Performance Appraisal: Definition, Methods, 360 Degree Appraisal

Performance Appraisal

It is referred to as a systematic evaluation of performance of employees in an organization. This is mainly done to have an understanding of the abilities of the resources for future growth and development. The objectives of performance appraisal are as follows:

(i). Data maintenance to decide salary packages, increase in salary, pay structure etc.

(ii). To know the strengths and weaknesses of the resources in order to put them at the right job.

(iii). To understand the probable interests of the employees for future development.

(iv). Give feedback to the manpower about their performance at a given point of time.

(v). Analyze and keep hold of the training programs for the promotion of the employees.

Importance of Performance Appraisal

When we discuss in a deeper sense, we can say that Performance Appraisal is an asset to the organization. This statement can be justified as follows:

  1. Selection justification: Performance Appraisal helps the HR managers in validating the selection made by them. It makes them clear as to the strengths and weaknesses of the employees selected by them. This can be kept as sample study for future selection of employees.
  2. Compensation: Appraisal system helps in merit rating from where a good compensation program can be chalked out. A compensation system which has good pay, bonuses, variable allowances and benefits is very much reliant on performance appraisal.
  3. Promotion: It helps in deciding promotion programs for competent employees. By this, inefficient workers can be either demoted or dismissed from the company.
  4. Employee Development: A very good appraisal system helps the HR managers in developing good training programs. This in turn helps the employees to discuss their interests in getting trained in various programs with their managers.
  5. Motivation: Appraisal can be called as a motivational tool for employees. By setting standards to achieve the targets, the employees are motivated to perform as well as to develop their performance in future.

Methods of Performance Appraisal

They are broadly classified into Traditional and Modern methods. Let us first discuss the Traditional methods.

1. Rating Scale Method: It is the most common method of assessing the performance. Under this method a scale is created from 1 to 10. The components of this method are traits like attitude, regularity, performance and accountability, which will be rated on a scale of 10. In India, many telecommunication industries are using this method to evaluate their employees. Here the employees are assessed as per the nature of the job or company. The number of points scored for all the traits are finally added; employee who scores more is regarded as good performer than the employee who has a descending score.

2. Essay Appraisal Method: It is also called the “free form method” because the superior gives a detailed description of its manpower’s performance. This will include supporting documents and examples of his/her performance. The main hitch of this method is that it is highly biased. The rater under this method may use Rating Scale method also to rate the weaknesses and strengths of an employee to validate his essay appraisal. This method is very time consuming as the rater should find enough time to collate all the documents. It is considered to be a non quantitative evaluation method of appraisal.

3. Ranking Method: Under this, the manager compares the performance of employees with other employees of the same rank or grade. A fixed percentage of employees are kept in different performance categories like excellent, average, below average, poor etc. This method is used when the managers have to make decision as to which person is the best worker for a given period, who has to be promoted, which employee is being laid off etc. Under such circumstances the Ranking Method comes handy to HR Managers in evaluating them correctly.

4. Critical Incident Method: As the name suggests these are based on events or incidents. Here logs are maintained for each employee to record the events or decisive incidents of behavior of employees. At the conclusion of the performance period these events are collated to find out the rating of the employees. The main drawback of this method is that the negative incidents are more obvious than the positive ones. Sometimes the employees will not like such close supervision by managers.

5. Confidential Report System: This method is very well known in government organizations. Here the superiors will write a confidential report on the subordinates with respect to his/her behavior and duties in the organization. This report will not be exposed to anyone, and finally will be referred the top management. In India this method is being used by most of the government organizations like the Armed Forces, Police department, CBI etc. The main factors assessed here are:

(a). Temperament of the employee.

(b). Promptness of employee.

(c). Unlawful absenteeism.

(d). Truthfulness and sincerity.

(e). His/her behavior with the public.


6. Check List Method: Under this method, the appraiser is given a set of metaphors to be used for rating the employees. This comprises of a list of questions based on which the rater evaluates the acts of the human resources. Let us see the below statements or descriptions used as checklist:

(a). Is the employee actually interested in the job?   Yes/No

(b). Do they give respect to their superiors?              Yes/No

(c). Do they follow the directives?                               Yes/No

(d). Mistakes are made frequently?                              Yes/No

7. Graphic Rating Scale Method: It is a widely accepted conventional technique of performance appraisal. Here the core traits of the employees are cautiously defined. These traits are assigned numbers on a scale of 5 to evaluate for a given appraisal period. The values of each trait is added to find out the best performer during the period of performance appraisal, the score will vary from person to person giving the appraiser a clear picture as to who is the best performer. Look at the example below for better understanding of the method.

Attitude 54321
Team Work54321
Knowledge of work54321
Managerial Skills54321

Table Title: Graphic Rating Scale Method

Now let’s see some new techniques of Performance Appraisal. To overcome the drawbacks of the traditional performance appraisal methods a few modern techniques were used by the organization.

1. The BARS Method: This is called Behaviorally Anchored Rating Scale which is comparatively a new one. It’s a combination of two methods like graphical rating scale and critical incident method. This method consists of a set of behavioral statements that explains the performance of the resources towards a particular job as good or bad. These statements are derived from critical incidents or events. Under this method the definite behavior is compared with the preferred behavior. The critical behavior thus obtained is given a numeric value based on which performance is rated. The below example can make us understand better.

Can be laid off7Employee can be expected to give important suggestions
Good6Employee can be expected to commence resourceful ideas
Beyond Average5Can expect him to do well
Average4Can cope with difficulty to reach goals
Below Average3Can be given training
Poor2Can be demoted
Extremely Poor1Can be laid off

Table Title: BARS (Behaviorally Anchored Rating Scale)

2. Human Resource Accounting Method: This method measures the efficiency of personnel management behavior and how the people are used in an organization. This is handing over, budgeting and reporting of how much cost is involved in the acquisition of human resources, which includes salaries and wages. There is a saying, ‘the human resources are the assets of an organization.’ HRA method finds out net worth of these resources in monitory terms. Under this method the cost incurred on employees right from recruitment to induction is calculated and the contribution of employees which in this method is the total value added, is also calculated. The difference between the cost and input is considered to be the performance of the manpower hired; preferably the contribution from the employee’s side should be greater than the cost incurred.

3. MBO (Management by Objectives): It is a process where in both the managers and subordinates recognize common goals and characterize the individual’s responsibility towards achieving those goals. It is a shared goal setting method, along with setting these goals, the key constituent of MBO method is a constant performance review sessions that happens between managers and subordinates. This helps in evaluating the growth on regular basis.


360 Degree Appraisal System

It is a system in which employees will get feedback from all the people they work with. There are about 7 to 12 people who will fill out a form which is usually a feedback form. The contents of the form may vary from broad range competencies to work environment. The employee who receives the feedback will also be required to fill out a self assessment which again might consist of the same components. This system is used to get an improved understanding of every one’s strengths and weaknesses.

There are three general reasons as to why an organization would go in for a 360 degree appraisal.

  • To get a better view of the performance and prospective of future leaders.
  • To have a broad insight of developmental needs of manpower.
  • To collect more feedback so as to ensure justice to the job performed by the employees.

In 360 degree appraisal system, the feedback is collected from managers, peers, subordinates, customers, team members etc. A survey is conducted to get close understanding of-on the job performance of the employees. A 360 degree appraisal has four stages in it:

  • Self Appraisal
  • Superior’s Appraisal
  • Sub-ordinates Appraisal
  • Peer Appraisal

It is not an easy task to implement 360 degree appraisal. For this appraisal to be effective one needs to bear in mind the following:

→ Right skills to be assessed are determined.

→ Appraiser should be selected properly.

→ He should be well aware of the system, if proper training on the appraisal system is not given.

→ Elucidate the intention of this kind of appraisal system.

→ Ensure the process to be simple.

→ Follow up.