How effective are performance appraisals in your organisation?
According to SHRM, only 1 in 10 human resources professionals consider formal performance appraisals to be accurate. Similarly, 95% of managers are dissatisfied with the process. Sound familiar?
Yet, performance appraisals are full of unfulfilled potential. Essential to any performance management strategy, appraisals can be a useful step in employee development and achieving organisational goals.
So, what are the best appraisal methods your organisation should be using? In this article, we'll weigh up the pros and cons of some of the common and less-common performance appraisal methods to help you decide which types are best for your organisation.
One of the simplest methods used in performance appraisals, behavioural checklists are lists of behaviours where the manager can tick off the ones that the employee shows. These usually only offer 'yes' and 'no' options although some of these checklists might have a multiple choice format. The purpose of this method of performance appraisal is to be a quick and simple assessment of employees which can be easily compared to other team members or to an individual's past results.
Pros of behavioural checklists
Offering just 'yes' and 'no' boxes to tick, the behavioural checklist method is simple, quick to complete, and very clear. It's a great way to get an overview of an employee's behaviours in their appraisal. Moreover, it can be adapted easily to specific roles, ensuring that the behaviours are applicable to the employee in question. It's no surprise that these are common in the performance appraisal process.
Cons of behavioural checklists
The simplicity of this method of appraising employees is also its downfall – the checklist format leaves little room for detailed analysis. Unlike the ratings scale, the manager can only answer yes or no to each behaviour, which can be damaging to employees' motivation because this absolute nature doesn't recognise smaller amounts of progress.
As a result of this limitation, the behavioural checklist method for measuring employee performance is best used as a starting point, not the complete performance appraisal. Because it's quick and easy, the checklist can form the beginning of the performance review, after which the manager and employee go on to discuss particular aspects in more detail and set relevant goals.
Also called the graphic rating scale, this method of performance appraisal differs from the behavioural checklist because the manager evaluates an employee's performance against a set of weighted criteria. Instead of a 'yes' and 'no' tick box, a rating can be provided to give a more accurate and nuanced measure of the employee's performance in various areas. The weighted criteria allow an employee's score to be calculated at the end of the review.
Pros of ratings scale
The ratings scale method is extremely versatile, allowing for the measurement of employees on a range of criteria ranging from behavioural traits, leadership skills, specific job tasks, and more.
Additionally, the nuance afforded by a rating system instead of a simple 'yes' or 'no' makes it easier to discuss employee progress and set goals. While receiving a 'no' on a behavioural checklist may de-motivate employees, receiving a rating slightly better than in their previous performance appraisal can be a great way to keep employees engaged in their goals.
These different areas can also be weighted in accordance with their relevance to the individual and their job role. The weighting of criteria makes this performance review method fairer, ensuring that a low score in a less important area doesn't bring down their entire overall score.
Cons of ratings scale
The ratings scale is a numerical system and providing an overall score can be detrimental to employee motivation, especially if they are uncertain what constitutes a 'good' or 'bad' score.
Furthermore, the ratings scale method can be time-consuming for managers who need to be able to justify the rating given for each criterion.
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The ranking method of performance appraisals is one of the older techniques and involves using a set of chosen criteria to measure how different employees compare to each other. This allows all team members to be ranked from the least to most productive.
Pros of ranking
Advantages of using this method to measure performance include that it is quick, relatively simple, and doesn't take a lot of time. When each employee is ranked, it's easier for managers to make decisions about promotions, compensation, and even contract terminations. These advantages make it a popular technique among managers who want to complete performance appraisals quickly.
Cons of ranking
The key disadvantage of the ranking method for performance appraisals is that it fails to account for individuals' differing skills, personalities, and behaviours. Every employee is different and that uniqueness is something to be celebrated rather than ignored in an overly simplistic ranking. Creating a ranking based on productivity alone fails to account for individuals' different abilities and future potential.
Instead of using a numerical ranking, we recommend using the 9 box grid to categorise employees as part of your performance management efforts. Instead of assigning employees a number in a ranking, the 9 box grid uses two axes: current performance and future potential. This allows you to see at a glance how employees compare to each other while also taking into account their potential for future development.
Also sometimes called the essay appraisal method, the written report technique involves managers writing a detailed and extensive review of an employee's performance. The report will evaluate various aspects of an employee's roles and behaviours and will illuminate any problem areas with strategies for improving performance.
Pros of written reports
This style of performance appraisal necessitates a lot of attention and reflection from the manager, ensuring that they are fully engaged in the performance appraisal process. This means giving careful thought to performance improvement strategies before meeting with the employee and setting goals with them. As a result, this method tends to be very in-depth and personalised to each individual employee. It is flexible and can be adapted to the needs of the employee and department.
Cons of written reports
The key downside of this performance appraisal type is that it is time-consuming and energy-intensive, requiring a lot of effort from managers. For large teams or busy managers, this can be far from ideal. Plus, the effectiveness of the method is dependent on managers' written communication skills. Managers may need to be given training on how to write performance review reports or use a template.
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The self-assessment or self-evaluation performance appraisal method encourages employees to reflect on their own performance. Often, employees are asked to evaluate their performance against a set of criteria before the appraisal. Then, in the appraisal with their manager, their evaluation can be used as a prompt for discussions and goal setting.
Pros of self-assessment
One of the biggest advantages of employees assessing their own performance is that this prepares them for the appraisal by encouraging them to think critically about their past performance. Encouraging them to think carefully about their performance ahead of the review means that they come to the appraisal with a more open mind and a fresher perspective on their work. This can make team members more open to feedback and proactive in setting new goals for the future with their line manager.
Moreover, the self-evaluation method can also spark productive dialogue within the performance appraisal and make it feel more collaborative. Instead of the manager delivering a speech or written evaluation of the employee's progress, the appraisal becomes a two-way discussion. This encourages employees to take more ownership over the performance management process.
Finally, the benefits of self-appraisal in performance management extend far beyond the appraisal itself. With a culture of self-evaluation, employees are encouraged to think more critically about their day-to-day performance.
Cons of self-assessment
On the other hand, one downside of self-evaluation is that it is highly subjective, relying on the employee's one-sided perception of their work. Some employees may rate themselves overly positively without outside perspectives that balance their perception. Other employees may rate their performance more negatively, which can contribute to feelings of impostor syndrome or anxiety. This can even lead to lowered performance as a result.
Because of the personal and reflective nature of self-assessment, it's easy for fundamental attribution error to creep in. This is a cognitive bias where individuals assume that their own actions are the result of uncontrollable external factors, while also believing that other people's actions are attributed to their personality or innate character.
For example, an employee may believe that they are a punctual person, showing up to meetings late only as a result of a delayed train or other unavoidable circumstances. In contrast, when their co-worker shows up late, they may think it is because this person doesn't care about being on time for the meeting.
Fundamental attribution error can be common in self-appraisals, which is why it's important to always pair this performance appraisal method with feedback from managers, too. Bringing balance to the evaluation, a dialogue between employee and manager about the content of their self-evaluation is a great way to prompt introspection about the employee's own biases towards their performance and their colleagues.
360 degree feedback
360 degree feedback involves feedback from other employees as well as a manager, giving a wider perspective on the employee's performance.
Pros of 360 degree feedback
360 degree feedback can be more comprehensive and accurate than feedback only provided by a manager, and therefore it can provide a new and better perspective on an employee's work. By incorporating feedback from an employee's co-workers who are on the job alongside them every day, it's possible to get a clearer picture of their performance than if feedback was only from their direct manager.
Another benefit of this method is that it contributes to a culture of employee recognition and peer-to-peer feedback within your organisation. When employees are comfortable providing feedback for 360 degree performance reviews, they also are more likely to be comfortable sharing recognition and positive feedback with co-workers in their day-to-day jobs. This can create a more supportive company culture and do wonders for employee engagement.
Cons of 360 degree feedback
Of course, there are also some downsides to this method of measuring employee performance. The biggest drawback is that the feedback may not be very accurate or useful – the likelihood is that many employees will only provide generalisations and these can be unhelpful for specific goal setting. Moreover, employees may struggle to provide constructive feedback to their colleagues.
Consequently, it's essential that HR teams implementing 360 degree feedback provide some training in constructive feedback giving for all employees, not just managers.
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Management by objectives
Management by objectives or MBO is a performance management technique laid out by consultant Peter Drucker in 1954 which continues to be used today. The idea behind this appraisal style is that the manager and employee collaborate on defining goals for the employee and planning how to achieve them. Then, they review progress frequently throughout the year.
Pros of management by objectives
Management by objectives is a forward-looking approach to performance management which allows managers and employees to collaborate on setting goals and making progress towards them. With frequent reviews, this is a hands-on process for managers which allows them to provide the support and training that employees need to meet development goals.
Employees are heavily involved in setting goals in this performance appraisal strategy, which can be beneficial. In fact, one Gallup poll found that employees are 3.6x more likely to be engaged in their work when they are involved in setting their goals.
Furthermore, the MOB method aligns individual goals closely with the wider organisational goals. Not only does this keep employees on track, but it can also contribute to employee engagement and satisfaction in their roles as they understand how their work contributes to business success.
Cons of management by objectives
The main downside of management by objectives is that it can be time-consuming and labour-intensive to achieve success. It requires frequent check-ins throughout the year to measure employees' progress towards goals and often also necessitates additional training. For success with MOB, it's important that all goals set are SMART (Specific, Measurable, Achievable, Relevant, and Time-bound).
Similar to the ranking method, paired comparison is a type of performance appraisal where the manager compares different employees against a set of criteria. The traits compared depend on the organisation, department, and performance goals. For example, a manager may choose to compare employees on traits such as listening skills, time management, creativity, and leadership.
Pros of paired comparison
Compared to the ranking method, the paired comparison technique can be easier and more accurate because each employee is only being compared to one other instead of the whole team.
Cons of paired comparison
Unfortunately, this performance appraisal format can be time-consuming and ineffective in large organisations. It doesn't provide much nuance into the reasons behind differing employee performance and therefore makes it harder to create strategies and set goals for individuals.
From self-assessment and 360 degree feedback to management by objectives, we're firm believers that the most effective performance appraisal methods take a nuanced and proactive approach to performance measurement. When managers, HR, and employees use a collaborative method for performance appraisals, employees are more likely to feel engaged in the process and motivated to work hard towards their goals.
So, where should you start with improving the effectiveness of performance reviews? HR performance management software is a great place to begin. Facilitating a collaborative, continuous process, XCD performance management software has a range of features that can take your performance reviews to the next level:
- Real-time analytics support performance reviews with data
- Discrete contributions from employees and managers to performance review documentation allows them to take ownership of the process.
- Personalisable performance review forms allow the process to be tailored to different roles, personalities, and departments.
- Automated alerts remind employees and managers to participate in the process, reducing wasting of HR's time chasing for completion.
Can performance management software actually boost performance? Absolutely, according to B.Braun Medical, one of our clients who saw a 10% increase in performance following implementation.
To find out more about supporting your performance appraisals with human resources software, click here to book a demo.