Feedbacks and performance appraisals in the corporate world play a vital role in determining the productivity of employees. According to Linkedin, 69% of employees say they would work harder if they felt their efforts were better recognized. Thus, methods of performance appraisal are crucial for companies to understand and exercise, in order to motivate employees and improve their productivity. Modern methods of performance appraisal are significant in performance management, not only because they are an influencing factor in an employee’s salary hike and promotion but also because they can evaluate an employee’s proficiency, productivity, and shortcomings accurately. Let us look at Performance Appraisal Methods For Every HR Professional.

What Is Performance Appraisal?

Performance appraisal is the process of assessing employee’s performance over a certain period to evaluate ways of improving their productivity and growth. It is a regular process that happens in every organization, either annually or quarterly. The methods of performance appraisal include assessing employee’s efficiency and efforts against the established set of Key Performance Indicators (KPI) for a particular year or quarter. By evaluating an employee’s skills, overall progress, gaps, and giving feedback alike, the performance appraisal process helps in determining salary hike and promotions as well.

However, traditional methods of performance appraisal are becoming obsolete, as they are no longer yielding efficient results. They are more focused on evaluating an employee’s past performance, rather than improving skills for future work by positive feedback. That’s why organizations are adapting the modern methods of performance appraisal, which are beneficial in defining the company’s goals clearly, providing effective feedback, enhancing employee’s skill sets, improving employee engagement, and employee retention. These factors also contribute to the identification of training and development needs for an overall transformation of the workforce, mainly for strategic benefits. According to LinkedIn, Managers & Leaders who receive positive feedback on their strengths showed 8.9% greater profitability.

We’ve curated a list of 7 Modern Performance Appraisal Methods for every HR professional. Take a brief look here.
  1. Management by Objectives (MBO)
  2. 360-Degree Feedback
  3. Behaviorally Anchored Rating Scale (BARS)
  4. Psychological Appraisals
  5. Assessment Centre Method
  6. Critical Incident Method
  7. Human-Resource (Cost) Accounting Method

Did you know that 77% of HR professionals believe performance reviews aren’t an accurate representation of employee performance? To make performance appraisal more than a buzzword, HR professionals are revamping their existing traditional methods of performance appraisal and deploying various modern methods of performance appraisal in HRM (Human Resource Management) systems.

Let’s take a look at these different types of performance appraisal methods:

1) Management by Objectives (MBO)

Management by Objectives (MBO) is one of the types of performance appraisal methods where managers and team members together identify, strategize, and organize areas of responsibility & KPI to focus on during a certain appraisal period. Over regular meetings, the manager and employee examine the advancements. These measures in progress could be used as SOP (Standard Operating Procedure) by employers to evaluate the contribution made by an individual employee. While helpful in deciding the paces of profitability, this process usually focuses on career-oriented and tangible goals.

2) 360-Degree Feedback

360-degree feedback is one of the multifaceted methods of performance appraisal in HRM. The measurement criteria for performance appraisal includes self-assessments, managerial reviews, peer reviews, and client reviews. This essay method of performance appraisal is ideal for private sector companies.

3) Behaviorally Anchored Rating Scale (BARS)

This is one of the most effective performance appraisal techniques, as it brings together both the qualitative and quantitative benefits of the modern methods of performance appraisal. The Behaviorally Anchored Rating Scale (BARS) process is a paired comparison method of performance appraisal, as in this process, the employer compares employee productivity, skills, and behavior with specific behavioral benchmarks that are anchored to numerical ratings.

4) Psychological Appraisals

This is one of the modern methods of performance appraisal which comes handy while evaluating an employee’s hidden skill set. This method uses performance appraisal techniques to access seven major components of an employee’s productivity, like interpersonal skills, cognitive abilities, intellectual traits, leadership skills, personality traits, emotional quotient, and other related skills. This method is ideal for large organizations.

5) Assessment Centre Method

This is one of the best modern methods of performance appraisal, which evaluates employee performance in social-related situations. Employees are asked to participate in various social team-building exercises that highlight their potential of being successful in handling various leadership roles and responsibilities. This method is ideal for service-based companies and consulting firms to determine the future leaders of the enterprise.

6) Critical Incident Method

In the Critical Incident Method of performance appraisal, employees are assessed based on certain responsibilities, known as ‘critical incidents’, in which the employee either achieves tremendous success or fails to perform the given responsibility. Throughout the evaluation process, a digital and physical data record is maintained that stores the insight from various incidents. This is one of the pivotal methods of performance appraisal, significant for an employee’s growth.

7) Human-Resource (Cost) Accounting Method

Ideal for startups and small businesses, this is one of the recommended modern methods of performance appraisal, where an employee’s productivity is evaluated through the monetary benefits they bring to the organization. It efficiently assesses the economic value of an employee to the organization.


With the changing dynamics of the workforce, choosing the right methods of performance appraisal has become more vital now. These modern performance appraisal methods reflect that you care for your employee’s growth, along with the organization’s goals, making you a data-driven HR professional for a futuristic workforce.

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