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6 performance appraisal types for HR leaders to consider
Performance appraisal types each have their advantages and disadvantages. Learn which is the right fit for your company, including whether you can combine approaches.
Employee performance reviews are a crucial part of employee experience, and some performance review approaches are a better fit for a particular company than others. HR leaders should learn about and evaluate performance review approaches so they can decide which works best, whether for a particular employee group or the entire company.
Performance appraisal types range from 360 reviews, which incorporate feedback from multiple sources, to self-assessments, which involve only the employee's thoughts on their performance. Each approach has its advantages and disadvantages, and the approaches are not mutually exclusive.
Here's more about each type, as well as what HR leaders should consider when choosing a certain approach.
1. Management by objective
Management by objective is a common performance appraisal type in which an employee's performance is evaluated against particular goals, or objectives. Often, company leaders develop objectives for the organization first, and then each company level develops its own objectives, which hopefully helps the organization achieve its overall goals. This process is typically referred to as cascading objectives from the top down.
Many HR systems offer performance management functionality that supports this type of appraisal. The advantages and disadvantages include the following.
Advantages
- The employee understands the objectives they must achieve.
- The employee and manager can meet regularly to go over the objectives and discuss progress, as well as next steps.
- HR staff can use the review for other HR practices, such as compensation planning and succession planning.
Disadvantages
- The company's trajectory may change partway through the year, making existing objectives irrelevant.
- Employees and managers sometimes struggle to think of new objectives.
- The feedback is often restricted to the employee's and manager's perspective, and incorporating others' feedback may be more valuable than focusing on only the employee's and manager's viewpoints.
2. 360 review
The goal of a 360 review is to provide an employee with an appraisal from multiple sources, such as the employee's manager, peers and, potentially, external contacts. A 360 review gives employees well-rounded feedback from multiple sources. Often, an HR staff member or a third party carries out the process of gathering and summarizing the feedback, but the employee's manager may take care of it as well.
The advantages and disadvantages include the following.
Advantages
- 360 reviews provide a more complete view of an employee's performance because multiple sources supply feedback.
- The review isn't affected by personality conflicts between the employee and another person, such as their manager, because multiple people deliver feedback.
- The employee and their manager can use a 360 review to develop objectives and identify training that helps the employee in targeted areas.
Disadvantages
- One of the co-workers giving feedback may be friends with the employee and give less honest answers.
- The process can take a significant amount of time.
- The process is carried out infrequently, so good employee performance and bad employee performance may go unrecognized for long periods of time.
3. Project-based review
A project-based review focuses on an employee's performance on a specific project. In a project setting, tasks are often clearly defined and tracked, so an employee's manager or other supervisor can use project tasks to analyze the employee's accomplishments and their adherence to deadlines, among other areas to review.
The advantages and disadvantages include the following.
Advantages
- Evaluating an employee using a project-based review may be easier because the tasks are likely fairly specific.
- Multiple team members can deliver feedback about the employee's performance.
- Employees may be able to receive feedback multiple times per year if they work on short or multiple projects.
Disadvantages
- If senior employees are working on multiple projects at once, they may perform less well on a particular project because another project is more demanding.
- A project leader may assign an employee too many tasks, which could negatively affect their performance, or other factors may affect the employee's ability to complete their work.
- If a project lasts longer than a year, the employee may receive little feedback outside of an annual appraisal.
4. Self-assessment
A self-assessment review enables employees to share how they feel they performed over a given period. HR leaders may decide to pair employees' self-assessments with other performance review types, such as management by objective.
The advantages and disadvantages include the following.
Advantages
- Self-assessment gives employees an opportunity to share their input, including projects or tasks at which they performed particularly well.
- Self-assessment makes the employee part of the performance review process, avoiding a one-way dialogue about their performance.
Disadvantages
- The employee may not accurately remember their performance, or they may embellish the role they played on a project or task.
- If a company uses only self-assessment, feedback is limited to the employee and doesn't include feedback from their manager and peers.
5. Peer review
Peer reviews use feedback from an employee's co-workers. If peers work alongside an employee on a project, for example, their feedback may be different than that of a manager and may provide further insight.
The advantages and disadvantages include the following.
Advantages
- Peer reviews may provide a deeper look at an employee's performance than just using a review by the employee's manager.
- Peers who work directly with an employee can often provide insight into the employee's performance in multiple situations, including stressful circumstances or positive moments, like the completion of a project.
Disadvantages
- Personality conflicts between a peer and an employee may affect a peer review.
- Peers may only experience one aspect of the employee's performance -- for example, how well or poorly the employee works with others.
- Peers who only work with an employee occasionally may receive an inaccurate view of the employee's overall performance.
6. Behaviorally anchored rating scale
The behaviorally anchored rating scale (BARS) evaluates an employee using a range of numbers. The employee is rated against statements that have a number and describe a particular type of performance. A manager, or whoever is carrying out the evaluation, selects the number and accompanying statement that they believe best fits the employee.
The advantages and disadvantages include the following.
Advantages
- The statements attached to each number can help managers or others select the most accurate number for the employee.
- Managers with direct reports who occupy similar roles use the same rating scale for each direct report, which may translate into more equitable ratings across managers or departments.
- Companies can use BARS alongside many other performance appraisal types, such as management by objective or peer reviews.
Disadvantages
- Creating the performance statements can be a time-consuming process.
- Variation in employee behavior may be difficult to capture in the review process.
- Configuring a system to enable BARS may be difficult, if not impossible. Performance management software is typically set up for a small number of ratings scales across the company, and BARS requires multiple rating scales per role.
