In which method of employee appraisal contribution of the employee is measured in monetary terms?

Being a manager means managing multiple things simultaneously while keeping the balance in check by compensating your employees extrinsically as well as intrinsically.

As a manager, one should maintain everything related to the team and work plan.  Most importantly, firstly you have to set harmony in your employees by defining everyone’s responsibilities, duties and position. You are supposed to do all of this within a given time frame, technology, and budget.

One of the many responsibilities of a manager is performance appraisal. But measuring the performance is a technical process through which we can evaluate an employee’s performance.

Performance Appraisal is a process through which any organization monitors and reviews an employee’s inputs to the organization. This process also helps to evaluate an employee’s skills, achievements, growth, and weakness.

Performance appraisal methods in HRM

There are multiple performance appraisal methods used by an organization to rate and measure the performance of its employees and set the future goals for them. Current employees’ performance, as well as benefits and cost used on the employees. There are two broad categories of Performance Appraisal Methods.

• Traditional Methods
• Modern Methods

Traditional methods of performance appraisal:

Traditional methods are an old way of performance measuring methods. These are based on personal qualities like knowledge, capacity, judgment, initiative, attitude, loyalty, leadership, judgment etc.

• Unstructured Method of Appraisal
• Straight Ranking Method
• Paired Comparison Method
• Man to Man Comparison Method
• Grading Method
• Graphic Rating Scale
• Forced Choice Method
• Check List
• Free Essay Method
• Critical Incidents Method
• Field Review Method

Modern methods of performance appraisal:

Modern Methods employ the use of technology and are an advanced way of measuring the performance by improving the old and traditional methods. Below we have a list of modern methods and few of them we will elaborate in this article.

• Target Setting Approach of Management by Objectives
• Behaviourally Anchored Rating Scales (BARS)
• 360 Degree Feedback
• Assessment Centre Method
• Psychological Appraisals
• Human-Resource Accounting Method
• General Performance Appraisal
• Technological Performance Appraisal
• Sales Performance Appraisal
• Critical Incident Method of Performance Appraisal
• Confidential Report System
• Checklist Method
• Field Review Method

Management by Objectives (MBO)

Management by Objectives is a process of identification of an individual’s performance by assigning them a specific task, through which we can assess an employee’s performance but the task which is assigned to an employee should be measurable, realistic and achievable. This method is commonly used in well reputed organizations to measure the individual’s performance, however, this method is effective and less costly in contrast to other methods. It also provides accurate analysis of an individual’s outputs.

Behaviourally Anchored Rating Scale (BARS)

Behaviorally Anchored Rating Scale method is a new technique to measure an individual’s performance. This method is a more expensive method from the aforementioned ones, however, provides guaranteed results. By using BARS, we get the result of employees’ behaviors by scaling them explaining an individual trait. On the basis of an individual’s behavior, we rate their behavior as good, average, or poor. This method provides constant results of an employee behavior and helps managers to compensate employees, or assign duties in future.

360 Degree Feedback

This is the most used method in organizations to evaluate employees’ performance. This method is a bit time-taking because we use a lot of scale to measure an individual’s performance within the organization. In this method we collect the information through feedback from the people who interact with that employee. We get the information from them by rating the services provided by the employees and get a statement which defines an employee’s performance and input provided to the organization. This method is a worthy tool to get realistic information. If an employee serves best to an individual he will obviously get a good rating and positive word of mouth. It also includes taking statements from the employees themselves regarding their performance. We take feedback reviews from the manager under whom they are working, and combining all this information helps the organization to get unbiased and accurate information to improve and guide the employees regarding their performance.

Assessment Centre Method

The assessment centre method helps employees to get transparent information of how they are being observed by the people. This method helps the organization to monitor and assess the current performance as well as forecast the performance of the employees.

In the Assessment Centre Method, an organization sets up a social simulation in which employees are asked to take part. This method is costly and time taking due to which it is slightly difficult to apply in the organizations.

Psychological Appraisals

Psychological appraisals are the technique to get the information of an employee’s covered potential. This method is used to forecast an employee’s future performance rather than previous workout performance. This method is  used to get the information of  seven major elements of an employee’s performance such as interpersonal skills, cognitive abilities, intellectual traits, leadership skills, personality traits and emotional quotient.

Specialists and qualified psychologists discuss various topics with the employee to ensure their effectiveness in certain situations. This process is not used commonly because of its slow processing, also, results are all based on the psychologist’s way of questioning, discussing, and measuring.

Human-Resource (Cost) Accounting Method

Human-Resource  Accounting method analyses an employee’s overall performance through the financial advantages he/she attains from the firm. In this process we compare the performance of an employee with the advantages he/she gets from the company. Different factors taken as a measuring tool such as quality, overhead cost and interpersonal relationships.

General Performance Appraisal in HRM

General Performance Appraisal is the most commonly used method by organizations to measure the performance of their employees. In this method a manager sets a specific goal and targets for his/her employees, pushes them to achieve that goal and encourages them to stay motivated for newer targets. Once a goal is achieved, the manager calls a meeting where he/she set new goals for each employee and the exercise pursues further.

Technological Performance Appraisal

Technological Performance Appraisal is an advanced method in which an employee’s performance is analyzed based on their technology-related knowledge. If an employee has awareness and grip on new technology and modernizes themselves with technological advancements, then they are able to handle specific technology related goals. Such employee’s performance is monitored on the basis of how they are interested to learn and modify themselves with innovations and technological changes.

Sales Performance Appraisal

Sales Performance Appraisal is one of the most common and effective methods exercised in firms. This method has a direct relation with any organization’s quantitative output scores, because sale is a process through which any organization earns. Managers set the specific target and goal to achieve. Once an employee achieves a goal, they are appreciated by their manager with bonuses and different incentives. This method is less costly and has high performance output than any other mentioned appraisal methods.

Critical Incident Method of Performance Appraisal

This performance appraisal method is a unique way of evaluating an employee’s performance. According to this, a manager logs details of critical incidents that an employee is involved in, or performs. A critical incident does not necessarily have negative happenings where the employee’s behavior or performance is below the expectation, but could involve positive incidents as well. For instance, on a random day, a manager might notice exceptional behavior or performance of an employee where the employee is working with dedication or might reflect their problem-solving ability. In that case, the manager would write down the details of that incident in a journal and provide recollection of that incident during the performance appraisal process.

Despite its novel attribute, this method is sparsely used. The reason being is that it is host to a bunch of demerits and limitations. As an example, let’s consider that an employee provides consistent output which the firm requires, however, he/she does not exhibit any critical event. In this case, the manager’s observation would be biased as he would not jot it down. Another drawback of this method is that such events are not witnessed regularly. Also, there is no specific definition of ‘critical incident’, it totally depends upon the manager’s perception or firm’s policies.

Confidential Report System

This is one of the traditional methods of performance appraisal, however, it’s not usually practiced in private firms. Mostly, public organizations or secret agencies employ this technique in their appraisal process. As suggested by name, Confidential Report System involves handing over the employee’s appraisal to senior level management in sealed envelopes. These envelopes include their performance detail in a certain time frame. The height of confidentiality is that even the employee who is subject to the assessment is not allowed free access to the particular envelope. Only the authorized appraisal writer and senior management is allowed access to it.

Even though this method allows managers to be objective and candid about their employees, still, it is host to some limitations. Since employees do not have access to their performance information, it gets difficult for them to take corrective measures and improve their performance. Confidential Report System ensures that employees do not see their rating or predict their future incremental growth changes. Due to the secretive nature of this method, it is not most likely that this technique would increase employee productivity.

Checklist Method

The checklist method is one of the most widely used performance appraisal technique. The reason is its convenience, objectivity, and time-saving process. According to this method, managers are provided with a standard checklist or questionnaire to fill in. Generally, this checklist includes multiple choice questions, or require answers in the form of ‘yes’ or ‘no’. it could also include particular statements and the manager would be required to answer it in the form of extent to which they agree or disagree with it.

On the other side of the coin, this method has its own limitations. Its biggest drawback is that its not subjective enough to be efficiently applicable in corporate organizations. In such setups, every employee has different roles and performance expectations which the standard questionnaire might not cover in detail. Employees might get dissatisfied that their role attributes are not highlighted up to par, or managers might complain that the standard checklist lacks subjective questions about employee role and expected performance outcome.

Field Review Method

This is an unconventional appraisal method used in critical situations. Human resources department might get informed or have significant doubt that the manager’s observation is biased (positively or negatively). In this case, they take the matter into their own hands and undergo Field Review Method to make an accurate assessment. The managers’ decision is not completely denied; however, it is given less weightage in the assessment process. The assessment might involve calling the employee for an interview, with predetermined questions, with the help of which his/her performance and abilities are assessed. As a result, the employee is given a specific rating by the human resources team.

Field Review Method has insignificant applicability because most managers consider this as interference of the human resources department in their team and processes. Also, it can not be frequently employed as it’s a time-taking process.

Related posts:

Which method evaluates an employees performance from the monetary benefits?

What are the methods of employee appraisal?

What are 3 types of performance appraisal?

What are the 4 performance appraisal methods?