The Pros and Cons of Different Performance Appraisal Methods

Employees are evaluated according to a checklist of predetermined key performance indicators and strengths and weaknesses such as time management skills. Supervisors determine whether the evaluated employee’s performance meets these criteria and provide structured goals. Most of the time, these employee appraisals take place annually and workers are rated on a linear scale.

Pros

• Structure and formality: Traditional performance reviews provide a structured framework for evaluating and discussing employee performance. They often follow a set process and timeline, which can help ensure consistency across the organization.
• Learning and development: These reviews offer an opportunity for supervisors to provide feedback on an employee’s performance, strengths, and areas for improvement. They can be a platform for discussing career goals, development plans, and performance expectations.
• Compensation and rewards: Annual employee reviews often play a role in determining compensation, promotions, and rewards. They provide a basis for identifying high-performing employees who may be eligible for salary increases, bonuses, or advancement opportunities.
• Performance documentation and tracking: Formal performance reviews typically involve documentation of the evaluation process and its outcomes. This can help build a record of performance discussions, achievements, and areas needing improvement, which can be useful for future reference and decision-making processes.

Cons

• Infrequent feedback: Annual performance reviews often imply that feedback is not shared on a daily basis. This time gap can hinder timely feedback and limit opportunities for ongoing communication and performance improvement.
• Bias and subjectivity: Annual employee performance reviews can lead to subjectivity, as they solely rely on the opinions of supervisors. This can lead to biased assessments based on personal perceptions and negative experiences for employees.
• Focus on past performance: These reviews often emphasize past performance rather than real-time or future-oriented assessments. They may not capture recent accomplishments or changes in an employee’s performance since the last review meeting.
• Anxiety and stress: The anticipation of an annual performance review can create anxiety and stress for employees. This once-a-year process can make the evaluation feel high-stakes and put pressure on both supervisors and employees.
• Lack of continuous feedback: Traditional reviews do not provide the feedback loop necessary for ongoing feedback and coaching. Employees may miss out on regular opportunities to receive guidance, suggestions for improvement, support, and recognition for their work.
• Administrative burden: Conducting annual reviews for all employees can be time-consuming, especially in large organizations. This can divert resources from other important tasks and potentially delay the feedback process.

Good for

The manufacturing industry, warehouses and retail companies can get great results from traditional employee appraisal systems. Indeed, these evaluations often focus on quantitative evaluation criteria that fit with repetitive tasks.

360-degree feedback consists of multi-rater feedback collected about an employee from their peers, their managers, and themselves. Obtaining constructive feedback coming from different perspectives helps gather comprehensive insights on employee performance strategies in the workplace.

Pros

• Feedback from multiple sources: Collecting feedback from peers, employees, and supervisors helps build a comprehensive evaluation.
• Upward feedback: This method encourages feedback from teams regarding their supervisor and management, meaning that everyone is accountable for their own performance.
• Broader perspective on employee performance: When conducted right, these evaluations provide a general and fair perspective of employee performance throughout the entire company.
• Encourages self-awareness and development: Receiving constructive feedback from multiple raters encourages self-reflection and development. Moreover, 360-degree feedback includes a self-evaluation that further fosters professional growth.

Cons

• Time-consuming process: Gathering feedback from multiple raters takes time and this method might be difficult to implement in your business.
• Personal biases: Office conflicts and personal opinions might influence raters and cause partial appraisals.
• Issues of anonymity: Anonymity – or lack thereof – may affect the quality and honesty of feedback.

Good for

All companies can use 360-degree feedback – it more so depends on the job category. Managers can particularly benefit from this process and it can be adjusted depending on the industry (companies that provide services can use client feedback for the evaluation). The downside is that this method can be quite costly and time consuming depending on your business reality.

This method defines clear and concrete goals that the employee and the organization aim to achieve. These objectives may be quantitative or qualitative, and tracking them often requires regular performance meetings.

Pros

• Goal-setting and alignment with organizational objectives: With a MBO approach, self-development objectives and organizational goals are aligned for better workflows and greater productivity.
• Employee participation and ownership: Employees participate in goal setting, which is proven to multiply their chances to be engaged by 3,6. They are also more likely to be proud of their performance and committed to improving it.
• Clear framework: This method provides a clear framework for evaluating performance based on measurable goals such as SMART goals. This means that everyone has a clear idea of what they have to do and can see the impact of their productivity on the company’s mission.

Cons

• Challenge of setting measurable goals: Although measurable goals are effective, they can be difficult to set up depending on the company’s roles. This performance appraisal method might be more efficient in some teams than others.
• Focus on short-term goals: Defining short-term objectives may result in a narrow focus that neglects broader aspects of performance and sets aside development opportunities.
• Reliance on goal attainment: Solely focusing on goal attainment might lead to a lack of recognition for smaller but valuable contributions.

Good for

This method is interesting for companies that work by project completion – consulting and professional services, for instance. A relationship of trust and providing autonomy to employees is crucial, so the evaluated team dynamic matters here.

Employees evaluate their own performance based on predefined criteria or goals to further encourage their personal commitment to their performance and growth.

Pros

• Self-reflection: Employees who reflect on their own performance have a better understanding of the challenges they need to overcome to become high performers. They are also more likely to request growth opportunities and share their ambitions with their managers.
• Ownership: Owning up to your individual performance and the way it impacts the team and the organization at large encourages growth and renewal.
• Self-development: Self-assessment is one of the best drivers of individual development as employees are able to regularly analyze their performance and its evolution over time.

Cons

• Lack of objectivity and biases: Evaluating your own performance is not an easy feat. Employees might be tempted to positively rate themselves to avoid questioning their practices. Objectively rating your strengths and weaknesses is a method that requires training beforehand.
• Issues of self-worth: On the contrary, some employees might have issues recognizing their self-worth and underrate themselves, which undermines their self-assessment.
• Need more varied perspectives: Self-assessments are not enough on their own and they need to be implemented alongside another appraisal method to be efficient, which might be complicated and time-consuming for some companies.

Good for

Industries which typically focus on qualitative criteria such as behavior and people skills can greatly benefit from using this appraisal method. This is the case of service industries, for example.

Of course, other appraisal methods exist, such as the 9-box grid appraisal and many others. However, with the previous examples we introduced, you will get a strong idea of which performance appraisal process will be the most efficient for your reality.

Some of these methods’ limitations can be addressed by implementing a healthy feedback culture consisting of regular check-ins, ongoing performance management, and effective performance management software tools. Indeed, regular and actionable feedback optimizes employee performance management and fosters productivity and development.

Here are some sample questions covering the essential points you need to address during a performance appraisal, sorted by evaluation method:

Once you’ve asked your questions during the performance interview, you can write up your assessment. Here are some sample results to help you in your writing and summarizing process:

Whatever the method you choose, a successful appraisal must focus on finding solutions to improve employee productivity and motivation, as well as promoting skills development. Good performance management is an integral part of effective human resources management practices, and directly supports your strategic objectives and the success of your organization.