A Smart HR’s Guide to Modern Employee Performance Appraisal Methods


November 9th, 2018 Performance Management  

The employee performance appraisal process is crucial for organizations to boost employee productivity and improve their outcomes. But although performance management is super important, it’s rarely put to good use. Many companies don’t put in their best effort to pick the best perfect performance appraisal method, which is why only 55 percent of employees believe theirs is effective.

A growing number of HR professionals report that existing performance appraisal methods fail to internalize employee performance results. In fact, performance appraisals are nothing more than an empty buzzword in some industries–just a formal way for companies to show that they have a standard procedure in place to measure individual competitiveness.

Performance Appraisal Raw Facts

Typically, the HR department runs an employee appraisal processto figure out how well employees are engaged with their work and what perks can better the chances their success. Statistics, however, reveal that 48 percent of companies don’t do anything to measure improved productivity.

The number is shocking, especially considering the benefits of performance appraisals.

69 percent of employees say that they would work harder if their efforts were recognized. The same survey reports that 57 percent of these workers aspire to receive constructive feedback in their employee performance appraisal. Similarly, 72 percent employees are confident that their actual performance would improve if they were given more frequent employee appraisals.

Studies show that more regular feedback leads to a 14.9 percent reduction in employee turnover rates. This is backed up with the finding that 43 percent of highly engaged employees get a regular performance appraisal.

These numbers paint a rather convincing picture about the importance of performance appraisals. In order to benefit from all of its positive impacts, however, a company will have to do employee appraisal in the correct way.

The Need for Modern Performance Appraisal Methods

Traditional methods of performance appraisals such as annual performance reviews suffer from major limitations since they focus more on measuring past performance rather than improving future work. Modern performance appraisal methods:

  • Define goals clearly
  • Provide real-time feedback
  • Enhance employee performance
  • Spot training and development needs
  • Offer insights on counter-productive tasks
  • Improve employee engagement and retention
  • Align individual performance with business goals
  • Transform the workforce into a strategic advantage

Traditional and Modern Performance Appraisal Methods

Performance appraisal methods have their own set of strengths and weaknesses. No appraisal method is accepted universally by all organizations. But, most organizations accept Strauss and Sayles classification of performance appraisal methods.

In their book named Managing Human Resources, George Strauss and Leonard R. Sayles have classified performance review methods into two categories: traditional methods and modern methods. Listed below are the various methods that belong in those two categories:

Traditional Performance Appraisal Methods Modern Performance Appraisal Methods
  1. Ranking Method
  2. Paired Comparison
  3. Grading Scale
  4. Forced Distribution Method
  5. Forced Choice Method
  6. Checklist Method
  7. Critical Incidents Method
  8. Graphic Scale Method
  9. Essay Evaluation Method
  10. Field Review Method
  11. Confidential Method
  1. Management by Objectives (MBO)
  2. Behaviourally Anchored Rating Scales (BARS)
  3. Assessment Centre Method
  4. 360-Degree Appraisal
  5. Human Asset (Cost) Accounting Method


Traditional performance review methods like appraisal templates, ranking, checklists, critical incidents, and more take a goal-oriented approach and evaluate work results. Modern methods focus on individual’s personality traits (creativity, integrity, goal-oriented approach, leadership qualities) and tend to be more objective.

Modern Performance Appraisal Methods

performance appraisal methods

With the right performance appraisal method, organizations can enhance employee performance within the organization. A good employee performance review method can make the whole experience effective and rewarding.

Now that the drawbacks of traditional methods are clear. Here’s a close look at the six most-used modern performance methods:

  1. Management by Objectives (MBO)

Management by objectives (MBO) is the process where managers and employees together identify, plan, organize, and communicate goals. After setting clear goals, managers and subordinates periodically discuss the progress made to control and debate on the feasibility.

This process usually lays more stress on tangible work or career-oriented goals. So, intangible aspects like interpersonal skills, job commitment, etc. are often brushed under the rug. This method is slightly expensive and time-intensive.

  1. 360-Degree Feedback

Once-in-a-year performance appraisals are lackadaisical and don’t work. Workers need ongoing communication with team leaders and managers. A continuous process, like 360-degree feedback, can help employees stay motivated. This is one of the most widely used appraisal methods.

In 360-degree feedback, every employee in an organization appraises his/her managers, peers, customers, suppliers, and also does a self-evaluation. This method ensures effective performance analysis and Total Employee Involved (TEI). If not handled properly, this method can also suffer from the subjectivity of the appraiser.

  1. Assessment Centre Method

The assessment centre method tests employees in a social-related situation. This concept was introduced way back in 1930 by the German Army but it has been polished and tailored to fit today’s environment. Employees are asked to take part in situation exercises like in-basket exercises, work groups, simulations, and role-playing exercises that ensure success in a role.

While it gives an insight of the employee’s personality (ethics, tolerance, problem-solving skill,  introversion/extroversion, adaptability, etc.), it can also breed unhealthy competition among the workers and bears adverse effects on low performers.

  1. Behaviorally Anchored Rating Scale (BARS)

Behaviorally anchored rating scales (BARS) bring out both the qualitative and quantitative benefits in a performance appraisal process. BARS compares employee performance with specific behavioral examples that are anchored to numerical ratings.

This performance appraisal method is said to be better than the traditional methods. BARS provides clear standards, improved feedback, accurate performance analysis, and consistent evaluation. However, when done manually it suffers from the usual distortions that are inherent in most review methodologies.

  1. Psychological Appraisals

Psychological appraisals come in handy to determine the hidden potential of employees. This method focuses on analyzing an employee’s future performance rather than their past work.

Qualified psychologists conduct a variety of tests (in-depth interviews, psychological tests, discussions, and more) to identify an employee’s emotional, intellectual, and other related traits. However, it is a rather slow and complex process and the quality of results is highly dependent on the psychologist who administers the procedure.

  1. Human-Resource (Cost) Accounting Method

Human resource (cost) accounting method analyses an employee’s performance through the monetary benefits he/she yields to the company. It is obtained by comparing the cost of retaining an employee (cost to company) and the monetary benefits (contributions) an organization has ascertained from that specific employee.

When an employee’s performance is evaluated based on cost accounting methods, factors like unit-wise average service value, quality, overhead cost, interpersonal relationships, and more are taken into account. Its high-dependency on the cost and benefit analysis and the memory power of the reviewer is the drawback of human resources accounting method.

A Future-Focused Employee Performance Appraisal Process

The future of the performance appraisal process relies on how well organizations can use technology to reward their best-performing employees and communicate ideas to make them go the distance. The only way for a great performance appraisal lies is to become more innovative in its approach.

With new performance appraisal methods within their reach, HR professionals can easily tailor and streamline their employee performance process with performance management software. Performance tracking in recent years has become intelligent in many ways. Automated HR software allow HR leaders to roll out a modern performance appraisal method in a few minutes.

Furthermore, customizable HR tools like KiSSFLOW integrate the performance appraisal process with other aspects of human resource management effortlessly. With KiSSFLOW, businesses can sync apps, exchange process data, and view the big picture at a glance. With a good performance appraisal method and process, organizations can address pressing issues like high employee turnover rates, low engagement, absenteeism, and a low overall ROI.

Employee performance management can be even more exciting and valuable with an adequate solution and the right performance appraisal method. Try KiSSFLOW’s performance management system for free and see how simple it is to redefine your performance management process!