6 Practical Methods of Performance Assessment for the Modern Workforce

by HRM Software Team

The employee performance appraisal process is crucial for organizations to boost employee productivity and improve results. Performance appraisal is an annual process in which an employee's performance and productivity are evaluated against a set of predetermined objectives.

Performance management is super important, not only because it is the key factor in determining an employee's salary increase and promotion, but also because it accurately assesses an employee's skills, strengths and weaknesses.

However, performance appraisal is rarely used to good effect, as existing performance appraisal methods fail to internalize employee results. To prevent performance appraisal from becoming a buzzword, human resources managers should review their current process and try to implement one of the six modern performance appraisal methods listed below.

Six modern methods of performance appraisal

With the right method of performance assessment, organizations can improve the performance of employees within the organization. A good method of assessing employee performance can make the entire experience effective and rewarding.

Here is an overview of the six most commonly used modern performance appraisal methods:

Management by Objectives (MBO)

Management by Objectives (MBO) is the assessment method in which managers and employees jointly identify, plan, organize and communicate the objectives they need to focus on during a specific assessment period. After setting clear objectives, managers and subordinates periodically discuss progress to monitor and debate the feasibility of achieving the set objectives.

This method of performance evaluation is used to effectively align the organization's overall objectives with employee objectives while validating the objectives using the SMART method to see if the objective set is specific, measurable, achievable, realistic and time-sensitive.

At the end of the evaluation period (quarterly, semi-annual or annual), employees are judged on their results. Success is rewarded with a promotion and a salary increase, while failure is dealt with by a transfer or further training. This process generally places more emphasis on tangible objectives, and intangible aspects such as interpersonal skills, commitment, etc. are often overlooked.

Integrate the MBO into your performance management process

To ensure success, the MBO process must be integrated into the goal setting and evaluation process of the entire organization. By integrating the MBO into the performance management process, companies can improve employee engagement, increase the likelihood of achieving objectives and enable employees to think ahead.

Ideal for :

Measuring the quantitative and qualitative results of senior managers such as directors, officers and executives (companies of all sizes)

Common reason for failure:

Incomplete MBO program, inadequate corporate goals, lack of senior management involvement

Steps to Implement a Successful MBO Program :
  • Each manager should have 5 to 10 objectives expressed in specific and measurable terms
  • Managers may propose their objectives in writing, which will be finalized after review
  • Each objective should include a description and a specific plan (task list) to achieve it
  • Determine how progress will be measured and how often (at least quarterly)
  • List the corrective actions that will be taken if progress is not in line with plans
  • Ensuring that the objectives at each level are linked to organizational objectives and to higher/lower levels
Did you know that?

Retail giant Walmart uses a participative MBO approach to manage the performance of its senior, middle and front-line managers.

360-degree feedback

360-degree feedback is a multi-dimensional method of performance assessment that evaluates an employee using information gathered from his or her circle of influence - superiors, peers, customers and direct reports. This method not only eliminates bias in performance appraisals, but also provides a clear picture of an individual's competencies.

There are five integral components to this assessment method such as :

Self-assessments
Self-assessments offer employees a chance to review their performance and understand their strengths and weaknesses. However, if self-assessments are conducted without structured forms or formal procedures, they can become lenient, inconsistent and biased.

Management Reviews
Performance appraisals by managers are part of the traditional and fundamental form of assessment. These reviews should include individual employee evaluations assigned by supervisors as well as team or program evaluations conducted by senior management.

Peer Reviews
As hierarchies move away from the image of the organization, colleagues gain a unique perspective on the employee's performance, making them the most relevant evaluator. These assessments help determine an employee's ability to work well with the team, take initiative and be a reliable collaborator. However, friendship or animosity among peers can end up distorting the results of the final evaluation.

Subordinate Assessment Manager (SAM)
This bottom-up assessment component of 360-degree feedback is a delicate and important step. Interviewees tend to have the most unique perspective from a management perspective. However, reluctance or fear of retaliation can skew the results of the assessment.

Customer/client assessments
The "customer" component of this phase may include either internal customers, such as users of the product within the organization, or external customers who are not part of the company but who interact regularly with that specific employee.

Client evaluations can better assess an employee's results, but these external users often do not see the impact of processes or policies on an employee's results.

Benefits of using 360-degree feedback :
  • Make the individual aware of his or her performance and the impact it has on other stakeholders
  • Serve as a key to launch coaching, consulting and career development activities
  • Encouraging employees to invest in their own development and adopt change management
  • Integrate performance feedback into the work culture and promote engagement
Ideal for :

Private sector organizations than public sector organizations, because peer reviews of public sector organizations are more lenient.

Common Reason for Failure:

Leniency in review, cultural differences, competitiveness, ineffective planning and misguided feedback.

Did you know that?

Leading private organizations such as RBS, Sainsbury's and G4S use a 360-degree, multi-level performance appraisal system to measure the performance of their employees.

Assessment Centre Method

The assessment centre concept was introduced in 1930 by the German Army, but has been refined and adapted to today's environment. The assessment centre method allows employees to get a clear picture of how others observe them and the impact this has on their performance. The main advantage of this method is that it allows not only to assess a person's current performance, but also to predict future job performance.

During the assessment, employees are invited to participate in social simulation exercises such as basketball exercises, informal discussions, investigative exercises, decision-making problems, role-playing and other exercises that ensure success in a role. The main disadvantage of this approach is that it is a time and money consuming process that is difficult to manage.

Advantages of the assessment centre approach :
  • Enhance a participant's knowledge, stimulate their thought process and improve employee effectiveness
  • Can be adapted to meet different roles, skills and business needs
  • Provide insight into the employee's personality (ethics, tolerance, problem-solving ability, introversion/extroversion, adaptability, etc.).
Ideal for :

Manufacturing organizations, service companies, educational institutions and consulting firms to identify future leaders and managers of the organization.

Guidelines for the implementation of assessment centre practice :
  • Use job analysis to determine the components of effective performance
  • Identify performance indicators that can be measured using this assessment centre
  • Rank the significant and relevant behaviours of candidates in the assessment process
  • Finding assessment techniques that can ideally obtain ideal behavioural information
  • Appraisers and ad hoc evaluators, excluding immediate supervisors
  • Provide in-depth training for evaluators and reviewers
  • Maintain a system of performance records for each candidate
  • Reviewing records and rewarding or training the employee accordingly
Did you know that?

Microsoft, Philips and many other organizations use the practice of assessment centers to identify future leaders for their staff.

Behavioural Anchored Rating Scale (BARS)

Behaviourally Based Rating Scales (BARS) highlight the qualitative and quantitative benefits of a performance appraisal process. BARS compare employee performance to specific behavioural examples that are anchored to numerical ratings.
Each level of performance on a BARS scale is anchored by multiple BARS statements that describe the common behaviours an employee commonly exhibits. These statements serve as a benchmark to measure an individual's performance against predetermined standards that are applicable to their role and job level.

The first step in the creation of BARS is the generation of critical incidents that describe typical workplace behaviour. The next step is to edit these critical incidents in a common format and remove any redundancy. After normalization, critical incidents are randomized and their effectiveness is evaluated. The remaining critical incidents are used to create BARs and evaluate employee performance.

Benefits of using BARS :

  • Benefit from clear standards, better feedback, accurate performance analysis and consistent evaluation
  • Eliminate unconstructive gaps in performance appraisals by placing greater emphasis on specific, concrete and observable behaviours
  • Reduce any risk of bias and ensure fairness throughout the evaluation process
Ideal for :

Companies of all sizes and in all industries can use BARS to assess the performance of their entire workforce, from front-line officers to senior management.

Common disadvantages of BARS:

  • High risk of subjectivity in evaluations
  • Difficult to make pay and promotion decisions
  • The creation and implementation of such a program takes a long time.
  • Demands more from leaders and senior managers

Psychological assessments

Psychological assessments are useful in determining the hidden potential of employees. This method focuses on analyzing an employee's future performance rather than past work. These assessments are used to analyze seven major components of an employee's performance, such as interpersonal skills, cognitive abilities, intellectual traits, leadership skills, personality traits, emotional quotient and other related skills.

Qualified psychologists conduct various tests (in-depth interviews, psychological tests, discussions, etc.) to effectively evaluate an employee. However, this is a rather slow and complex process and the quality of the results depends heavily on the psychologist administering the procedure.

Specific scenarios are taken into account during the psychological assessment. For example, the way an employee deals with an aggressive client can be used to assess his persuasive abilities, behavioural response, emotional response, etc. The employee's behaviour can be assessed in a variety of ways.

Advantages of psychological assessments :
  • Extract measurable and objective data on an employee's performance and potential
  • Can be easily deployed compared to other performance evaluation methods
  • Provide a platform for introverted or shy employees to shine and prove their potential
Ideal for :

Large companies can use psychological assessments for a variety of reasons including leadership development, team building, conflict resolution, etc.

Common reasons for failure:

Lack of adequate training, lack of trained professionals to administer the assessments, and candidates' nervousness or anxiety can skew the results.

Did you know?

Ford motors, Exxon Mobil, Procter & Gamble use psychological assessments to test the personality and performance of their employees.

Method of accounting for human resources (costs)


The human resources (cost) accounting method analyzes an employee's performance through the monetary benefits he or she brings to the company. It is obtained by comparing the cost of retaining an employee (cost to the company) and the monetary benefits (contributions) that an organization has obtained from that specific employee.

When an employee's performance is evaluated on the basis of cost accounting methods, factors such as the average unit value of the service, quality, overhead, interpersonal relations, etc. are taken into account. The disadvantage of the human resources accounting method is the heavy reliance on cost-benefit analysis and the memory capacity of the reviewer.

Advantages of the human cost accounting method :

Effectively measure the cost and value that an employee brings to the organization
Helping to identify the financial implications of an employee's performance on the organization's results

Ideal for :

Start-ups and small businesses where an employee's performance can make or break an organization's success.

Implementation of the human resources cost accounting method :
  • Identifying the gap between the market and an employee's current package
  • Determining the monetary and non-monetary value an employee brings to the table
  • List an employee's accomplishments over the review period (increased subscribers, improved revenues, number of new business wins, etc.).

A forward-looking method of evaluating employee performance

Choosing the right performance appraisal method is more crucial than ever, as it reflects how you feel about your employees and how much you care about their morale. Once you've found the ideal performance appraisal method for your needs, the next step is to implement it properly to eliminate critical performance gaps and address urgent issues that impact ROI.

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