Performance appraisal methods differ according to an organisation's size, number of employees and employee position. Common performance appraisal methods include graphic rating scales, management by objectives, 360-degree feedback and forced distribution. Each performance appraisal method comes with its own advantages and disadvantages; however, the effectiveness of each method depends largely on how frequently managers provide ongoing feedback to employees and how managers conduct performance appraisal meetings.
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Graphic Rating Scales
Production-oriented work environments operate at a frenetic pace, and because of this managers of large departments often do not have the time to devote to lengthy, narrative-format performance appraisals. The answer to measuring performance for large departments with little time to spare is a graphic rating scale. Graphic rating scale performance appraisals contain performance standards, or expectations, for each job task. Managers evaluate employees using a numerical scale and add the total to arrive at an average rating for the employee's overall job performance. This performance appraisal method offers precision and ease, particularly when assigning wage increases. Compensation structure tied to precise ratings eliminates much of the subjectivity and guesswork in determining raises and bonus amounts.
Management by Objectives
Aligning individual employee goals and organizational goals is relatively easy using a management by objectives (MBOs) performance appraisal method. Managers and employees work together to identify employee goals, the steps necessary to attain each goal and the time and resources required for reaching milestones. Benefits of this performance appraisal method include the manager-employee open dialogue and their mutual agreement on goals and objectives. MBOs also provide assurance that employee tasks are relevant to the job and congruent with the company's expectations and goals. Frequent interaction is required as a part of monitoring progress for MBOs -- it's much simpler to review quarterly milestones and readjust the employee's goals accordingly.
Companies that use 360-degree feedback realise the importance of well-rounded assessments and varied perspectives when it comes to evaluating the performance of front-line employees as well as managers and directors. In 360-degree feedback appraisals, employees are evaluated by others with whom they have regular interaction in the workplace, regardless of position, level or status. Workers evaluate managers and directors in the same manner directors and managers evaluate workers. Some workers are not accustomed to conducting employee appraisals; therefore, training is an essential step in this performance appraisal method. In companies that use 360-degree feedback, the human resources staff provides training on how to give meaningful, objective feedback that can be helpful in constructive feedback.
The forced distribution performance appraisal method is not without its critics; however, it's a straightforward approach to evaluating performance and limiting the power that nonperformers have in the workplace. Employers who use this method are usually concerned about maintaining productivity and engagement, because the forced distribution ranking method provides financial rewards and motivation for top performers. Managers who utilise forced distribution appraisals determine which employees demonstrate performance and commitment that earn them ranking in the top 20 per cent of the workforce. Average performers constitute roughly 70 per cent of employees, and poor performers make up about 10 per cent of the workforce. The bottom 10 per cent of employees -- poor performers -- are usually terminated or voluntarily resign. Eliminating poor performers frees up time to develop average performers and seek qualified applicants to fill the slots left open by departing employees.
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- Harvard Business School: Forced Ranking: Making Performance Management Work; Dick Grote; November 2005
- University of California, Berkeley: Performance Appraisal (Negotiated Approach); Gregorio Billikopf; 2001
- Encyclopedia of Business, 2nd Edition: Employee Performance Appraisals
- Explore HR: Seven Roles of Managers in the Performance Review Meeting