Performance Appraisal System in HRM

Akash Saikia
Feb 25

What does it mean by the Performance Appraisal System in HRM? We can thoroughly go through these terms as; The performance appraisal is the process of assessing employee performance by way of comparing present performance with already established standards. These standards have already been communicated to employees, subsequently providing feedback to employees about their performance level to improve their performance as required by the organization.

Everything you need to know about the performance appraisal of human resource management: performance appraisal process is a systematic evaluation of the employee’s present job capabilities and potential for growth and development by his superiors. It can be either informal or formal.

  1. How often should a Performance Appraisal System in HRM be Done?
  2. Performance Appraisal system in HRM included some important things:
  3. Performance appraisal Meaning
  4. Characteristics
  5. Goals
  6. How Performance Appraisals Work
  7. Performance Appraisal Process
  8. Methods
    1. Traditional Methods
    2. Modern Methods
  9. Advantages and Disadvantages
  10. Conclusion

How often should a Performance Appraisal System in HRM  be Done?

Performance measurement will be carried out at a given time of any company, such as annually or half-yearly or quarterly or weekly. It all depends on its nature or scale, and managers often need to determine their workers’ performance assessment cycle.

Let’s Learn about it!

Performance Appraisal system in HRM included some important things:

  • Meaning of Performance Appraisal
  • Characteristics
  • Objectives of Appraisal Process
  • How employee Performance Appraisals Work 
  • Performance Appraisal Process
  • Methods (Traditional & Modern)
  • Advantages and Disadvantages
  • Other Details

Performance appraisal Meaning

What does the term performance mean? Employees are performing well when they are productive. Productivity implies both concerns for effectiveness and efficiency; effectiveness refers to goal accomplishment. However, it does not speak of the costs incurred in reaching the goal.

Appraisals are judgments of the characteristics, traits, and performance of others. Based on these judgments, we assess others' worth or value and identify what is good or bad. In industry, employee performance appraisal is a systematic evaluation of employees by supervisors.

The Performance Appraisal system in HRM creates a healthy competition between colleagues. It also helps employees compare and improve upon their skills if needed. Appraisals are usually held annually in most companies.


A employee performance appraisal system that may have the following features may become a sound system of evaluation:

  1. It should be simple and understandable by the employees. Any complications need to be avoidable.
  2. It should be suitable for an appraisal at regular intervals because periodic appraisal enables the employees to improve.
  3. It should create an atmosphere of mutual understanding and confidence.
  4. The system should be capable of giving equitable justice to all employees. Therefore it should be objective and free from personal bias.
  5. When planning performance assessment, the staff should be taken in confidence.
  6. From the point of view of its structure, needs, and, more practically, based on the latest advances in the sector, the framework should be acceptable for the organization.
  7. Finding opportunities for advancement, increments, placements, transfers, etc., should serve the desired purpose.
  8. To make him/her more unbiased and free of prejudice, the employee gets special training to test him/her later.
  9. The department should convey the negative evaluation of any worker to him/her immediately to take improvement steps.
  10. If his/her performance review is unfavorable, the administration should allow the employee to appeal if he/her is not happy. Through this, the management will win the employees' confidence.


For different purposes, performance evaluation may be performed. One of the most valuable tools that a business has is human resources. Therefore, in terms of efficiency and productivity, any company should recognize where their workers stand. Here are some more success assessment goals:

  1. Feedback Providence
  2. Downsize or Right-Size
  3. Right Promotion Right Person
  4. Set Goals & achieve targets
  5. Improve Work Performance
  6. Determine Compensation Changes
  7. Encourage Mentoring & Coaching
  8. Employee Training and Development
  9. Provide a Legal Defense For Personal Decisions
  10. Improving Overall Organization’s Performance

How Performance Appraisals Work

Some companies also adopt one-on-one check-ins, which are less formal ways than the annual assessments. Managers can provide frequent feedback to their employees in this system. These check-ins help the employees to check their performance and re-evaluate their goals if needed periodically. This approach works well on agile and collaborative projects and helps companies in better performance appraisal decisions.

Performance Appraisal Process

  1. Setting performance standards
  2. Set up measurable goals
  3. Measure actual performance
  4. Compare with preset standards and goals.
  5. Discuss with the employee – met the expectations, did not meet the expectations, exceeded the expectations
  6. Take corrective actions
  7. Set standards for the next cycle


There are various methods for conducting  employee performance appraisal to identify performance areas that should be modified or improved and provide information to management for specific actions such as promotion, transfers, and compensation adjustment.

There are mainly two types of methods, e.g., Traditional Methods & Modern Methods of the Performance Appraisal System in HRM.

Traditional Methods

Here you go for Traditional Methods in Performance Appraisal System in HRM.

Rating Scales

The department prepares the numerical scale for performance appraisal that represents the job evaluation criterion such as the output, initiative, attendance, attitude, dependability, etc., and ranges from excellent to low.

Forced Choice Method

This employee performance appraisal method assumes that an employee’s job performance conforms to the standard distribution curve, i.e., a bell-shaped curve. Hence, the rater is compelled to put employees on each point on the scale.

Forced Distribution Method

This performance appraisal method assumes that an employee’s job performance conforms to the standard distribution curve, i.e., a bell-shaped curve. Hence, the rater is compelled to put employees on each point on the scale.

Critical Incidents Method

Under this method, the supervisor records each employee's critical behavior that makes a difference in the effective or non-effective performance. It is taken into consideration while evaluating his performance.

Behaviorally Anchored Rating Scale

The department puts on the scale points the descriptive statements about employees’ behavior, both effective and ineffective. The rater indicates which behavioral point describes the employee behavior the best & employee performance appraisal is done based on the points.

Field Review Method

Under this method, someone who does not belong to an employee's department or is usually from the corporate office or the HR department evaluates the performance of an employee for performance appraisal.

Performance Tests and Observations

The test, either written or oral, is conducted to test the knowledge and skills of employees.

Confidential Reports

The government departments mostly prepare confidential reports, wherein the company evaluates employee on some of the following parameters:

  1. Attendance
  2. Leadership
  3. Self-expression
  4. Ability to work with others
  5. Initiative
  6. Technical ability
  7. Integrity
  8. Responsibility, etc.

Essay Method

Under this method, the rater writes a detailed description of the employee's performance. The performance of an employee, his relations with other Co-workers, requirements of training and development programs, strengths and weaknesses of the employee, etc., are some of the points that a rater includes in the essay.

Comparative Evaluation Approaches

Under this method, several comparative analyses are done, wherein one employee's performance is compared with that of another Co-worker, and the rating is determined accordingly.

Modern Methods

Some of the modern methods of Appraisal are here:

Graphic Rating Scale Method

Graphic scales are practical; they are cost-effective and can be developed quickly. They also help in measuring a particular objective effectively. This scale rates the employees on a fixed scale (say 1-10) based on the extent to which they meet each of the desired criteria. For example, some organizations may evaluate employees based on quality and quantity of work, decisiveness & emotional stability for its employee performance appraisal.

Ranking Method

The administration can change this simple method of ranking employees in several ways. One of these methods is the paired comparison ranking style wherein the company compares the employees in pairs of two against each other. The number of times one employee is preferred over someone else is recorded. The top employee is the one with the highest number of preferences.

Checklist Method

The checklist can have various factors that the human resource department has chosen to be necessary. The employees are then judged based on those factors. The employers must select between the yes/no options in those checkboxes. For example, Behaviour Based appraisals are done by using the checklist method.

Management by Objectives Method (MBO)

MBO is one of the most systematic methods in performance appraisals. The idea is to give each employee a set of objectives that have to be achieved by them. During the performance appraisal, the supervisors will evaluate the extent to which the goals have been completed.

360-degree Feedback Appraisal

This approach is a group performance review. His/her close subordinates collect the data regarding an employee’s behavior. An employee’s colleagues might be able to review his/her performance under a variety of situations and circumstances, which might have escaped the employer.

General Performance Appraisal

In general, a manager sets goals and targets for an employee and urges them to achieve it. This pushes the employee to achieve them and encourages them to grow.

Technological Performance Appraisal

In this method of employee performance appraisal, HR judges the employee’s technological capabilities. Technical skills are kept at the forefront of all the other skills not related to their job.

Sales Performance Appraisal

The manager should discuss goals and deadlines for sales. This way, an employee can have a goal to achieve.

Advantages and Disadvantages


  • A systematic appraisal system helps the managers correctly identify employees' performance in an organized manner and their areas of talent and regions where they are lacking.
  • It helps the management place the right employees for the perfect jobs depending on their skills in particular areas.
  • It helps employees identify the areas in which they need to improve. The managers can also use this information to provide constructive criticism of the way employees perform their work.
  • Potential employees are often given promotions based on or the results of performance appraisals. People who have high ratings get promotions.  They can also transfer or demote employees if they are not performing up to the managers' expectations.
  • An appraisal is also useful in determining the effectiveness and results of training programs. It can show managers how much employees have improved after taking the training programs. This will give managers data on how to change and evolve the training programs.
  • It creates healthy competition among employees as they will try to improve their performance and score better than their colleagues.
  • Managers use appraisal programs to identify the grievances of employees and act upon them.


  • If the factors being used in the employee performance appraisal are incorrect or not relevant, the assessment will fail to provide any useful or practical data.
  • Sometimes, equal weightage is not given to important factors when performing an appraisal.
  • Some objective factors are very vague and difficult to gauge, like attitude and initiative. There is no scientific method to measure these factors.


There you've got it, the full HRM performance evaluation guide. Quality assessments are just as successful as their execution and the system in which they are carried out. If it is done merely for the sake of doing it, then it does not have any value.

However, if the strategy is applied correctly, it can enable the company to be more efficient, more concentrated and help authority figures make better decisions.

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