based on the monetary benefit they bring to the organization. It includes a comparison between an employee’s salary, benefits, and other costs associated with retaining them, and their financial contribution to the company. This method is considered ideal for startups and small businesses that are focused on cost-saving. Here’s how you can implement the human resource accounting method – 

  • Define the gap in your employee’s current cost to the company and market trends 
  • Identify monetary values an employee brings 
  • Work towards developing a system that enables you to monetize the non-monetary aspects based on an employee’s core competencies
  • List down the various aspects and calculate their total monetary contribution 

All of these modern methods of performance appraisal are competent ways to assess the performance of your employees. However, how do you make sure the gaps are bridged once the performance review is completed? It is vital that you invest in upskilling and reskilling your employees, and the best way to do that is by implementing a competent LMS. Get in touch with our experts for a FREE 30-minute consultation to understand how Auzmor Learn can help you.