Performance evaluation activities help managers understand the level of task completion of employees. They can also determine who needs to be improved, where are the strengths and weaknesses of each individual to have a plan to overcome. From there, businesses can offer salaries, bonuses and benefits commensurate with their efforts and completion levels as well as motivate employees to complete their work better.
If you are struggling with not knowing how to properly measure performance, let's take a look at a few common performance evaluation methods to have the best overview.
1. Management by Objective (MBO)
MBO (Management by Objectives) first appeared in 1954 in the book The Practice of Management by Peter Drucker, it is seen as a way that managers use to approach and familiarize themselves with their planning work.
Governance by objectives means management through defining goals for each employee and then directing the employees' activities towards the realization and achievement of the established goals. All members not only clearly understand the goals and orientations of the organization, but are also aware of their roles and responsibilities in the process of achieving the organization's goals, have the right to choose actions and goals, so they are more likely to fulfill their responsibilities.
2. 360 Degree Feedback
360-degree feedback is a multidimensional performance appraisal method that evaluates an employee using feedback collected from the employee's circle of influence, specifically managers, peers, customers, and direct reports. This method will not only eliminate bias in performance reviews but also offer a clear understanding of an individual's competence.
This appraisal method has five integral components: Self-appraisals, managerial review, customer or client reviews, Subordinates Appraising manager (SAM), and peer reviews.
3. Assessment Center Method
The assessment center method is commonly used in selection procedures to check the suitability of candidates. The assessment consists of a number of real tests and simulations that aim to show whether a person is a good fit for a particular position or is still performing optimally. The assessment usually consists of different components including an intelligence test, a psychological test, and a presentation. Regular role-playing is also part of the assessment.
After the audit, a report is prepared with the results and conclusions from the audit. Candidates have the opportunity to check this report before it is sent to their (potential) employer.
4. Behaviorally Anchor Rating Scale
Behaviorally Anchored Rating Scales, also known as BARS, are a type of performance management scale that use behavior “statements” as a reference point instead of generic descriptors commonly found on traditional rating scales. Designed to add the benefits of both qualitative and quantitative information to the appraisal process, BARS measures an employee's performance against specific examples of behavior that are given a number rating for the purpose of collecting data.
Establishing specific behaviors for grading, are meant to give the rating a higher degree of accuracy relative to performance. This is because you’re relying on unique, individual behaviors required for each individual position within an organization, instead of behaviors that can be evaluated in any position across the board. It is presumed that using a rating scale with specific behaviors for selected jobs, minimizes the subjectivity in using basic ratings scales.
5. Psychology Appraisals
Psychological Appraisals come in handy to determine the hidden potential of employees. This method focuses on analyzing an employee's future performance rather than their past work. These appraisals are used to analyze seven major components of an employee's performance such as interpersonal skills, cognitive abilities, intellectual traits, leadership skills, personality traits, emotional quotient, and other related skills.
Qualified psychologists conduct a variety of tests (in-depth interviews, psychological tests, discussions, and more) to assess an employee effectively. However, it is a rather slow and complex process and the quality of results is highly dependent on the psychologist who administers the procedure.
6. Human Resources (Cost) Accounting method
Human resource (cost) accounting method analyzes an employee's performance through the monetary benefits he/she yields to the company. It is obtained by comparing the cost of retaining an employee (cost to company) and the monetary benefits (contributions) an organization has ascertained from that specific employee.
When an employee's performance is evaluated based on cost accounting methods, factors like unit-wise average service value, quality, overhead, interpersonal relationships, and more are taken into account. Its high-dependency on the cost and benefit analysis and the memory power of the reviewer is the drawback of human resources accounting methods.
Above are our suggestions, hope you can choose the right performance evaluation method!
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