Performance Appraisal

What is Performance Appraisal – Meaning

Performance appraisal is a formal system that evaluates the quality of a worker’s performance.
The appraisal measures skills and accomplishments with reasonable accuracy and uniformity. It
provides a way to help identify areas for performance enhancement and to help promote
professional growth. It should not, however, be considered the supervisor’s only communication
tool. Open lines of communication throughout the year help to make effective working
relationships. Performance appraisal is the process which assessing the performance and progress
of an employee on a given job for his future development, and it mainly consists formal
procedures.
Each employee is entitled to a thoughtful and careful appraisal. The success of the process
depends on the supervisor’s willingness to complete a constructive and objective appraisal and
on the employee’s willingness to respond to constructive suggestions and to work with the
supervisor to reach future goals.
An appraisal should not be viewed as an end in itself, but rather as an important process within a
broader performance management system that links-
a. Organizational objectives

b. Day-to-day performance

c. Professional development

d. Rewards and incentives

Performance in the organizational context is a function of determining job criteria, selecting

those employees who will be able to perform the required organizational task, motivating and
developing them for improving their job skills, and preparing them for higher responsibilities.
Hence, the process of performance appraisal involves obtaining, recording, and analysing
information about the relative worth of an employee.
The focus of performance appraisal is as much on the measuring and improving of the actual
performance as on the future potential of the employee. This activity is performed annually by a
supervisor for his/her subordinates designed to help employees understand their roles, objectives,
expectations, and performance success. Performance appraisal can be used for developmental as
well as administrative purposes. It is a powerful tool to calibrate, refine, and enhance the
capabilities of the employee.
The developmental purpose of performance appraisal provides feedback for identifying the
employee’s strengths and weaknesses, improving performance, and planning for training and
development needs of the future. The emphasis is on improving the employee’s on-the-job
behaviour.
The administrative purposes include decisions regarding promotions, transfers, demotions, or
layoff. It also provides inputs to other HR activities such as compensation programmes,
recruitment and selection, human resource planning, career planning, and the like.
Performance evaluation is the process of evaluating employee performance on the job in terms of
job requirements. For example, the ability to do the work, initiative, industry, tact, judgement,
leadership, etc.

What is Performance Appraisal – Evolution Over the Period of Time

Performance appraisal is an old concept. In fact it began in China in the Weidy Dynasty where
an imperial rater appraised the performance of the members of office family (CAD) 261 – 265.
In 1883, New York City Civil Services introduced formal appraisal programme before First
World War. However formal employee’s performance appraisal is believed to have been started
for the first time during First World War. Walter Dill Scott, US army chief put in place man-to-
man rating system in military establishment.
In the early fifties performance of technical, professional and managerial personnel were taken
up. Since then, it gained momentum. A tremendous change has been sweeping the performance
appraisal spectrum of HR. Different experts have evolved different philosophies and concepts in
the sphere of performance evaluation. The common phrases used include merit rating,
behavioural assessment, employee evaluation, personnel review, performance audit etc. However
the term ‘performance appraisal’ is widely used.
After placed and trained as an employee on the job, the next important and essential step in the
management of human resources of an organisation is to evaluate the performance of an
employee on the job. The management must be able to recognize the level of an employee’s job
performance and then they can be rewarded on the basis of their contributions to organizational
goals. It is the process of deciding how employees do their jobs and if any problems are
identified, then immediately steps are taken to remedy them.
As per the views of C. Heyel (1973), “performance appraisal is the process of evaluating the
performance and qualifications of the employees in terms of the requirements of the job for
which he is employed, for the purposes of administration including placement, selection for
promotions, providing financial rewards and other actions which require differential treatment
among the members of a group as distinguished from actions affecting all members equally”. It
is organized on the principle of goals and management by objectives.
The performance appraisal of employees has been used for the first time during the First World
War when Walter Dill Scott, the US Army adopted the ‘Man-to-Man’ rating system for
evaluating the performance of military personnel. During the 1920-30, the merit rating
programmes were used for employees of industrial units. In the early fifties, attention began to
the performance appraisal of technical, professional and managerial personnel.
According to Wonston Oberg (1972), Common descriptions include performance appraisal,
merit rating, behavioural assessment, employee evaluation, personnel review, progress report,
staff assessment, service rating and fitness report.
However, the term performance appraisal or evaluation is most widely used. Performance
appraisal is a systematic evaluation of the employee’s present job capabilities and also his
potential for growth and development by his superiors. It can be either informal or formal. The
informal appraisals are unplanned while formal appraisal system is set up by the organisation to
regularly and systematically evaluate employee performance. It reduces the chance of bias and
snap judgement but bound to yield better results.
“Formal appraisal of an individual’s performance began in the Weidymasty (A.D. 221-265) in
China, where an Imperial Rater appraised the performance of members of the official. In 1883,
the New York City Civil Service in U.S.A., introduced a formal appraisal programme shortly
before First World War”.

Monappa and M. S. Saiyadain Douglas Mc Gregor (1957) says – Formal performance

appraisal plans are designed to meet three needs, one of the organisation and other two of
the individual, namely:

(i) They provide systematic judgements to back up salary increase, transfers, demotions or
terminations.
(ii) They are means of telling a subordinate how he is doing, and suggesting needed changes in
his behaviour, attitudes, skills or job knowledge. They let him know ‘where he stands’ with the
boss
(iii) They are used as a base for coaching and counselling the individual by the superior.

What is Performance Appraisal – Objectives

The main objectives of performance appraisal is to secure information necessary for making
objectives and correct decisions on employees. It provides information for personnel decisions
just like – promotion, transfers, demotions, terminations, etc.
Appraisal of managerial performance is very important and a manager is responsible for
achieving the targets of his work unit. A sound appraisal system should include the post-
appraisal interview and interview provides an opportunity to the employee to explain his views
about performance standards.
The main objectives of performance appraisal has been discussed in the following:
(1) It provides feedback to employees so that they came to know where they stand and can
improve their job performance.
(2) It provide a vital database for personnel decisions concerning placements, pay, promotion,
transfer and punishment etc.
(3) It diagnose the strengths and weaknesses of individuals so as to identify further training
needs.
(4) It provides coaching, counselling, career planning and motivation to subordinates.
(5) It helps to develop positive superior- subordinate relation, and thereby reduce grievances.
(6) It facilitates research in personnel management.
(7) It also helps to test the effectiveness of recruitment, selection, placement and induction
programmes.
What is Performance Appraisal – Types of Appraiser: Self-Appraisal,
Supervisors, Peers, Customers/Clients and Subordinates
Analysis of a number of appraisal situations reveals that several alternatives are available for
conducting performance appraisals. The effectiveness of some of these alternative choices
depends on factors such as the capability, knowledge level, objectivity, time availability, and so
on.
1. Immediate supervisor- Common choice, because of his responsibility and opportunity to
guide and observe his subordinate.
2. Immediate supervisor and his boss- Bringing in the immediate supervisor and his boss
might enhance the objectivity of evaluation.
3. Third person along with the immediate supervisor and his boss- The third person can be a
consultant, or a person from within the organization.
4. A group of managers or supervisors- This might help to reduce the immediate familiar with
the subordinate supervisor’s bias and prejudice.
5. Peer-rating- Individual’s work associates participate in the appraisal.
6. Rating by one’s subordinates- This can be effective if subordinates are capable.

What is Performance Appraisal – Role and Importance

In most organizations, appraisals are conducted only once per year. Organizations usually
conduct appraisals in order to improve organizational effectiveness by providing vital
information pertaining to the suitability and capability of its human resource.
Performance appraisal is usually conducted by the organizations for administrative and/or
developmental purposes.

The role and importance of performance appraisal in these areas is discussed below:

1. Human Resource Planning:

Performance appraisal generates significant, relevant, and useful information about the
promotability and the potential of employees. This information is used to assess the
organization’s internal supply of human resources and availability of managerial personnel for
succession planning.
2. Recruitment and Selection:
Evaluation made in performance appraisal can be used to find out the particular areas of
knowledge, skills, and experience possessed by successful performers. This information can be
used to review effectiveness of recruitment and selection procedures and practices so that right
type of candidates can be selected for the right job.
3. Training and Development:
Performance appraisal helps in identifying development needs of employees. This information
can be used to devise suitable training and development programmes to enable employees to
overcome their weaknesses and improve their strengths. Improvement in employees’
performance will bring about improvement in their department’s performance also.
4. Career Planning and Development:
Feedback guidance from reporting officers can enable employees to bring about changes in their
behaviours, attitudes, skills and knowledge, and set realistic goals for themselves. Employees can
also be counselled to develop their potential for particular types of work, keeping in view their
strengths and weaknesses.
5. Compensation:
Information gathered through performance appraisal provides inputs for making decisions
concerning salary administration, financial incentives, appreciations, additional responsibilities,
promotions etc. On the basis of this information, achievers can be rewarded and poor performers
can be given appropriate signals.
6. Employee Relations:
Employees can have a continuous dialogue with their managers for clarifying misunderstandings
and explaining mutual expectations. They can thus be motivated and developed for better
performance and higher productivity. Data gathered through performance appraisal can also be
used for making decisions concerning transfer, demotion, or dismissal.
Sometimes an employee’s performance in one position or under one manager may not be an
accurate indicator of job success. In such cases, a transfer may be called for, and the employee
can be tried in another job or under another manager.
Persistent substandard performance, despite opportunities to improve it, may result in demotion,
or even dismissal. Performance appraisal provides legal and organizational justification for such
decisions.

What is Performance Appraisal – 4 Main Types: Formal Appraisal, Informal

Appraisal, Objective Appraisal and Subjective Performance Appraisal
Performance Appraisal can be categorised into:
Type # 1. Formal Appraisal:
Many organisations adopt the policy of regular appraisal of the performance of their employees.
This helps the management in many ways. Regular performance appraisal reports are tabled
before the bosses, who inter initiates required action.
A permanent and common procedure is adopted for all the employees and their evaluation is
made on predetermined standards. Such an appraisal is made at regular intervals, may be
quarterly, half yearly or yearly and so on. A permanent record of such appraisal is maintained.
It helps the administration in assessing the development. If there is no improvement the
employee is taken to task and if there is significant improvement rather development the
employee is rewarded. Such a policy motivates the employees. Thus a regular and standardized
appraisal is known as formal performance appraisal.
Type # 2. Informal Appraisal:
Contrary to formal appraisal this is done at any moment of time by the immediate supervisor if
he feels it necessary. There is no standardised procedure for this. The supervisor may assess the
performance of any subordinate if he feels necessary. Such appraisal is aimed at assessing the
consistency of a particular employee, in-his performance.
This is done in informal way of discussion, dialogue or communication or constant supervision
of his performance. There is no time fixed for such appraisal. The supervisor gets the feedback
from the employees and thus knows whether he has followed the instructions or whether he
could understand the way to perform a job.
It is always up to the enterprise as to which type of appraisal is adopted. But then both are
supplementary to each other. As such many enterprises adopt both the types. Formal appraisal
enables the management to get regular information and informal appraisal gets them feedback.
This feedback helps the management to formulate policies for human and atmospheric
development.
Type # 3. Objective Appraisal:
Evaluation of performance with a specific object can be termed as objective performance
appraisal. Such an appraisal is aimed at assessing the performance of the workers against some
specific standard. Such standards are based on job analysis and evaluation.
Thus objective appraisal assesses the performance on specific job. It does not include any other
aspect in which his otherwise performance is not considered. Such an appraisal removes
misconceptions regarding the performance on a specific job. Objective performance evaluation
apparently looks to be the best as far as workers performance on a particular job is concerned.
But it is difficult to measure management potential.
If objective appraisal is decided to be undertaken preliminaries right from understanding the job,
then analysing it and afterwards fixing measurement or assessment standards are required to be
done. If such evaluation is required for a number of employees it may consume more time and
naturally more expenditure, in nutshell objective performance appraisal is best for a job but
expensive.
Type # 4. Subjective Performance Appraisal:
Contrary to objective evaluation, subjective evaluation is meant for overall evaluation of the
workers performance. Thus it gives more information to the management. Such evaluation is
aimed at assessing the general performance of the employees, the performance is assessed as
well as evaluated against general standards and not specific standards.
Performance Appraisal Process
1.Establishing performance standards
The first step in the process of performance appraisal is the setting up of the standards which will
be used to as the base to compare the actual performance of the employees.
This step requires setting the criteria to judge the performance of the employees as successful or
unsuccessful and the degrees of their contribution to the organizational goals and objectives. The
standards set should be clear, easily understandable and in measurable terms.
In case the performance of the employee cannot be measured, great care should be taken to
describe the standards.
2.Communicating the standards
Once set, it is the responsibility of the management to communicate the standards to all the
employees of the organization. The employees should be informed and the standards should be
clearly explained to the employees. This will help them to understand their roles and to know
what exactly is expected from them. The standards should also be communicated to the
appraisers or the evaluators and if required, the standards can also be modified at this stage itself
according to the relevant feedback from the employees or the evaluators.
3.Measuring the actual performance
The most difficult part of the Performance appraisal process is measuring the actual performance
of the employees that is the work done by the employees during the specified period of time. It is
a continuous process which involves monitoring the performance throughout the year. This stage
requires the careful selection of the appropriate techniques of measurement, taking care that
personal bias does not affect the outcome of the process and providing assistance rather than
interfering in an employees work.
4.Comparing actual performance with desired performance
The actual performance is compared with the desired or the standard performance. The
comparison tells the deviations in the performance of the employees from the standards set. The
result can show the actual performance being more than the desired performance or, the actual
performance being less than the desired performance depicting a negative deviation in the
organizational performance. It includes recalling, evaluating and analysis of data related to the
employees’ performance.
5.Discussing results [Feedback]
The result of the appraisal is communicated and discussed with the employees on one-to-one
basis. The focus of this discussion is on communication and listening. The results, the problems
and the possible solutions are discussed with the aim of problem solving and reaching consensus.
The feedback should be given with a positive attitude as this can have an effect on the
employees’ future performance. Performance appraisal feedback by managers should be in such
way helpful to correct mistakes done by the employees and help them to motivate for better
performance but not to demotivate. Performance feedback task should be handled very carefully
as it may leads to emotional outburst if it is not handing properly.
Performance Appraisal Methods

1. Traditional Performance Appraisal Methods

Generally, traditional methods of performance appraisal focus on employees’ ability to take
initiative, leverage resources, and perform tasks with innovation and creativity. Moreover,
employees are also evaluated based on their leadership qualities, interpersonal skills,
intelligence, and integrity.
Traditional Methods Of Performance Appraisal
1. Rating Scales Method
It is a well-known traditional method of performance appraisal. As the name suggests, this
performance appraisal method involves the use of a rating scale that spans from 1 to 10. In this
performance appraisal method, employees’ performance is measured against several factors
including their attitude, timeliness, efficiency, and interpersonal skills. 
For example, If an employee gets a low rating then it means they have received negative
feedback, if the scale rating is high let’s say 9 or 10, then the employee has done exceptionally
well. 
⋄ Pros: 
 Helps in assessing employee attributes and how they relate to their current role.
 They are structured and standardized in nature.
 Useful for comparing employees against one another.
 Helps assess salary adjustments.
 Useful in considering candidates for promotion.
⋄ Cons: 
 Responses are open to interpretation.
 The final rating can be deceiving.
 Average results can be difficult to interpret.
 Recent events can influence answers.

2. Checklist Method
The Checklist method is one of the easiest traditional performance appraisal methods. Under this
traditional method of performance appraisal, HR prepares a checklist and forwards it to the
manager. The checklist may include a list of questions (depicting behaviour and job performance
of employees), and the manager has to answer them in just ‘YES’ or ‘NO’ form.
The manager analyzes the question and the employee and answers them according to their
evaluation of the employee. Questions in the checklist carry a numerical value based on their
importance to job performance. Therefore, the appraisal score is calculated by adding up the
scores of all these individual factors.
For example, the checklist may contain a question- “Is the employee helpful to other team
members?” The question may carry a numerical value of 5, so if an employee has been really
helpful to their team, they may get a full score of 5 or if the employee isn’t helpful according to
the manager’s analysis, then they might get 1 or Zero. 
⋄ Pros: 
 Helps managers avoid discrimination.
 Ensures clarity of evaluation criteria.
 Helps the manager to be objective in their reviews. 
 Provides an organized view of the performance. 
⋄ Cons: 
 Doesn’t allow elaborate explanations.
 Time-consuming process.
 Costly to prepare.
 Easy to overlook some important evaluation factors.

3. Forced Distribution Method

This strategy is widely used in large corporations. It is predicted that employee performance
varies widely within an organisation, with some individuals being more productive than others.
As a result, with this strategy, the management must distribute employees based on their
performance over the entire bell curve. Some are exceptional, while others are average, and still,
others are at the bottom of the spectrum.
⋄ Pros:
 Helpful in eliminating the leniency of the appraiser. 
 Highlights future front-line leaders.
 Relatively quick and easy model to understand and implement. 
⋄ Cons: 
 Does not work well for high-performing employees who are introverts in nature. 
 Encourages discrimination among employees.
 Can have a negative impact on innovative employees due to limited categories of
evaluation

4. Critical Incident Performance Appraisal Method

The critical incident technique is a performance review method that examines an employee’s
behaviour in specific circumstances, both in which he did admirably and those in which he could
have improved. A series of methods are utilized to collect data and analyze it. The critical
incident technique involves observing critical human behaviours, abilities, and on-the-job
situations.
Critical Incident Performance Appraisal Method steps:
1. establish individual goals
2. specify requirements/plans
3. collect information/data
4. analyse data
5. determine outcomes
6. formulate solutions
⋄ Pros:
 It aids in the detection of unusual events that might otherwise go unnoticed by other
means.
 This method is inexpensive and gives you a lot of information.
 The viewpoint of the respondent is taken into account.
 Respondents are not compelled to fit within any certain framework.
 There are numerous ways to apply the method, including observation, surveys, and
interviews.
⋄ Cons: 
 Many instances may go undetected or be inaccurate since incident reporting is based on
the respondent’s perception.
 It’s possible that biases will emerge in response to recent events.
 The instances described may or may not be reflective of scenarios that occur on the job
on a regular basis.

5. Essay Method
The management uses this strategy to produce a description of the employee’s behaviour and
performance. In this method, the review description contains all pertinent information, such as
the employee’s mindset, job knowledge, present performance, and potential for growth.
⋄ Pros:
 The essay method is far less rigid and constraining.
 Allows the manager to emphasize practically any significant issue or performance aspect.
 The method is fairly open-ended and adaptable.
 Subjective in nature.
⋄ Cons: 
 It takes a long time and is tough to administer.
 A biassed essay could be written by a manager or supervisor.
 It’s tough to draw conclusions about organisational demands.
 From a business standpoint, it is unprofitable.
 6. Paired Comparison Method
Employees are evaluated using this method based on any single attribute. Each employee is
compared to others on a one-to-one basis, in pairs, based on a particular quality/attribute, for
example, creativity. The formula N (N-1)/2 is used to calculate the number of potential pairs.
While the letter N denotes the number of employees to be appraised. 
⋄ Pros:
 It aids the manager in determining priorities when competing demands on a company’s
resources arise.
 In nature, it is cost-effective.
 It’s simple to pick the most significant problem to address or the solution that will give
you the most benefit.
⋄ Cons: 
 It’s beneficial when the priorities are unclear.
 This method is especially useful when you don’t have any objective data to assess.

7. Field Review Method

This method is based on the supervisor’s assessment of the employee’s performance, behaviour,
and skills. The HR professional invites seniors to respond to questions about the employee’s job
and then evaluates the person based on the feedback obtained from managers. This is an
evaluation conducted by someone outside of the employee’s department.
⋄ Pros:
 Reduces the chances of biased performance reviews. 
 Useful for managerial level performance evaluations.
Cons: 
 Outsiders are generally not familiar with employees’ performance; hence, the review
might be inaccurate.
 Observation of actual employee behaviours is not possible.
 Highly time-consuming process.
 The process is not very employee-friendly. 

Drawbacks of Traditional Performance Appraisal Methods 

These methods are highly subjective. The performance appraisal is dependent on the appraiser’s
judgement, which is subject to favouritism and bias. Because the reviewer has not gotten enough
job training, he is unable to effectively assess the performance of others.
These performance appraisal techniques have several flaws, which include the following:
 1. Halo Effect:
This is one of the major drawbacks of traditional performance appraisal methods. When
appraisers allow one significant attribute to affect their performance evaluation process, the
phenomenon is known as the halo effect. Regardless of the employee’s performance, the
appraiser assigns the same scores to all factors. 
2. Leniency and Strictness:
The appraisers have different tendencies when it comes to rating. Some are more liberal, while
others are more rigorous. The evaluator’s habits mirror their rating of employees. You may have
noticed that a lenient evaluator gives the employees good scores, whereas the stricter one gives
them low scores for their performance.
3. Central Tendency:
When the evaluator lacks appropriate knowledge about the employee and his performance and
the time to devote to the performance appraisal process, he may play it safe and rate all
employees’ performance as average. This propensity is a major flaw in the performance
evaluation system.
4. Personal Bias & Favoritism:
The evaluator’s bias towards employees based on sex, religion, caste, color, or status is fairly
widespread. This makes objective appraisal difficult. The evaluator can be swayed by the
member’s seniority and give him a high rating. Some supervisors want to purposely rate their
subordinates low so that they can outperform them.

How can organizations make their performance appraisal process fair and
inclusive? 
★ Continuous feedback
Gone are the days when annual performance reviews were important for the performance review
process. Today, organizations must focus on holistic performance management. Instead of yearly
reviews, they must focus on weekly, monthly, or quarterly performance reviews. 
★ 360-degree feedback
The 360-degree feedback approach ensures fairness and transparency in the performance review
process. In this process, the employees receive feedback from peers or subordinates. You can
use 360-degree feedback software to exchange constructive feedback. 
★ Pay as per performance
You must reward your high performers not only to motivate them but also other members of the
team. When you appreciate employees and offer the pay they deserve, they feel more productive,
engaged, and satisfied with their work. 
★ Don’t punish instead, uplift
You can use the performance review process as an opportunity to uplift the poor performers in
your organization. So don’t punish people for bad performance as there could be hundreds of
valid reasons for that, instead, you need to have frequent one-on-ones with your employees to
understand their challenges. You can make a difference in their performance by equipping them
with all the necessary resources or help they need to perform better. 
★ Allocate projects based on potential not on experience
As managers, you must also ensure that there is a fair allocation of projects. You must assign
responsibilities to qualified candidates even if it means disregarding the seniority level of an
employee. This way you are giving fair and equal opportunities to all the team members to grow
in their respective fields. 
Modern Methods of Performance Appraisals

Organizations can improve employee performance by using the ideal modern method of
performance appraisal. A smart system for reviewing employee performance can make the entire
experience more successful and satisfying.
To keep employee performance appraisals from turning into meaningless jargon, HR managers
should redesign their traditional performance appraisal methods and experiment with one of
these six modern methods of performance appraisal.
Here’s a closer look at the most popular modern methods of performance appraisals:
1) Management by Objectives (MBO)
Management by objectives (MBO) is an appraisal process in which managers and employees
collaborate to create, plan, organize, and communicate goals to focus on during a specified
appraisal period. Following the establishment of clearly defined goals, managers and employees
meet regularly to discuss their progress and explore the possibility of reaching those targets.
You can use this performance appraisal method to link organisational goals with employee goals
efficiently. Analyzing objectives using the SMART goal setting method can determine whether
the aim you’re setting is specific, measurable, attainable, realistic, and time-sensitive.
Employees are evaluated based on their performance at the end of the review period (quarterly,
semi-annually, or annually). Progress is awarded a promotion and a raise, while failure is dealt
with through transfer or additional training. This procedure typically emphasizes quantifiable
goals, while intangible factors such as communication skills, devotion, etc. are sometimes
overlooked.
2) 360-Degree Feedback

360-degree feedback is a multifunctional performance appraisal system that assesses an

individual by collecting input from the employee’s close circle, including managers, colleagues,
clients, and direct reports. This strategy will not only reduce the bias in performance evaluations
but will also provide a clear picture of an individual’s ability.
This appraisal method has five essential components, which are as follows:
a) Self-appraisals
Employees can use self-appraisals to assess their performance and identify their strengths and
flaws. However, if self-evaluations are conducted without standardized procedures, they can turn
to be unfair.
b) Managerial reviews
Managers conduct performance evaluations as part of the traditional methods of performance
appraisals. These appraisals must contain individual employee reviews provided by managers
and senior managers.
c) Peer reviews
As hierarchies are removed from the organizational picture, peers gain a unique view of the
employee’s performance, making them the most appropriate appraiser. These evaluations aid in
determining an employee’s ability to work effectively with others, take on initiatives and be a
trustworthy contributor. Peer friendship on the other hand, may wind up affecting the final
results.
d) Subordinates Appraising manager (SAM)
This upward appraisal component of 360-degree feedback is a critical and delicate phase. From a
managerial standpoint, subordinates have the most distinctive insight.
e) Customer or client reviews
The client component of this phase might comprise internal customers such as product
users from the organization. Even external clients who deal with individual employees on a
routine basis.
Customer feedback can help better assess an employee’s performance; however, these external
parties frequently do not notice the impact of methods or policies on an employee’s productivity.

Useful For: 
 Improving an individual’s knowledge of their performance and the impact it has on other
individuals.
 Assists in initiating mentoring, counseling, and professional development activities.
 Encourages people to invest in their development and adapt to change.
 Embed regular feedback into the workplace culture to increase engagement.
3) Assessment Centre Method: Employees can have a clear image of how others perceive them
and their influence on their performance by using the assessment center method. The key
advantage of this method is that it assesses an individual’s current performance and predicts
future work performance.
The method’s main disadvantage is that it is a time-consuming and expensive procedure that is
hard to regulate.
Useful For: 
 Increasing a participant’s knowledge, speeding up their mental process, and increasing
employee efficiency
 It is adaptable to diverse roles, capabilities, and company needs.
 Provides information about the employee’s personality traits.

3) Behaviorally Anchored Rating Scale (BARS)

In a performance appraisal system, behaviorally anchored rating scales (BARS) bring forth
theoretical and practical benefits. BARS compares employee performance to specified
behavioral traits that are numerically rated.
Each performance level on a BAR scale is supported by several BARS statements that explain
common behaviors that an employee shows regularly. These statements serve as a yardstick for
comparing an individual’s performance to preset standards relevant to their function and
employment level.
Useful For: 
 Having clear criteria, better feedback, precise performance assessment, and consistent
evaluation is a plus.
 Minimizing construct-irrelevant variance in employee performance ratings with a greater
emphasis on specific, tangible, and verifiable actions
 Eliminating the possibility of biases and ensuring fairness throughout the performance
appraisal process.
 BARS can be used by businesses of all sizes and sectors to evaluate the performance of
their entire staff.
5) Psychological Appraisals
The hidden potential of employees is determined through psychological appraisals. This strategy
is intended to analyze the future performance of an employee rather than their previous work. 
These assessments investigate seven key elements of the employee’s performance:
communication skills, thinking abilities, intellectual characteristics, leadership qualities,
personality traits, emotional intelligence, and other relevant skills.
It is a pretty slow and intricate process, and the quality of results depends greatly on the
individual who manages the procedure.
Useful For: 
 Gather quantifiable, objective data not only about an employee’s performance but also
about their potential.

 Provide a stage to shine and demonstrate their potential to introvert or shy employees.
 Psychological appraisals can be used in large organisations for various purposes,
including leadership training, team building, resolving conflicts, and more.
6) Cost Accounting Method
The cost accounting approach evaluates an employee’s performance by examining the monetary
benefits that he or she provides to the organisation. It is calculated by comparing the expense of
maintaining an employee (cost to the company) with the financial benefits (contributions)
derived from that employee.
When cost accounting methods evaluate an employee’s performance, criteria such as unit-wise
average service value, quality, overhead costs, interpersonal communication, and more are
considered. The disadvantage of the cost accounting method is that it is highly dependent on the
cost-benefit analysis and the reviewer’s recall power.
Useful For:
 Determining the cost and value of an employee’s contribution to the company.
 Managing the overall impact of an employee’s performance on the company’s bottom
line.
 Useful for startups and small enterprises where one employee’s performance can make or
break the company’s success.
Types of Performance Appraisals in HR
Managers aren’t the only ones that participate in an appraisal. It’s more like an exponentially
rising curve where each vertex represents individuals, their colleagues, and supervisors who
provide value to the performance evaluation process and assist them in progressing along the
curve. 
1. The 360-Degree Appraisal
Superiors can evaluate employee performance from multiple sources. Using just one-on-one
feedback from the reporting manager is old school. 360-degree feedback creates transparent
communication, boosts team performance, and promotes self-awareness.
The conventional appraisal techniques are quickly becoming old-school where just one-on-one
feedback from the manager was accounted for. A 360-degree appraisal is a modern method of
performance appraisal where the manager can evaluate an employee’s performance through
multiple sources. Also called a multi-rater feedback. A 360 degree appraisal feedback allows an
employee to receive feedback from not only managers or superiors but also peers, clients, and
other staff members.
A 360 degree appraisal aids by clarifying the role, by defining potential appraisals, also helps in
career planning, leadership, and team building.
2. General Performance Appraisal
A general performance appraisal is routine review of an employee’s operations and contribution
towards a company. Through this regular check, organizations determine the count of employees
who contributed the most towards the company’s success and reward them accordingly.
A general performance appraisal is a well-structured and timely process of measuring an
employee’s work performance against the preset objectives of the job. General performance
appraisal is a subjective evaluation of the employee’s strengths and weaknesses and future
development potential.
3. Technological Performance Appraisal
Because the employees involved have specific skills, this appraisal technique emphasizes
technical performance over any other component of job performance. They are evaluated based
on their abilities and the activities that they do. That’s why the method is called technological
performance appraisal.
Basically, an employee’s technical expertise, skills and capabilities are evaluated. The technical
knowledge of the employee will be given importance over other skills and competencies when
being evaluated for the technological performance appraisal process to identify how sound the
employee technically is.
4. Manager Performance Appraisal
A manager’s performance should be evaluated as well, and this involves on-the-job performance
and relationship management with prospects. In most cases, anonymous surveys are received,
which are subsequently evaluated.
Manager performance appraisal is the assessment of a managers’ performance in the company.
Manager performance appraisal is conducted to raise productivity to an optimum level.
Organizations conduct these to help both managers and the company be aligned with each other
and work towards organizational growth.
5. Employee Self-Assessment
Self assessment performance appraisal is a portion of a performance review that offers
employees an opportunity to self-reflect and consider what their strengths and weaknesses are.
Although employee self assessment appraisal isn’t all that effective since employees feel they
can’t grade themselves accurately. In this method, the contrasts between the self-assessment
form and the one filled out by the manager are reviewed.
They are important for both the professional and personal growth of the employees.
6. Project Evaluation Review
This strategy entails evaluating team members’ performance at the end of each project. It helps
the team to grow as each project progresses.Project evaluation checks the coherence between the
project and the activities that took place to achieve the goal. The results are essential for the
functioning of the monitoring system.
7. Sales Performance Appraisal
A salesperson is evaluated based on his or her ability to sell and the achievement of previously
specified financial targets. Goals set for sales should be practical, and the manager and
employees in charge should map out strategies to achieve them.
You can identify the best strategy for your business by the number of different positions within
it, the amount of time you have to devote to the performance review process, and the goals you
want to achieve.
8. Paired comparison
In a paired comparison system, the manager compares employees with others within the
department. Each employee is compared and the higher performer is given a score.
In this modern method of performance appraisal employees are arranged into pairs, and then
compared. The idea behind this method is to give the employers an idea about work
competencies of the employees on the basis of skill, the time required to execute tasks,
knowledge, etc.
9. Grading system
In a grading appraisal method, managers usually use a numerical (1-5) or descriptive (poor to
outstanding) scale to mark an employee in accordance with some specific areas of their job. As
they’re an easy way to evaluate and develop quantitative data, the rating appraisal method is
quite popular.
10. The 720-degree feedback
 A 720-degree feedback is a modern method of performance appraisal where a 360 degree
appraisal is conducted twice. A pre and post-intervention practice that’s carried out for a
qualified analysis and assessment of employee performance.
Why and how to create performance standards in an organization (plus
examples)
Every job has its own description of what needs to be done when working in that position. In
addition, there are performance standards. They prove how to perform these tasks to do the job
well. So, when evaluating your employees, you’ll compare their performance with predetermined
standards – performance standards. Be sure that these standards are founded on specific
positions, not individuals.
It will guide you through all the details about performance standards, such as:
 the purpose of performance standards,
 the three levels of performance,
 what to consider when establishing performance standards,
 how to create a performance standard, and
 examples of performance standards.

What is the purpose of performance standards?

Before we explore the purpose of performance standards, let’s have a step back and define
performance management.
Performance management is the communication process between employers and employees.
This process also involves giving feedback to the workers. To know how to conduct their job
with success, employees first need to see the performance standards for that position.
The goal of performance standards is to ensure that both employers and employees are on the
same page regarding job expectations. That’s why managers need to provide their new
employees with the performance standards during the first month of employment.
Performance standards also equip employees with specific performance outlooks for every skill.
Furthermore, performance standards foster communication between managers/employers and
workers.
When it comes to evaluations, managers use performance standards as a guideline. Then, they
compare employee performance with this fixed pattern. This way, there’s an equal evaluation for
all employees in the same position.
Regarding performance standards, all workers are equal and should be treated the same way.
According to the U.S. Equal Employment Opportunity Commission, both employees with
disabilities and without it, “must meet the same production standards, whether quantitative or
qualitative.”
Performance standards should be:
 specific,
  achievable,
 easy to understand,
 relevant to the position, and
 easy to measure.
Once an employer or a manager has evaluated the employees, their expectations can be:
Met – if an employee showed adequate performance,
Exceeded – if the performance is beyond well, and
Not met – if the performance is below the performance standards levels.
So, in the case of insufficient performance, the employer or supervisor has to issue
a Performance Improvement Plan (PIP). The purpose of this document is to help an employee
improve his/her performance.
The PIP happens in the last phase of the performance management cycle – the review phase. In
brief, this is the phase when managers track employee performance by conducting evaluations.
We mentioned before that this cycle starts with setting performance standards.
Now, performance management includes three levels within the organization.

What are the three levels of performance?

Performance management can be focused on the entire organization or its departments. Besides,
it can emphasize the performance of individual employees. Thus, there can be three levels of
performance management:
Strategic performance management
The purpose of this level is to achieve overall organizational goals. Thus, this is the highest rank
of using performance management standards in the organization.
To accomplish these objectives, company management strives to answer these questions:
 Does this company have a strategy for achieving its goals? If so, does the company
implement this strategy?
 Is the organization bringing the expected results?
Operational performance management
The intention here is to get operational goals. This level focuses on processes within the
organization, such as projects or activities. Thus, the intent is to find out if these specific
projects/activities are working.
To reach these objectives, company management has to answer the following questions:
 Is each department or project fulfilling its targets?
  Are operational activities aligned with the organizational strategy? If so, how do these
activities promote organizational strategy?
 Are projects or activities efficient enough or should they be changed?
Individual performance management
Finally, this level emphasizes the performance of each employee in the company. This process
begins with setting work goals and standards, reviewing employee performance, and enhancing
learning skills of each employee.
To carry out these goals, company management needs to get answers to these questions:
 How are individuals working?
 How can they boost their performance?
When reviewing employee’s work, performance standards are your point of reference. These
standards are vital because they analyze diverse areas of performance. Let’s take a look at how to
properly determine the performance standards and what to consider when doing so.
What to consider when establishing performance standards?
To ensure that standards are suitable for a particular position, here are four points you should
consider:
 Standards need to be motivational.
 Standards should not be too easy nor too difficult to achieve.
 Let your employees know that you’re analyzing their performance.
 Establish a trial period.
Standards need to be motivational
Having motivational performance standards will make workers more inspired to do their job
better. Besides, if they’re able to see their progress within a project, this will also be their driving
force. Thus, they’ll be more likely to achieve exceptional levels of performance.
As a leader, you can encourage your workers to track their working hours. Employee time
tracking is beneficial to your employees, too, because they’ll be able to review their project
progress. So, they’ll discover what part of the project they have finished, and what still needs to
be done. Moreover, workers will continue with completing their tasks the best they can.
In case you need to monitor who was working on what tasks and for how long, you can use
Clockify as a free employee attendance tracker.
Standards should not be too easy nor too difficult to achieve
If performance standards contain tasks that are too simple, they’ll be too easy to achieve. So,
employees won’t be motivated because they won’t be challenged to finish a particular task.
On the other hand, performance standards should not be too complicated. If they are, workers
will struggle to complete almost every assignment. Therefore, their performance levels may
decline.
But, how do you find the right balance between these two? Be sure that performance standards
should be daring enough. That way, workers will have to search for an ideal strategy to finish
their tasks. Whenever they succeed, employees will feel that they’re working towards
accomplishing their goals. Thus, they will be more enthusiastic about their job
Let your employees know that you’re analyzing their performance
In case there’s a new employee, a supervisor has to inform an employee about performance
standards that regulate his/her position. Likewise, all the other workers need to know that the
company is evaluating their performance.
So, a manager has to be transparent about performance standards. Throughout the year, leaders
should remind employees about these measures. If workers need an explanation for some part of
the standard, managers should provide them with clarification.
Establish a trial period
As a manager, you don’t have to set performance standards by yourself. Let the HR staff help
you write down these measures.
Aside from the HR team, you can also include your team members as well. This step is crucial
because your employees may have some concerns about the current measures. If so, adjust these
parts of the performance standard.
Then, you should start testing these new measures by setting a trial period, which can last from
six to eight weeks. This way, you’ll get straightforward feedback from your employees. Once the
trial period is complete, ask your workers if these standards were suitable for them. Again, if
there are any current issues, be sure to slightly modify the measures.
Including your employees in creating performance standards will boost trust between you and
them. Moreover, when workers take part in such a process, they’ll feel like valued members of
the company. Plus, this will increase employee productivity, too.

How do you create a performance standard?

Let’s say that you and your team want to create a new performance standard for several positions
within the team. If you’re still unsure how to start and what requirements you should cover, here
are a few simple steps to ease this process.
1. Focus on the position, not individual
Remember that measures you’re writing should be about a position, not an individual. So, if
there are four employees in the same position, the performance standards for them should be the
same.
If more than one employee performs the same task, standards should be identical for conducting
this particular task. This rule applies even if these workers are in diverse positions within the
company.
 2. Decide what tasks should be included in the standard
You shouldn’t incorporate every assignment into the performance measures. Determine what
tasks are the most important for each position. Then, write performance standards only for these
tasks. By choosing the most significant ones, you’ll have a brief standard.
3. Choose parameters that make a performance successful
To perform a job successfully, employees must meet particular criteria. Here are some indicators
of an effective performance:
 precision,
 conducting job duties on time,
 customer satisfaction,
 showing signs of leadership,
 being productive,
 showing initiative,
 showing creativity, and
 quality of work.
But, there’s more. An employee with the beyond-expectations performance will present qualities
such as:
 professionalism,
 constantly following professional protocols,
 their performance is constantly improving,
 always performing their best,
 being meticulous,
 having visionary ideas and solutions, and
 expressing their own opinions.
Performance standards always have to be clear and specific, so employees could easily work in
line with these standards.  If you want to evaluate how individuals or teams are performing, you
can also do this with Key Performance Indicators (KPI).
Generally speaking, KPI can help you find out how your company is performing and if it’s going
towards achieving its goals. As you can imagine, all workers need to align their performance
with the company’s objectives. Plus, they need to do their job following performance standards.
But, what happens when an employee presents inferior performance, below the acceptable
standards? The above-mentioned Performance Improvement Plan is one of the solutions.
Before starting with this plan, first, you’ll need to decide how many errors are too many. For
example, an employee can have a performance below the suitable levels twice. But, if this
happens again, you may give him/her an “Improvement needed” rating.
You may have a different plan for setting error rates. Whatever you choose, just stick to that
plan.
Create standards for solid performance first, then the others
When creating performance standards, begin with positive aspects first. So, you can start by
writing down the qualities of a solid performance. Then, continue with the qualities of the above-
expected performance.
Once you have these two categories, focus on indicators that are below the solid levels. You can
use phrases like this:
 An employee proves a solid performance when…
 An employee proves an above-expected performance when…
 An employee proves a below-appropriate performance when…
The in-depth explanation for each sentence will depend on the employee position.

What are the examples of performance standards?

Performance standards can vary depending on the position and job description. The only thing
that’s common to all performance standards is that they demonstrate how one’s job should be
done well.
Performance standards for teachers
Let’s find out what performance standards would look like for teachers.
As you can see from the table above, each measure has an in-depth explanation. So, every new
teacher will have to review these standards in the first month of employment.
The purpose of these measures is to find the proper ways of presenting the curriculum to the
students. To do so, teachers can use all available resources, so that the students can comprehend
everything with ease. Besides, teachers have to maintain positive relationships with students’
parents or guardians.
Performance standards for administrative assistants
Here’s an example of performance standards for administrative assistants.

When it comes to administrative assistants, their performance standards include supervising

support functions, arranging correspondence, and ensuring that all files and databases are well
organized and updated. In addition, administrative assistants need to make sure that travel
arrangements are within the budget and that travel documents hold accurate information.
Performance standards match with company’s goals
One of company’s objectives is to improve customer service. Let’s take a hotel as an example of
this company. The first person you see when you enter is a receptionist. Naturally, a
receptionist’s responsibility is to greet visitors. But, how the receptionist will greet visitors is
what matters. To enhance customer service, the receptionist has to be friendly and welcome
visitors with a smile. Plus, the receptionist needs to provide them with as much information
about the hotel as they need. Moreover, if visitors have any concerns, the receptionist has to find
a way to solve these issues. By following these performance standards, the receptionist will
present excellent performance and achieve the company’s goal.