Before conducting quarterly or annual employee appraisals, you should be familiar with the different types of performance evaluation out there.
As their name suggests, performance appraisals evaluate employees’ skills and progress within a specific period.
However, different roles require different approaches and different types of employee performance evaluations.
Performance appraisals are important. They help managers evaluate employees for salary increases and promotions. They also benefit the company as a whole.
In this article, we’ll cover the advantages and disadvantages of performance appraisals along with the different types of performance evaluations.
What are the advantages and disadvantages of performance appraisals?
Despite their importance, employee performance evaluations have pros and cons.
Advantages of performance appraisals
1) Uncover top performers
Employee performance reviews help managers, HR, and companies uncover top performers, who can be candidates for promotions or raises.
2) Uncover skills
They also help managers learn more about their different team members’ skills, specifically if someone has leadership skills or managerial skills.
3) Improve employee-manager relationships
Though employee performance review may cause conflicts between managers and employees, they may also improve those relationships.
This is because managers, especially new ones, struggle with broaching the subject of performance and pay with many of their team members.
But with regular performance appraisals, managers can easily identify strengths and weaknesses and help employees work on their weaknesses.
4) Uncover opportunities for rewards and promotions
Performance appraisals focus on an employee’s performance. Accordingly, they’re a good guide for managers to determine who is best-suited for a promotion or pay increase.
5) Can help employees grow and improve
Managers can also use performance appraisal discussions to learn more about what engages employees, what types of training they need, and so on.
This helps create a better company culture, increases employee engagement, and can translate to better employee retention.
Disadvantages of performance appraisals
Unfortunately, employee performance reviews have a few disadvantages.
1) Can be biased or subjective
One of the biggest problems that may arise with employee evaluations is they may become subjective.
If the manager favors one employee over others, they may give them a higher rating on their performance appraisal.
Similarly, if a manager is forced to hire a certain employee, or dislikes them for any personal or non-work-related reason, they may be subjective during the appraisal process.
2) Some may lack constructive feedback
If a manager is new to the team, or lacks the skills to conduct a performance evaluation, they may be unable to offer constructive feedback.
The purpose of these employee reviews is to help employees work on their weaknesses, grow, and eventually help the company grow.
But without constructive feedback, the performance appraisal falls flat.
3) Can lead to employee anxiety
Performance evaluation are tied to employee promotions and salary increases. As a result, this may cause employees to focus on the numbers, ratings, and their evaluations, causing anxiety.
4) Can feel like a chore
Most companies conduct performance evaluation on an annual basis, while others conduct them every 3 or 6 months.
Although performance evaluations help employees, they may feel like a task to be ticked off the manager’s to-do list. In this case, they become like a chore and don’t deliver on the intended value.
15 Types of Employee Performance Evaluations
Now, that we’ve covered the pros and cons of employee evaluation, let’s dive into the different types of performance evaluations.
By understanding the types of appraisals, you can decide which one or ones best fit your team and the company.
1) 360-degree performance evaluation
This is one of the most common types of performance appraisals used in companies. To conduct the 360-degree performance appraisal, the company collects feedback from various sources.
These can include colleagues, manager(s), subordinates, and customers or clients (if applicable). The employee themselves also offers a view of their role within the department or team.
2) Customer/client appraisal
In this type of performance appraisal, it is the clients or customers the employee deals with who give the review. Customers are given a questionnaire or form with questions to answer or to give a rating.
Companies use customer appraisals for customer-facing employees such as sales, marketing, and sometimes, public relations (PR) professionals, among other roles.
Account manager and account director-types of roles can also benefit from customer appraisals or reviews because they show if the employee has the suitable people and negotiation skills to perform their job.
3) Self-appraisal
In a self-appraisal, the employee needs to review their personal performance. They have to determine their strengths and weaknesses and highlight any achievements or milestones they’ve made during the review period.
Also known as self-assessment or self-review, this type of performance review usually involves the employee filling a form or questionnaire.
After a self-review, managers will often follow up with a one-on-one meeting.
4) Competency assessments
Another frequently-used type of performance review is the competency or competency-based assessment.
Competency appraisals help managers identify gaps in employees’ skills. They measure an employee’s abilities against the skills they need to perform their job. Competency assessments show where an employee is and where they need to be.
Often, competency assessments help managers, and HR teams, identify learning and development needs to help employees and drive the company forward.
To conduct competency assessments, you must first have clear job descriptions for the different roles and teams in your company.
5) Negotiated appraisal
In the negotiated performance appraisal, the manager and employee have a third-party present, usually an HR executive, who acts as a mediator. The manager or team leader shares what they think the employee is doing well, the positive aspects about the employee, before sharing the negative aspects.
Negotiated appraisals are a good option when there’s friction between a team member and their manager.
6) Management by objective appraisal
The management by objective (MBO) performance evaluation is a collaborative type of review. It involves the manager and employee working together to determine the goal or goals the employee needs to achieve. Once the goal is set, the manager and employee determine how they will measure the employee’s progress towards achieving that goal.
In the next MBO appraisal, the manager reviews whether or not the employee has achieved their previously-set goal or not. They may also see how far they’ve progressed to achieve that goal and set a new goal.
7) Peer reviews
Peer reviews are considered a popular, if not fully-encompassing, type of performance appraisal. In this type of review, it is the employee’s team members and peers who perform the evaluation.
Co-workers help determine whether an employee is a team player, supportive of others, and has the skills needed to perform their job.
It’s important to have a specific list of questions to share with the reviewers to avoid prejudices and favoritism.
8) Assessment Center method
This is another frequently-used type of performance review. It’s also widely-used when reviewing managers’ performance.
The assessment center performance appraisal looks at how employees perceive each other and, accordingly, how they affect each other’s performance.
Unlike most of the performance appraisal types on this list, the assessment center method isn’t an on-the-spot type of review.
It takes longer to conduct because it involves 3 stages, these are pre-assessment, during-assessment, and post-assessment. Usually, the process for conducting this type of performance appraisal takes the full year.
Conducting the assessment center performance review involves creating a development plan for the employee or manager and using a psychometric assessment to see their personality traits.
9) Behaviorally anchored rating scale
The behaviorally anchored rating scale (BARS) appraisal method looks at an employee’s behavior according to specific behavioral criteria and examples.
10) Project-based reviews
Unlike many types of performance reviews on this list, project-based reviews focus on an employee’s most recent work or project.
Project-based review questions focus on how much an employee contributed to a recent project. They can also be more frequent than other more-standard types of performance reviews.
Feedback from a project-based performance appraisal is often quicker because the employee may need to join another project soon after.
With project-based reviews, employees can quickly understand what areas they need to improve and use the feedback in their next project.
11) Ranking appraisals (stack-ranking appraisals)
Stack-ranking performance appraisals are considered controversial because they directly compare employees with each other.
In this case, the manager uses a ranking system to compare employees based on certain performance criteria. Often, stack-ranking appraisals will deliver results in the form of batches or groups of ‘high performing employees,’ ‘low performing employees,’ and those in the middle.
Despite the obvious comparison, the stack-ranking method clearly shows who the top performers are in a team. And who the low-performing employees are.
12) Checklist performance appraisals
The checklist performance evaluation relies on a series of ‘yes’ or ‘no’ questions that focus on employee traits. The manager or person doing the rating ticks certain boxes if they believe they have a specific listed trait. Otherwise, they respond with ‘no’ or leave the question blank.
When they’re done, the HR team takes the checklist and performs the employee evaluation.
13) Rating appraisals
In grading or rating performance evaulation, managers answer questions about an employee’s performance using a 1-5 rating scale.
Although they show employees where they stand, they don’t help them see how they need to grow or improve. That’s why it’s best to use rating appraisals along with another type of performance appraisal.
Rating appraisals are considered quick and easy to fill out.
14) Narrative/essay appraisals
Often referred to as the ‘narrative appraisal’ or ‘free form method,’ the essay appraisal is a common type of performance evaluation.
Under the narrative evaluation method, the manager writes a type of essay about the employee’s strengths and weaknesses.
Although this type of performance review lets managers write (or talk) freely about employees without being limited by specific questions, it comes with several disadvantages.
Chief among those disadvantages are that essays tend to be very subjective and take a long time to write. Essay appraisals can also leave employees confused or disgruntled. In addition, narrative appraisals are harder to compare because they don’t rely on the same criteria or sets of questions.
For better results, managers should pair narrative appraisals with another type of performance evaluation.
15) Critical incident appraisals
Another behavior-centered performance evaluation is the critical incident appraisal. In this type of performance evaluation, managers note specific situations and examples of positive and negative employee behavior.
Their behavioral reference or standard can be the employee’s job description, the company’s values, or a combination of the two.
Critical incident appraisals are important because they focus on specific incidents and help managers and employees see the latter’s progress. Or lack of it.
It’s worth mentioning that critical incident appraisals are an advanced type of performance evaluation. They can be hard to conduct and can be limited to certain types of roles and employees.
Final words
The first step in conducting performance evaluation for your team members is having a clear business strategy and performance management system.
Then you can decide which of the above types of performance evaluation is more suited to your needs.
All performance appraisals require having clear job descriptions and skill requirements for each role you have in your company.
Without job descriptions, creating and conducting performance reviews is going to be problematic. It’s unlikely you’ll be able to measure results and even compare an employee’s performance reviews of the years.
Need help getting started with creating performance evaluations? Get in touch with Tawzef.
Our team of experts to help you create a performance management system, show you how to conduct performance evaluation, and make the most of these appraisals for your teams and company.
