What Are The Popular Methods of Performance Appraisal in HRM?

methods of performance appraisal in hrm

Did you ever feel disheartened by getting praise or a raise? 


The answer must be Never!


Performance appraisal is an integral part of business operations. It helps organisations to retain their employees and create opportunities for employee development. Losing an employee to competition can be a massive setback to your business.


86% of recruiters said the current job market is entirely candidate-centric, making them look for unique ways to attract and retain talents. You can implement multiple methods of performance appraisal in HRM (human resource management) with attractive salary packages and career development opportunities. 


But what is performance appraisal? How does it work? What are the top methods for performance appraisal? We will answer all your queries in the article. 

What is Performance Appraisal in HRM?

A survey revealed that 79% of employees quit their workplace due to a lack of appreciation. It means the chances of losing them to competitors increase if you don’t appreciate your best employees for their efforts towards your company.


Therefore, recruiters are adopting different techniques to identify and appreciate employees. One effective way of retaining employees is implementing different methods of performance appraisal in HRM.


It evaluates each employee’s performance and productivity against your company goals and objectives, yearly or quarterly. This helps employees get promotions or raises and allows them to understand where to improve to achieve better performance. 


In return, they contribute to your company’s overall productivity and meet more targets in less time. 


Until now, recruiters have used traditional methods like ranking or point-based systems, basic appraisal, paired comparison, etc. But these were biased approaches and aren’t very detailed. 


But with changing times, you need to adopt modern methods of performance appraisal in HRM. For example, Management by Objectives (MBO), 360-degree feedback, Assessment Centre Method, etc.

How Does Performance Appraisal in HRM Work?

Recruiters use multiple techniques of performance appraisal in HRM to evaluate their employee performance. You can use such tools to give people feedback on how they’re performing and meeting targets. It ensures you can better manage and achieve your company goals and reduce skill gaps hindering their work process. 


Additionally, if you have limited resources to reward your employees, performance appraisal methods can help you determine how to deploy them. The right process of performance appraisal can benefit both employers and employees alike.


This can further assist you in creating a systematic approach to the professional development of your employees. For example, adopting beneficial training initiatives to elevate employee responsibilities. 

Top 9 Methods of Performance Appraisal in HRM

Organisations can use multiple methods of performance appraisal in HRM to garner more accurate and valuable employee performance information systems. Let us look at the top 9 strategies for performance appraisal that can be adapted in your organisation. 

Management by Objectives (MBO)

This approach brings managers and employees together to uplift your company’s overall performance and meet objectives. They together can identify, plan, and communicate objectives for the entire board to focus on during a specific appraisal period. You can judge their results quarterly, half-yearly, and annually and make necessary adjustments to your goals and objectives. However, ensure you reward successful employees with a promotion or a salary raise. Additionally, the candidates who couldn’t meet your targets might need further training. 

360-Degree Feedback

360-degree feedback allows recruiters to gain input from managers, peers, customers and direct reports to evaluate an employee’s performance. One advantage of this approach is that it eliminates biased reviews and offers a clear understanding of each employee’s competence. It comprises five main components: 


  1. self appraisal 
  2. managerial reviews
  3. peer reviews
  4. subordinate appraisal manager,
  5. customer reviews

Ranking Method

It is one of the most traditional types of appraisal methods in HRM that ranks employees based on multiple factors. You can evaluate employees and rank them accordingly, with the best performers on top and poor ones at the bottom. 


One of these methods is paired comparison ranking, where you compare employees in pairs and record their performances. Employees with the highest number of preferences are rewarded as top employees. 

General Performance Appraisal

Your manager can set goals and targets for company workers and urge them to complete them within a timeframe. Once your employees can achieve these goals, managers will review them and set new targets. This process continues throughout the year, where the manager evaluates an employee’s performance and effectiveness in meeting targets. 

Behaviorally Anchored Rating Scale (BARS)

Out of numerous modern techniques of performance appraisal in HRM, BARS brings out the qualitative and quantitative measures of an employee’s performance. You can compare employee performance with certain behavioural examples and rate them on a BAR scale. 

Psychological Appraisal

Psychological appraisal approaches attempt to evaluate your workers’ future performance rather than assessing their past work. You can hire a qualified psychologist to conduct in-depth interviews and psychological tests and have private conversations with workers to determine their psychology. 


Research says that 22% of companies ask managers to focus more on employee behaviour than outcomes when assessing performance. 

Assessment Centre Method 

You can use an assessment centre method to assess an employee’s existing performance and predict their future job performance. Additionally, it enables employees to understand how others observe them and what is its impact on their performance. 


During the process, you can ask your employees to participate in social simulation exercises, e.g., informal discussions, fact-finding exercises, role-play, etc. However, this method of performance appraisal in HRM is time and cost-intensive and challenging to manage. 

Technological Performance Appraisal

With technological advancements, recruiters need to evaluate their employees’ technical capabilities. In a technological performance appraisal, you focus on how employees adapt to new technologies and their overall tech knowledge. 

Sales Performance Appraisal

Your main target in business is to increase revenue generation, and it is where your salesperson plays the upper hand. However, only a top salesperson can bring added revenue to your business, which urges sales performance appraisal in HRM. 


Using this method, you can evaluate how much an employee brings revenue to your business. Additionally, you must focus on their behaviour with customers.

Benefits of Implementing Methods of Performance Appraisals in HRM

We know the methods of performance appraisals in HRM are complicated, but it give managers a clear idea about the employees. It is beneficial for both employees and recruiters in multiple ways. 

Determine True Employee Potential

The modern techniques of performance appraisal in HRM help you learn about the employees’ strengths and weaknesses. You can also learn about their interests and potential, allowing you to choose the best employees for specific roles. 


For example, if a salesperson’s tech abilities are strong, you can shift them from sales to the IT department. 

Promotes Employee Development

When using these performance appraisal techniques, you can identify where your employees are lacking. Managers usually provide necessary feedback to these employees and help them improve. Your employees feel valued and get chances to improve, resulting in better engagement rates. 

Motivates Workers

Without constant communication and speaking about where an employee is lacking and how they can improve, you are pushing them towards uncertainty. On the other hand, performance appraisal methods can help understand what needs to be done. Additionally, praising them for their hard work and effort motivates them, leading to better overall company performance. 

How Can 6 Pence Help?

Implementing the methods of performance appraisal in HRM is essential for every business to improve productivity and encourage employee growth. It helps you recognise their strengths and weaknesses and assists them in growing with proper training. 


Are your employees’ performances showing a negative curve? It might be because you have numerous bad hires in business. In these situations, you can connect with 6 Pence for better staffing solutions. We are the leading temporary and permanent staffing agency helping companies find their best-fit candidates in Oman, Iraq, Bahrain, and Dubai. 


Also Read: 6 Benefits of HR System Integration For Companies

Frequently Asked Questions

What is performance appraisal? 

Performance appraisal methods in HRM refer to the evolution and documentation of how well your employees work on their jobs depending on company goals and objectives. 

What are the three appraisal methods of HRM? 

The three essential appraisal methods of HRM are 360-degree feedback, Management by Objectives, and Behaviorally anchored rating scale. 

What is the best performance appraisal method?

The behaviorally anchored rating scale (BARS) is one of the best performance appraisal methods.

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