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Top 5 Performance Appraisal Techniques

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Performance appraisal in a company is about assessing the value, quality or outstanding performance of employees.

Performance appraisal refers to a methodical assessment of a person's work by their superiors or by people familiar with their job performance. Performance appraisal is also known as performance evaluation, where a person is ranked based on their performance compared to others. The main objective of this performance evaluation is to determine an employee's suitability for promotion.

However, performance appraisal is a broader term for such activities because its scope goes beyond assessing suitability for promotion. In addition to promotions, these activities can include training and development, salary adjustments, transfers, layoffs and much more.

Importance of performance appraisal in an organization

The importance of performance appraisal for the human resources department of a company are:

1.Human resources planning

When evaluating a company's human resources, it is important to have data to identify people who may be considered for promotion or to address internal issues related to employee relations. By conducting performance reviews, HR managers can determine whether there is a shortage of employees ready for leadership roles. A well-structured appraisal system provides an overview of the company's strengths and weaknesses in relation to its human resources and supports these efforts.

2.Recruitment and selection

Performance reviews can be helpful in predicting the performance of job candidates. For example, successful employees in a company may exhibit certain behaviors when performing important tasks. These observations can serve as benchmarks for evaluating applicants' responses in behavioral interviews.

3.Training and development

The performance appraisal should highlight an employee's specific training and development needs. For example, if an employee's assessment reveals a deficit in the technical writing skills required for their job, additional training in written communication may be required. Identifying deficits that impact performance allows for the development of training and development programs that enable individuals to build on their strengths and reduce their weaknesses.

4.Career planning and development

Career planning is an ongoing process in which the individual sets career goals and determines how they will achieve them. On the other hand, career development is a formal approach that companies use to ensure that qualified employees with the right experience are available when they are needed.

Performance appraisal data is critical for assessing an employee's strengths and weaknesses and assessing their potential. Managers can use this information to advise subordinates and help them create and implement their career plans.

5.Compensation programs

The results of the performance appraisal serve as the basis for informed decisions about salary adjustments. Recognizing and rewarding behaviors that are essential to achieving company goals is a central part of a company's strategic plan. To promote good performance, a company should establish a reliable performance appraisal system.

How do performance reviews work?

A typical performance management process consists of five steps.

1.Performance planning

Before the performance review cycle begins, it is important to review employee performance expectations. This includes the behaviors expected of employees and the tasks they must complete before the appraisal cycle. The behavior and outcome expectations in a performance plan are:

  • Behavioral expectations:

They relate to what is expected of employees in the areas of key competencies. Managers should make it clear to their team members how behavioral issues impact their overall evaluation and performance standards.

Example: This includes following the norms and cultures of an organization and working together in a team.

  • Outcome expectations

The results to be achieved by employees must be linked to the organizational goals. Outcome expectations may relate to improving current work performance or preparing for career advancement.

The most important step in performance planning is aligning organizational and individual goals.

  • Organizational goals must be translated into more detailed goals and expectations at the unit, team, and individual levels.
  • Each level can develop its own goals and align them with company goals.
  • For employees working in workplaces characterized by constant change, short-term goals need to be set to ensure they are achievable.
  • Feedback should be provided and appraisals should be made when employees reach key milestones.

2.Ongoing feedback

During the performance planning process, managers should have established both behavioral and outcome expectations. Employee performance in these two areas should be measured and continuous feedback should be provided in case of exceptional and ineffective performance. However, this doesn't happen often because many managers don't know how to provide constructive feedback that minimizes employee defensiveness. For continuous feedback to be effective, it must be treated as a two-way communication and responsibility should be shared equally between managers and employees.

3.Employee input

Employee input is used in all companies to assess how employees view themselves. This can take the form of a self-assessment or by asking employees to make statements about their key findings or most meritorious achievements before the appraisal cycle. The benefits of employee input are:

  • The personal responsibility and acceptance of employees is strengthened.
  • Reminds managers of the results achieved by employees.
  • Improves communication and understanding.

3.Performance evaluation

In many organizations, competency models have become established as the basis for performance management systems. This model describes the knowledge, skills, abilities and other characteristics required to achieve the company's goals. Some techniques for identifying key competencies are:

  • Workplace observations
  • Interviews
  • Focus groups
  • Survey

The competency model measures the technical, managerial and interpersonal skills required to excel in a workplace. These models not only provide information about what is needed in a company, but also provide a basis for developing integrated HR systems, e.g. for staffing and recruiting.

Defining competencies helps:

  • Differentiation between employees who perform more or less than others.
  • Analysis or reflection of the different levels of responsibility, complexity and level of difficulty that characterize employees' jobs.
  • To make employees understand what is expected of them.
  • Provide managers with uniform standards for employee evaluations.

Some competency models are developed at the organizational level and apply to all workplaces. An example to illustrate such situations is provided below.

A large company creates a competency model for the entire company. However, three sets of performance standards have been developed for these competencies, each for professional, managerial and administrative tasks.

It is necessary to decide what types of competencies and performance standards to develop and adapt to measure employee performance. Managers should be able to effectively evaluate their employees using the competency models.

5.Performance review

The performance appraisal helps the manager assess how the employee performed during the appraisal period. Typically there are annual appraisal periods, but some companies follow a semi-annual appraisal cycle. In the performance appraisal meeting, supervisors should discuss the assessments, descriptions and reasons for the evaluation given. It is also a good time to plan career advancement with employees and understand their career path.

How to organize a performance appraisal process

An appraiser must have the necessary skills and training to conduct a performance review with an employee. One reason for the bad impression left by the performance appraisal process is the experience of being criticized throughout the process.

A performance review should do exactly the opposite. It should inform employees about how they performed during the appraisal period without making them feel guilty. The language and tone of the manager also determine how employees will decipher the message.

Once a message is sent, the recipient's interpretation depends on the sender's language. This can affect body language, word choice and even tone of voice. A performance review is about constructive criticism, so it's important to use the right words and behavior.

General instructions for conducting a performance review process include:

1.Use of an assessment matrix

An appraisal matrix is a visual tool used in performance appraisal to evaluate an employee's performance against a set of predetermined criteria. It usually consists of a grid with two axes: one represents the employee's performance level, the other represents the importance of the criteria to be evaluated.

2.Providing an overall assessment

An overall appraisal can give employees a holistic view of their performance by highlighting their competencies and the areas in which they need to improve. This information can help employees set goals for themselves and identify the resources and support they need to develop their skills and knowledge.

3.Setting performance standards

Setting clear performance standards ensures a shared understanding of the expectations of employees, managers and the organization as a whole. This clarity helps align individual efforts with organizational goals and ensures everyone is working toward the same goals.

4.Proper assessment and documentation

Without proper assessment and documentation, performance evaluations can be subjective and biased. This can lead to unfair or inaccurate reviews, which can have negative consequences for employees, such as: E.g. missed promotions or salary increases.

5.Identify methods to improve or increase performance

Identifying methods to improve or increase performance is necessary to achieve organizational goals, increase productivity, and improve employee engagement and satisfaction.

6.Obtaining signatures and comments

Obtaining signatures and comments in the performance cycle is an important step in ensuring that the performance appraisal process is fair, accurate and transparent. It also offers managers and employees the opportunity to have a dialogue about the employee's performance and their goals for the future.

Performance Appraisal Examples

Performance appraisals can go either way and depend on how a manager handles the situation. Here is an example of a constructive performance review.

Example of a performance review:

We can begin the assessment by examining the progress you have made on each project this quarter. Is that a good tone?

First of all, all the projects you worked on in the last four months were completed on time and within budget. One project, as I can see, was completed ahead of schedule. All were carried out successfully.

Excellent work. You have met all of the requirements that ABC requires of a project manager.

Now let's explore some areas where you can further improve your project management skills.

Some team members of projects A, B and C expressed in the first meetings that they were not clear about what they were supposed to work on and that they felt like they only joined the project at the last moment. Could you please work on refining your project management skills so that the project can start on time?

Six modern methods of performance appraisal

Performance appraisal methods can be divided into two approaches: Traditional Approach and Modern Approach

1.Traditional approach

  • Critical Incidents:

In this method, the employer or supervisor evaluates an employee based on "specific events" known as critical incidents in which the employee did something really great or something not so great at work.

This essentially involves three steps:

  1. A list compiles all notable events (positive or negative) related to the employee's behavior at work.
  2. A team of experts is tasked with assigning a weight or score to each incident.
  3. The employees are then evaluated based on this list.

The evaluator should keep a digital or physical diary to store the information about the various incidents. This method is extremely useful for the development of an employee because it provides detailed information, unlike other performance appraisal methods.

  • Checklist method

This is a structured approach to evaluating an employee's performance using a predetermined list of statements or questions. The evaluator simply checks “yes” or “no” to indicate whether the employee exhibits each characteristic or behavior. However, the weight assigned to each statement is not communicated to the evaluator. The human resources department makes the final assessment taking all statements into account. It is therefore an objective procedure for carrying out performance appraisals.

  • Behaviorally Anchored Rating Scale

This method was recently developed and is considered one of the most effective among the listed assessment methods. It is a combination of traditional essay assessment and rating scale. It is more expensive than other methods and guarantees precise results.

In this method, the employee's behavior and performance are analyzed and used to evaluate the employee's overall performance. It consists of various scales, which are supplemented by several BARS statements that explain the characteristics of the employee in more detail. Based on an employee's performance and behavior, these are anchored as good, average or poor.

The BARS method is the preferred performance appraisal method because it allows managers to achieve better results, provide constant feedback, and maintain evaluation consistency.

2.Modern approach

  • Management through goal setting

This is a process in which a manager determines the goals to be achieved and assigns each individual a large area of ​​responsibility in relation to the results expected of them and uses these measures as a guide to capture the contribution of each individual employee. This method essentially uses the SMART technique to ensure that the assigned goals are specific, measurable, achievable, realistic and time-dependent.

It is less time-consuming and cost-effective compared to other performance appraisal methods. With this method of "Management by objectives" it is easy to determine whether the given goal will be achieved within a certain period of time or not. Additionally, managers can easily determine whether the employee is being rewarded or needs further training to improve their performance.

This technique mainly includes four important steps: objective setting, evaluation standards, analysis and periodic review.

  • 360 degree feedback

This method is a bit time-consuming because it uses multiple scales to evaluate performance, but it is worth a try. In this method, the employee's feedback is collected from the people who interact with him in the organization, including his superiors, colleagues, subordinates and also from customers. Feedback is usually obtained using a questionnaire designed for this purpose. This method is very useful for startups. Take a look at this detailed infographic on the 360-degree performance evaluation process

This technique helps managers gain insights from a different perspective and conduct an unbiased performance review. The step-by-step process includes the following components:

  • Self-assessment
  • Peer review
  • Review by the manager
  • Customer feedback

All of these phases ensure that not only the managers but also the employees know how to perform and guide each other as they try to improve their individual performance.

  • Assessment center method

An assessment center typically uses techniques such as tests and exercises, assignments to a group of workers, social/informal activities to assess an employee's competence. Employees are typically given a task that is similar to the position they would likely assume if promoted. The trained assessors observe and evaluate workers as they perform assigned tasks and are evaluated based on job-related qualities.

The primary competencies assessed in assessment centers include interpersonal skills, mental capacity, organizational and planning ability, inclination towards a particular career, etc.

How can using performance management software help?

Without performance management software, keeping track of every employee's performance can be tedious and error-prone. A performance management system that recognizes the best employees, helps managers connect with their team members, supports scheduling 1:1 meetings, and provides ongoing feedback is critical to company development. IceHrm PMS is a one-stop solution that offers a complete package to evaluate your employees' performance.

With 360-degree feedback, 1:1 meetings, OKR setting, goal tracking, and employee recognition features, it's the only tool you need for an effective appraisal and performance evaluation process.


1.What is a performance appraisal?

  • The performance appraisal process refers to evaluating an employee's job performance. It is used to identify areas in which the employee is performing well and areas in which the employee can improve.

2.Why is performance appraisal important?

  • The performance appraisal process is critical to improving employee performance, driving engagement, strengthening employee retention, facilitating informed decisions, and fostering a stronger company culture.

3.What is a 360 degree performance appraisal method?

  • The 360-degree performance appraisal includes performance reviews from various sources, including supervisors, colleagues, subordinates and customers, and provides a comprehensive assessment of an employee's abilities.

4.How does the Management by Objectives (MBO) method work in performance appraisal?

  • With management by objectives, mutually agreed goals are set between managers and employees, progress is regularly evaluated and adjustments are made if necessary to ensure goal achievement.

5.What are the advantages of the assessment center method for performance appraisal?

  • The assessment center method provides a versatile assessment that uses simulations, role plays and group exercises to assess an employee's suitability, leadership potential and decision-making ability.

6.Explain the critical incident method of performance appraisal.

  • The critical incident method involves documenting an employee's specific behaviors, both positive and negative, to identify patterns and areas for improvement or recognition.

7.What is the checklist method and how is it used in performance appraisal?

  • The checklist method uses a predetermined list of job-related behaviors or competencies that allows managers to evaluate an employee's performance against established standards.

8.How does the Behaviorally Anchored Rating Scale (BARS) work in performance appraisal?

  • The Behaviorally Anchored Rating Scale (BARS) uses specific behavioral descriptors to anchor each performance rating level, providing more objective and consistent assessment.

9.What is the purpose of customer/client discussions in performance appraisals?

  • Customer/client reviews provide an external perspective on an employee's performance, particularly in customer-facing roles, and provide valuable insight into the effectiveness of interactions with external stakeholders.

10.How does the forced choice method work in performance appraisal?

  • In the forced choice method, two performance statements are presented and managers must select the one that best reflects the employee's behavior, thereby reducing rater bias and increasing objectivity.

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