How Can Organizations Implement Performance Appraisals The Right Way?

Post by
Karthick Sundar
How Can Organizations Implement Performance Appraisals The Right Way?

The time of the year that every employee looks forward to after a year of dedicated work is their 'Performance Appraisal.'

Performance Appraisal is an employee evaluation process to identify growth and development areas that impact future outcomes and productivity.

Being a yearly process, Performance Appraisal is an integral part of the Performance Management System. Performance Appraisal determines whether an employee is deserving of promotion or training by factoring in an employee's strengths, skills, shortcomings, and weak points.

Thus, choosing the right appraisal system is crucial as it reflects what you make of your employees and how invested in them you are. It sets a tone for your employees on how aligned you as an organization are to goals and the steps you're committed to enhancing employee performance.


Do companies prefer Modern Appraisal Methods over Traditional Methods?

The Traditional Performance Appraisal method emphasizes rating the individual's personality traits such as leadership, initiative, integrity, dependability, and more.

The traditional system focused more on past performance, but as companies have evolved, this method does not seem to be yielding effective results.

Companies worldwide are now adapting to modern appraisal methods, where the focus is on evaluating work rather than personality traits. The modern approach aims to assess work results and is more objective than the traditional performance appraisal method.


A few examples of the various methods of Performance Appraisal

Methods of Performance Appraisal



Basic Functions of Performance Appraisal Systems

Performance Appraisal Systems help organizations identify competencies and define an employee's action better to be measured effectively. This can also help employees understand if they are meeting organizational expectations or not.

Performance Appraisal systems can be challenging to execute, but they keep the employees motivated and productive at optimum levels when done efficiently.

The primary functions of a Performance Appraisal system are:

  • Defining and setting clear company goals
  • Identifying areas of development and training
  • Offering insights when employees results have been ineffective
  • Aligning employee performance with organizational goals
  • Improving employee engagement
  • Providing real-time feedback to all team members
  • Improving employee retention


Various methods of Performance Appraisal

  1. Management by Objectives

This performance appraisal method is where managers and employees set objectives for a specific appraisal period. They identify, plan and organize objectives to periodically discuss progress and the feasibility of achieving set goals.

At the end of a review period, which can be quarterly, half-yearly, or annually, employees are evaluated based on their results and further rewarded if they've been successful or trained if they couldn't achieve the desired results.

Points to consider when implementing the MBO method:

  • Goals must be specific and measurable
  • Determine how frequently the management will measure goals
  • Convey the actions/training that will take place if progress does not take place
  • Goals at each level must be under organizational objectives


  1. 360-degree feedback

The 360-degree method of appraisal was first formally developed and used by General Electric Company of USA in the year 1992. This performance appraisal method is multi-dimensional and evaluates an employee's skills, abilities, and behaviors from his immediate surroundings, who influence his actions, namely managers, peers, subordinates, and even clients. All these appraisers provide valuable feedback by filling out a survey questionnaire. Their answers are compiled to prepare individual reports and develop a performance improvement plan.

This appraisal method is realistic and removes any bias that may exist, and provides a clear understanding of an individual's key competencies and how they're impacting other stakeholders.



  1. Short-cycle Performance Review

The short cycle performance review is an ongoing system of planning, monitoring, and reviewing employee performance. Traditional techniques would set yearly goals and check them only at the end of the year, but short-cycle reviews are much more valuable and actionable. With short-cycle performance reviews, goals are broken down. Each sub-task is planned, executed, monitored, and reviewed to give employees a better understanding of their performance and improvement. The short-cycle performance appraisal method guarantees continuous feedback. It is the preferred choice for young employees who want the management to intervene when the problem arises rather than discuss it at the end of the year review.


  1. Self Appraisal

The self-appraisal method gives employees to review their performance to understand where their strengths and weaknesses lie. It encourages employees to take accountability for their work and gives them the opportunity to self-reflect and understand how competent they are. It helps them to list their accomplishments and acknowledge areas of improvement. The self-appraisal method helps employees reflect on their established goals, competencies, and overall performance. But to achieve this, the self-appraisal system must be structured to remove any personal bias. Self-appraisals can show the management aspects of employees' work-life that supervisors are not aware of. When implemented effectively, self-appraisals can result in increased employee engagement.



  1. Behaviorally anchored rating scales

The Behaviorally anchored rating scale is a qualitative and quantitative measure that provides accurate performance analysis with consistent evaluation. In this method, specific behavioral examples are compared with employee performance and are numerically rated. The behavioral models are commonly exhibited behaviors of employees and are used as a yardstick to measure employees on pre-determined standards.

Benefits of the BARS System:

  • The rating scales are accurate and reliable as they measure specific behaviors and check whether the employee demonstrates them or not
  • This method of performance appraisal allows managers to view their employees objectively.
  • The BARS system is relevant as it focuses on an employee's behavior to be in a particular position.




Key Takeaways

Organizations need to select the right performance appraisal system for their employees. An effective performance appraisal system can help build your employees to organizational standards and bridge performance gaps early on.


"There are only three measurements that tell you nearly everything you need to know about your organization's overall performance: employee engagement, customer satisfaction, and cash flow. No company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it." - Jack Welch.