What are the traditional and modern method of performance appraisal?

Several methods and techniques are used for evaluating employee performance. They may be classified into two broad categories :
a) Traditional Methods
i. Confidential Report
ii. Free Form or Essay
iii. Straight Ranking
iv. Paired Comparisons
v. Forced Distribution
vi. Graphic Rating Scales
vii. Checklist Method
viii. Critical Incidents
ix. Group Appraisal
x. Field Review

b) Modern Methods
i. Assessment Centre
ii. Human Resource Accounting
iii. Behaviourally Anchored
iv. Rating Scales
v. Appraisal through MBO
vi. 360 Degree Appraisal

a) Traditional Methods

i. Confidential Report
• Used in most government organizations.
• A report is prepared by the employee’s immediate superior which covers the strengths and weaknesses, main achievements and failure, personality and behavior of the employee.
• It is descriptive in nature
• Used mainly used for promotions and transfers of employees.
• Employee is not provided with the feedback. Therefore the employees never get to know about his strengths and weaknesses.
• The method focuses on evaluating rather than developing the employee.

ii. Free form or Essay
• The evaluator writes a short essay on the employee’s performance on the basis of overall impression.
• The description should be factual and concrete.
• The drawback is that the method may involve biasness as evaluation is not based on specific performance dimensions related to the job.
• Another drawback is that quality of appraisal depends on the writing ability of the evaluator rather than on employee performance.

iii. Straight Ranking

• In this method, the superior ranks his or her subordinates in the order of their merit, starting from the best to the worst.
• Straight ranking is one of the oldest and Simplest methods.
• The ‘how’ and ‘why’ are not questioned, nor answered.
• The major drawback is that ranking of individuals having varying behaviour patterns or traits is difficult especially when a large number of persons are to be rated.
• The method only indicates how a person stands in relation to others in the group but does not tell how much better or worse he is than another.

For instance
If five persons A, B, C, D , E , F and G are to be ranked, the ranking may be as follows:

Employee

Rank

A

7
B

5

C

2
D

1

E

3
F

4

G

6

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As a part of an organization, each employee is looking to grow in terms of status, finances and, skills. Over the past decade, companies have realized the importance of having a performance appraisal system for promotion and compensation decisions. However, most companies and employees are unsatisfied with the existing annual appraisal methods.

Did you know? 45% of HR managers believe the yearly reviews do not provide a complete picture of an employee’s performance.

Employees today are more self-aware and looking for ways that help them cultivate their skills and improve in real-time. For this, companies need to adopt a more hands-on approach to offer regular constructive feedback to employees. More than 94% of employees in a survey preferred to receive real-time feedback on their performance. To provide a more real and unbiased system for performance evaluation, there are five modern methods of performance appraisal that can be used.

  •         Management by Objectives (MBO)
  •         360 Degree Feedback Method
  •         Assessment Center Method
  •         Human Resource Accounting Method
  •         Behaviorally Anchored Rating Scale (BARS) Method

These methods are effective in evaluating the qualitative and quantitative aspects of an employee’s performance. These methods should be implemented as a part of your digital performance management system to ensure a higher rate of success and derive maximum benefits. 

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Table of Contents

1

  • Introduction
  • Improve your employee engagement in less than two minutes
  • Five Modern Performance Appraisal Methods
  • 1. Management by Objectives (MBO)
  • 2. 360-Degree Feedback Method
  • 3. Assessment Center Method
  • 4. Human Resource Accounting Method
  • 5. Behaviorally Anchored Rating Scale (BARS)
  • Conclusion

Introduction

Edwin B. Flippo defines Performance Appraisal as “a systematic, periodic and so far as humanly possible, an impartial rating of an employee’s excellence in matters pertaining to his present job and his potentialities for a better job.”

In any organization, an employee is always looking for an opportunity for growth in terms of position and financial compensation. To ensure that each employee is given an unbiased opportunity to grow, organizations rely on Performance Appraisal methods.

Performance Appraisal is one of the most crucial processes in an organization. Not only does it help in evaluating the promotion and salary of an employee, but it also helps to gauge their skills, strengths and, shortcomings. However, companies seldom benefit from traditional annual performance appraisal methods.

The most important factor that current appraisal methods fail to accommodate is being continuous and consistent in review of employee performance. Yearly appraisals lack a continuous communication system to offer timely constructive and actionable feedback to employees. During annual appraisals, employees lack a chance to rectify or improve on their performance basis the feedback received. In fact, a survey found around 24% employee consider leaving their jobs due to inadequate feedback from their managers.

To ensure that they benefit from performance appraisal, companies need to adopt a modern and actionable method for appraisal. Let’s look at the top five modern methods of performance appraisal.

1. Management by Objectives (MBO)

In this method, managers and employees collaborate together to identify, plan, organize, and communicate objectives. This is usually for a specific appraisal period and objectives are validated using the SMART (Specific, Measurable, Achievable, Realistic & Time-sensitive) method.

After setting clear goals, managers and employee interact periodically to discuss the feasibility of achieving set objectives and the progress made. These measures of progress help analyze the contributions of an employee at the end of the review period. Success is rewarded with appraisals like salary hike or promotion, whereas others are re-evaluated for further training.

Pro: Success is measured on tangible and measurable goals with constant interaction between manager and employee.

Con: Intangible aspects like interpersonal skills are not considered.

Ideal for: Businesses of all sizes, evaluation for top-management positions like directors, executives, etc.

Used by: Retail giant Walmart extensively uses the MBO method for managing the performance of its employee across all levels.

What are the traditional and modern method of performance appraisal?

2. 360-Degree Feedback Method

Considered a multidimensional method of performance appraisal, 360 degree feedback is gaining popularity lately. The method focuses on collecting feedback from everyone an employee interacts with like managers, customers, peers, etc. When data is collected from multiple sources, the chances of a manager’s bias affecting the appraisal are eliminated. Plus, it offers a clearer picture of the employee’s competence in terms of work.

Businesses understand that employees seek unbiased and objective feedback on their performance to stay motivated and engaged. A continuous 360 degree digital feedback method opens additional channels of feedback for the employee. The objective evaluation is seen as a fair evaluation and encourages the employee to improve their performance based on the appraisal. In fact, 8.9% greater profitability is seen when managers are offered feedback on their strengths.

Pro: Gives a clearer and unbiased review of the employee’s performance.

Con: Outside sources like customers may not understand how to provide constructive feedback.

Ideal for: Is suitable for businesses of all types. The private sector can especially benefit from this method.

Used by: RBS, G4S are some of the top companies employing 360 degree feedback system for appraisal.

What are the traditional and modern method of performance appraisal?

3. Assessment Center Method

Introduced by the German Army in the 1930s, the concept of assessment center has been revamped to suit the current business scenario. The employees are assessed based on their performance like social-stimulating exercises like role-playing, decision-making, informal discussions, etc. The assessment evaluates the performance of employees to identify future leaders and managers.

The effectiveness of the Assessment Center Method allows employees to get a clear picture of their own performance and how others observe them. The impact of other’s perspective on their performance can also be realized from these exercises. It is easier to evaluate the current performance of an employee and also predict future performance.

Pro: The method can be tailored according to need, role, position, or objectives and give insight into an employee’s personality.

Con: Can be costly and, time-consuming.

Ideal for: Manufacturing, service-oriented, educational and consulting firms.

Used by: Philips and Microsoft use assessment center method to identify future leaders in their organization.

What are the traditional and modern method of performance appraisal?

4. Human Resource Accounting Method

Also known as Human Resource Cost Accounting Method, it is used to evaluate an employee’s performance as per the monetary benefits they yield from the organization. This means the performance of an employee is compared against the salary & other costs the company pays to the employee.

The cost of retaining an employee in regard to their contribution is evaluated to get the cost of that employee for the organization. This method of performance appraisal considers factors like work quality, overhead cost, unit-wise average service value, interpersonal skills and, so on. The idea is to analyze how the contributions compare with regard to cost (recruiting, hiring, training and development) benefit the organization. In this method, the company appraises employees on the basis of cost to the company and the value they offer.

Pro: It is effective to measure the value an employee brings to the organization.

Con: There are no certain guidelines to define the cost and value that an employee offers. It may vary for each evaluator.

Ideal for: Startups & small businesses where each individual employee’s contribution holds significance for the company.

What are the traditional and modern method of performance appraisal?

5. Behaviorally Anchored Rating Scale (BARS)

In this modern method of performance appraisal, both the qualitative and quantitative aspects of an employee are evaluated. BARS compares an employee’s performance with specific behavioral examples that are assigned a numerical rating. As per employee’s role and job-level, BARS has a set of predetermined standards called BARS statements. These statements are used as yardsticks to measure the performance on each BARS scale level.

BARS sets typical workplace behaviors as per a job role and evaluates an employee’s performance in comparison to these set standards. How an employee should behave in any given situation (critical incidents) is measured as per the expected behavior. The performance appraisal with BARS provides more accurate and unbiased results.

Pro: BARS sets clear standards and provides accurate and consistent performance evaluation that includes both the qualitative and quantitative aspects of an employee.

Con: Can be time-consuming if the process is not automated with a performance management system.

Ideal for: Businesses of all sizes and depth for evaluating entry-level to top management performance.

What are the traditional and modern method of performance appraisal?

Conclusion

Organizations understand the importance of providing performance appraisal to employees. However, it sometimes neglect that employees are also humans and require guidance to stay motivated and improve. In the coming years, performance appraisal will become more human-centric. That means the human aspect of the manager-employee relation will be at the forefront.

A futuristic approach to your performance management system and performance appraisal can help establish a pro-active working environment. When you adopt a more realistic and human approach to judging your employee performance, they will be more satisfied with their work. And satisfied employees work to their best ability and contribute towards the organizational success.

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What are the traditional methods of performance appraisal?

Generally, traditional methods of performance appraisal focus on employees' ability to take initiatives, leverage resources, and perform tasks with innovation and creativity. Moreover, employees are also evaluated based on their leadership qualities, interpersonal skills, intelligence, and integrity.

What is the difference between traditional method performance appraisal and modern performance appraisal?

The key difference between the traditional methods and the modern methods of performance appraisal is that traditional methods of appraisal are more work-oriented or goal-oriented and does not pay attention to employee's other strengths, whereas the modern method of performance appraisal focuses on employee's ...

What is the one of the modern method of performance appraisal?

Modern methods of performance appraisal include 360 degree feedback, management by objectives (MBO), psychological appraisals, and the behaviorally anchored rating scale (BARS), to name a few.

What are the 5 performance appraisal methods?

5 Modern Methods of Performance Appraisal.
Management by Objectives (MBO).
360 Degree Feedback Method..
Assessment Center Method..
Human Resource Accounting Method..
Behaviorally Anchored Rating Scale (BARS) Method..