How to Evaluate the Performance of Your Employees? (Traditional Methods & Modern Methods)

These methods try to explain how management can establish standards of performance and devise ways and means to measure and evaluate the performance of employees.

There is no foolproof method of evaluating the performance of employees. Every method suffers from certain drawbacks and some merits. These methods can broadly be divided into traditional and modern methods.


A. Traditional Methods:

These are the old methods of performance appraisal based on personal qualities like knowledge, capacity, judgement, initiative, attitude, loyalty, leadership, judgement etc. The following are the traditional methods of performance appraisal.

1. Unstructured Method of Appraisal:

Under this method, the appraiser has to describe his impressions about the employee under appraisal in an unstructured manner.

This is a simple method of performance appraisal. The rater has to list his comments specifically on qualities, abilities, attitude, aptitude and other personal traits of the employees. This makes the method highly subjective in nature.

2. Straight Ranking Method:

In this technique, the evaluator assigns relative ranks to all the employees in the same work unit doing the same job.

Employees are ranked from the best to the poorest on the basis of overall performance. This method is also highly subjective and lacks fairness in assessing the real worth of an employee.

While using this method, the evaluator is asked to rate employees from highest to lowest on some overall criterion.

Though it is relatively easier to rank the best and the worst employees, it is very difficult to rank the average employees.

Generally evaluators pick the top and bottom employees first and then select the next highest and next lowest and move towards the average (middle) employee. The limitations of this method are:

(a) It is highly subjective.

(b) Comparison of the various components of a person’s performance is not done. The “whole man” is compared with another “whole man” in this method. In practice, it is very difficult to compare individuals possessing varied behavioural traits.

(c) This method speaks only of the position where an employee stands in his group. It does not tell anything about how much better or how much worse an employee is when compared to another employee.

(d) The magnitude of difference in ability between ranks is not equal at different positions. For example, the difference in ability between the first and second individual may be much greater in absolute terms than the difference between the second and third. In terms of ranks, however, the differences between these individuals are the same.

(e) There is no systematic procedure for ranking individuals in the organisation. The ranking system does not eliminate the possibility of snap judgements.

(f) Its use is difficult in large groups when the rater cannot compare several people simultaneously. As an answer to this problem the paired comparison method of ranking has been evolved.

3. Paired Comparison Method:

Ranking becomes more reliable and easier under the paired comparison method. This method is an attempt to improve upon the simple ranking method. Under this method, employees of a group are compared with one another at one time.

If there is a group of five employees A, B, C, D and E, then A’s performance is compared with that of B’s and decision is taken as to whose performance is better.

Similarly A’s performance is compared with C, D, and E and decisions regarding comparatively better performance are taken.

4. Man-to-Man Comparison Method:

Under this method, certain factors are selected for analysis. The factors include leadership qualities, initiative etc. The appraiser develops a scale for each factor.

The standards are very concrete because these are neither numbers nor alphabets nor descriptive adjectives but are persons of varying ability whom the rater has selected and ranked in the ability under consideration. Thus a scale of men is created for each trait. In rating other persons, the rater simply looks over this scale and compares them with the persons on the scale.

This method is also known as factor comparison method. It was used during World War I by the American army. The defect of this method is that developing a scale is quite a tough and complicated task.

5. Grading Method:

Under this technique of performance evaluation, certain categories of worth are determined in advance and they are carefully defined.

These selected and well defined categories include Grade ‘A’ for outstanding Grade ‘B’ for very good Grade ‘C’ for average Grade ‘D’ for poor etc.

These grades are based on certain selected features of employees such as knowledge, judgement, analytical ability, leadership qualities, self-expression etc.

The actual performance of employees is compared with the above grades and employees are allotted grades that speak for their performance.

6. Graphic Rating Scale:

Perhaps the most commonly used method of performance evaluation is the graphic rating scale.

The evaluator is asked to rate employees on the basis of job related characteristics and knowledge of job. Evaluator is given printed forms.

The performance is evaluated on the basis of these traits on a continuous scale. It is a standardised, quantitative method of performance appraisal. The scores are tabulated indicating the relative worth of each employee.

The rating scale is the most common method of evaluation of an employee’s performance today.

One positive point in favour of the rating scale is that it is easy to understand, easy to use and permits a statistical tabulation of scores of employees. When ratings are objective in nature, they can be effectively used as evaluators.

The method has certain demerits. It is arbitrary and highly subjective in nature. It assumes all characteristics are of equal importance for performance of all jobs.

It is charged that high score on one factor may compensate for low score on another. A superior may favour his subordinates unnecessarily.

7. Forced Choice Method:

This method was developed during World War II for evaluating the performance of American army personnel.

The evaluators have the tendency to rate the performance as high, moderate or low and escape the important responsibility assigned to them.

The primary purpose of the forced choice method is to correct the tendency of a rater to give consistently high or low ratings to all the employees.

This method makes use of several sets of pair phrases, two of which may be positive and two negative and the rate is asked to indicate which of the four phrases is the most and least descriptive of a particular worker.

Actually, the statement items are grounded in such a way that the rater cannot easily judge which statements applies to the most effective employee.

The evaluator is forced to select from each group of statement (normally two). The statements may be the following.

(a) Good work organiser

(b) Shows patience with slow learners

(c) Dishonest or disloyal

(d) Careful and regular

(e) Avoids work

(f) Hardworking

(g) Cooperates with fallow workers

(h) Does not take interest in work

From the above list of statements, favourable statements are marked plus and unfavourable statements are marked zero. Under this method, subjectivity of evaluator is minimised.

8. Check List:

A checklist represents, in its simplest form, a set of objectives or descriptive statements about the employee and his behaviour.

The rater checks to indicate if the behaviour of an employee is positive or negative to each statement.

The performance of an employee is rated on the basis of the number of positive checks. The following are some of the sample questions in the checklist.

(a) Is the employee regular on the job yes/no?

(b) Is the employee respected by his subordinates yes/no?

(c) Is the employee always willing to help his peers yes/no?

(d) Does the employee follow instructions properly yes/no?

(e) Does the employee keep the equipment in order yes/no?

The objections to this method are:

1. It is difficult to construct a good checklist.

2. A separate checklist is needed for each job because statements used in one checklist to evaluate one category of workers cannot be used in another checklist to evaluate other category of workers.

9. Weighted Checklist:

The checklist provides to the evaluator statements about work related behaviour of the employees where every statement is given equal importance.

However, under weighted checklist the items having significant importance for organisational effectiveness are given weight age.

Thus, in weighted checklist, weights are assigned to different statements to indicate their relative importance.

This method has some demerits. It suffers from evaluator’s bias. A separate checklist is required for each job which increases the cost. It is also difficult to provide due weight age to the particular characteristic of the employee.

10. Free Essay Method:

Under this method, no quantitative approach is undertaken. It is an open-ended appraisal of employees. Evaluator describes in his own words what he perceives about the employee’s performance. While preparing the essay on the employee, the rater considers the following factors:

(a) Job knowledge and potential of the employee.

(b) Employee’s undertaking of the company’s programmes, policies, objectives, etc.

(c) The employee’s relations with co-worker and superiors.

(d) The employee’s general planning, organising and controlling ability.

(e) The attitudes and perceptions of the employee in general.

The description is expected to be as factual and concrete as possible. An essay can provide a good deal of information about the employee especially if the evaluator is asked to give examples of each one of his judgements.

The essay evaluation method, however, suffers from the following limitations:

1. It is highly subjective; the supervisor may write a biased essay.

2. Some evaluators may be poor in writing essays on employee performance.

3. A busy appraiser may write the essay hurriedly without properly assessing the actual performance of the worker.

4. It is not possible to compare two essay appraisals due to variations in their length and contents.

11. Critical Incidents Method:

Under this method, the performance of the worker is rated on the basis of certain events that occur during the performance of the job (i.e., the evaluation is based on key incidents).

These critical incidents or events represent the outstanding or poor behaviour of employees on the job.

The rater maintains logs on each employee, whereby he periodically records critical incidents of workers behaviour. At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers’ performance.

Critical incidents method helps to avoid vague impressions and general remarks as the rating is based on actual records of behaviour/ performance.

The feedback from actual events can be discussed with the employee to allow improvements. The rater can fully defend his ratings on the basis of his record.

The method requires that the behaviour of employees in all significant incidents be recorded (the effective and ineffective behaviour) in a specifically designed notebook. The notebook contains various categories of characteristics about the employees.

An evaluator or supervisor here should refrain himself from passing his own judgements but should discuss the facts as he observes.

This method provides an objective basis for conducting a thorough discussion of an employee’s performance. This method avoids bias (most recent incidents get too much emphasis).

Like other methods, this method is also with limitations:

(a) Negative incidents may be more noticeable than positive incidents.

(b) It requires very close supervision, which is generally not liked by the employees.

(c) The supervisors have a tendency to unload a series of complaints about incidents during an annual performance review session.

(d) If the recoding of incident is put off for some time, supervisor may forget the same and fails to record it later.

12. Field Review Method:

In this method, a HR specialist interviews line supervisors to evaluate their respective subordinates.

The interviewer prepares the questions to be asked in advance. By answering these questions, a supervisor gives his opinions about the level of performance of his subordinate, the subordinate’s work progress, his strengths and weaknesses, promotion potential etc.

The evaluator takes detailed notes of the answers, which are then approved by concerned supervisor. These are then placed in the employee’s personnel service file.

Since an expert is handling the appraisal process, in consultation with the supervisor, the ratings are more reliable.

However, the use of HR experts makes this approach costly and impractical for many organisations.

13. Confidential Report:

A confidential report by the immediate supervisor is still a major determinant of the subordinate’s promotion or transfer. This is a traditional form of appraisal used in most government organisations.

It is a descriptive report prepared generally at the end of every year, by the employee’s immediate superior.

The report highlights the strengths and weaknesses of the subordinate. The disadvantages of this method are as under:

(a) It involves a lot of subjectivity because appraisal is based on impressions rather than on data.

(b) No feedback is provided to the employee being appraised and, therefore, its credibility is very low.

(c) The method focuses on evaluating rather than developing the employee. The employee who is apprised never knows his weaknesses and the opportunities available for overcoming them.

In recent years, due to pressure from courts and trade unions, the details of a negative confidential report are given to the appraise.

B. Modern Methods:

Modern methods are an improvement over the traditional methods. They are an attempt to remove defects from old methods.

The modern methods of judging the performance of employees are developed. They are discussed below:

Behaviourally Anchored Rating Scales (BARS):

It is designed to identify critical areas of performance of a job. Under this method, the behaviourally anchored ratings scales are outlined to recognise the critical areas of effective and ineffective performance behaviour for getting results.

The evaluator is required to observe the behaviour of the employee while performing the job. He then compares these behavioural observations with the behaviourally anchored rating scales.

This method is more valid and expected to give more reliable results as it minimises the errors in performance appraisal. It identifies measurable behaviour and is therefore more scientific.

BARS are a combination of the rating scale and critical incident techniques of employee performance evaluation. The critical incidents serve as anchor statements on a scale and the rating form usually contains six to eight specifically defined performance dimensions.

The steps involved in constructing BARS are as follows:

Step I:

Identify Critical Incidents:

People with knowledge of the job to be appraised (probed), such as jobholders and supervisors, describe specific examples of effective and ineffective behaviour related to job performance.

Step II:

Identify or Select Performance Dimensions:

The people assigned the task of developing the instrument cluster the incidents into a small set of key performance dimensions. Generally, between five to seven dimensions account for most of the performance.

While developing varying levels of performance for each dimension (anchors), specific examples of behaviour should be used, which could later be scaled in terms of good, average or below average performance?

Step III:

Retranslate the Incidents:

Another group of participants who are knowledgeable about the job is instructed to retranslate (reclassify) the critical incidents generated in step II above. Incidents for which there is less than 75% agreement with the first group are not retranslated.

Step IV:

Assigning Scale Values to the Incidents:

Each incident is then rated on a one- to-seven scale with respect to how well it represents performance on the appropriate dimension.

A rating of one represents ineffective performance; and a rating of seven indicates very effective performance.

Rating is done on the basis of how well the behaviour described in the incident represents performance on the appropriate dimensions.

Mean and standard deviations are then calculated for the scale values assigned to each incident. Incidents that have standard deviations of 1.5 or less are included in the .final anchored scales.

Step V:

Producing the Final Instrument:

A subset of the incidents that meets both the retranslation and standard deviation criteria is used as a behavioural anchor for the final performance dimensions.

A final BARS instrument typically comprises a series of vertical scales (one scale per dimension) that are endorsed by the included incidents. Each incident is positioned on the scale according to its mean value.

Advantages of BARS:

BARS method has several advantages.

1. The ratings are likely to be accurate because these are done by experts.

2. BARS typically requires considerable employee participation, therefore, its acceptance by both superiors and their subordinates may be greater. Thus, the ratings are likely to be more acceptable due to employee participation.

3. Proponents of BARS also claim that such a system differentiates among behaviour, performance and results and consequently is able to provide a basis for settting developmental goals for the employee.

4. It is job-specific and identifies observable and measurable behaviour, hence it is more reliable and a valid method for performance appraisal.

5. The method is more reliable and valid as it is job specific and identifies observable and measurable behaviour. The rater’s bias is reduced. Systematic clustering of critical incidents helps in making the dimensions independent of one another.

6. The method provides a basis for setting developmental goals for employee as it differentiates between behaviour, performance and results.

7. The use of critical incidents is useful in providing feedback to the employee being rated.

Disadvantages of BARS:

Researchers, after surveying several studies on BARS, concluded that “despite the intuitive appeal of BARS, findings from research have not being encouraging”.

It has not proved to be superior to other methods in overcoming rater errors or in achieving psychometric soundness. The weaknesses of BARS method are:

1. It is very time consuming and expensive to develop BARS for every job.

2. Behaviours used are more activity-oriented than result-oriented. Several appraisal forms are required to accommodate different types of jobs in an organisation.

3. A specific deficiency is that the behaviours used are activity oriented rather than result oriented. This creates a potential problem for the supervisor doing the evaluation, who may be forced to deal with employees who are performing the activity but not accomplishing the desired goals.

In view of the lack of compelling evidence demonstrating the superiority of BARS over traditional techniques, Decotis, concluded that – “It may be time to quit hedging about the efficiency of behavioural scaling strategies and conclude that they offer no clear-cut advantages over more traditional and easily developed methods of performance evaluation”.

2. Result Oriented Appraisal or MBO Technique: The result-oriented appraisals are based on the concrete performance targets, which are usually established by superior and subordinates jointly. This procedure has been known as Management by objectives (MBO).

Much of the initial impetus for MBO was provided by Peter Drucker (1954) and by Douglas McGregor (1960).

Drucker first described MBO in 1954 in his book “The Practice of Management”. Drucker pointed the importance of managers having clear objectives that support the purposes of those in higher positions in the organisation.

McGregor argues that by establishing performance goals for employees after reaching agreement with superiors, the problems of appraisal of performance are minimised. MBO in essence involves the setting out clearly defined goals of an employee in agreement with his superior.

Refinements brought out by George Odione, Valentine, Humble and others have enriched the concept and made it more acceptable all over the globe as an appraisal technique.

The definition of MBO, as expressed by its foremost proponent, Dr. George sadiron is “Management by objectives is a process whereby the superior and subordinate managers of an organisation jointly identify its common goals, define each individual’s major areas of responsibility in terms of the results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members”.