Employee performance evaluation is essential for organizations that strive to increase employee productivity and improve overall success. Over the years, various performance appraisal methods have been used, some more useful than others to meet modern demands. Let’s look at the definition of performance appraisal before exploring modern ways.
What is performance appraisal?
Employees’ work performance is regularly evaluated according to the organization’s eligibility requirements. Performance appraisal usually involves both the core competencies required by the organization and the specific competencies of the employees for the job.
The evaluator, often a supervisor or manager, will provide the employee with constructive, actionable feedback based on the evaluation. It gives the employees the direction to improve and develop their work. Based on the type of feedback, performance appraisal is an opportunity for the organization to identify employee achievement and future potential.
Types of Modern performance appraisal methods
With the proper performance appraisal method, organizations can enhance the performance of employees in the organization. A suitable employee performance review method can make the whole experience effective and rewarding.
Objective Management (MBO)
In this approach, managers and employees work together to identify goals for success, plan, organize, and communicate. The manager identifies to achieve the desired objectives, giving the employee a key area of responsibility the results expected from them. In regular TouchPoint meetings, managers and staff discuss progress made. The employer can then use this measure of progress to measure employee contribution levels.
While helpful in determining productivity rates, this process usually emphasizes career-giving and tangible goals. So, intangible aspects of employee performance, such as mutual skills or job commitment, are often overlooked.
Critical event method
In this method, the employer evaluates the employee based on specific events, known as “critical events,” in which the employee either succeeded immensely or failed in any task. Throughout the process, the evaluator maintains a digital or physical journal in which they store information from different events.
This process, although manually demanding, is helpful for the personal growth of employees. By keeping a detailed record of both the optimistic and opportunistic milestones of an employee’s career path, employers can provide detailed information in their feedback, improving future growth prospects. These metrics can be reviewed immediately during the scheduled progress / 1: 1 meeting.
This method is beneficial when determining employees ‘hidden potential because it focuses on evaluating employees’ future performance rather than the results of past work. In this performance evaluation method, qualified psychologists conduct various tests on the staff, including in-depth interviews, psychological tests, and private discussions. These tests aim to identify employees’ emotions, intelligence, and other related qualities that may affect their future performance.
Although this method is in-depth and intuitive, it can be a slow, complicated and expensive process. Further, the quality of the results depends on the psychologist administering the process and the various external influences that may affect the employee during the test (e.g., personal stress-related incidents), so the results may sometimes be inconsistent.
HR (Expenditure) Accounting Method
The cost accounting method involves the analysis of employee performance from the financial benefits to the company. These measurements are usually obtained by comparing the cost of retaining an employee with the economic benefits (contributions) determined by the organization from that particular employee.
Many factors are considered in this performance appraisal method, including unit-wise average service value, quality, overhead cost, correlation, etc. However, its primary disadvantage is its high reliance on price and quality of profit analysis, as well as the memory of the reviewer.