The 6 Best Employee Performance Evaluation Methods

What are Employee Performance Evaluation Methods?

Companies of all sizes and functions will oftentimes conduct annual or quarterly employee performance evaluations to improve overall operational productivity. These reviews are formal assessments of an employee's output and performance at a company during a given time. Employers that use the best employee performance evaluation methods can ensure their staffers internalize the constructive feedback and improve.

Having a system for evaluations is important for both employers and employees. It enables companies to enhance their operations and processes via employee feedback. As for staff members, the evaluations provide insight into strengths and weaknesses and growth opportunities.

There are various techniques companies can employ to make sure their evaluations are effective. Generally, these methods entail providing praise, concrete examples, and setting goals. Depending on the organizational structure and objectives, employers should choose a method that works best for them and their employees.

Top Performance Evaluation Methods

Conducting face-to-face performance evaluations can be stressful for both managers and employees. An unbalanced or unsupported assessment can easily result in demotivating employees and ineffectiveness. To ensure performance appraisals are rewarding, organizations should utilize the following performance evaluation methods.

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1. Management by Objectives (MBO)

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Management by objectives is the most common performance review that companies use. This process entails managers and employees collaborating to pinpoint, strategize, and share objectives they want to focus on. After establishing these goals, the two parties will regularly update one another about their progress in attaining them.

The MBO method is best paired with the SMART technique. This is the practice of identifying specific, measurable, achievable, realistic, and time-sensitive objectives. With SMART goals, employers can effectively assess results and reward or retrain employees accordingly.

2. 360-Degree Feedback

Organizations also oftentimes employ the 360-degree feedback method for appraisals. With this method, employers will send out anonymous surveys to managers, employees, and customers so they can review a specific staffer. This process helps eliminate subjectivity in performance reviews and allows employees to better understand their impact on company culture. The 360-degree feedback technique will also drive employees to improve their engagement with their colleagues and customers.

3. Assessment Centre

The assessment centre is a modernized method that dates back to Germany in the 1930s. Today's companies will use this technique to allow employees to see how their colleagues perceive them in the workplace. It also highlights how an employee impacts their co-worker's performance. The assessment centre practice entails social-stimulation exercises, such as discussions and decision-making activities.

4. Behaviorally Anchored Rating Scale (BARS)

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The behaviorally anchored rating scale involves using numerical ratings to determine an employee's behavior in the workplace. By incorporating qualitative and quantitative reviews, employees will have an accurate performance analysis. It also ensures the assessment is based on concrete and observable behaviors and attitudes.

5. Psychological Appraisals

This form of performance evaluation is considered the most complex and time-consuming because it requires a psychologist's expertise. In general, a psychologist will conduct tests, such as interviews and discussions, to understand employee performance. These evaluations probe into a staffer's interpersonal skills, intellect, leadership capabilities, and personality. With psychological appraisals, employers can find out an employee's untapped potential.

6. Human-Resource Accounting

Also known as human cost accounting, the human-resource accounting method analyzes an employees' performance based on the capital they generate for the company. Employers will examine the cost of wages in comparison to the employees' monetary benefits. Other factors that may go into this assessment technique include overhead costs, interpersonal skills, and output quality. Organizations will use this method to highlight an employee's financial implication and how they impact the company's bottom line.

Key Takeaways for Performance Evaluation Methods

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  • Performance evaluation methods are formal assessments that detail an employee's output and productivity during a specific time period.
  • With the right evaluation techniques, employees can internalize feedback and improve their performance.
  • Evaluations are also important for employers because it gives them insight into how they can improve operations and company culture.
  • The best methods for performance evaluations include management by objectives, 360-degree feedback, and psychological appraisals.