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8 Performance Evaluation Methods That Boost Employee Morale: A Detailed Guide

Parvathi Vijayamohan

8 min read

Things are finally starting to look up. We think that it might, could be possible to vaccinate most of the world against COVID 19 by 2022.

But frankly, most of us are hitting a pandemic wall right now. After enduring two full years of COVID 19 with all of its chaos, it can be hard to care about work some days.

In this situation, how can you boost your employees’ morale? Surprisingly, the dreaded performance review can help you out with that.

This article will cover performance evaluation methods to boost employee morale in the new “new normal.” All of these performance evaluation methods have their pros and cons. So, whichever way you pick, make sure that it’s the right one for your needs.

What are the methods of performance evaluation?

Method 1: Management by Objectives (MBO)

This method uses an objectives-based approach to improve the performance of the firm as a whole. Peter Drucker first proposed the MBO method in his book, The Practice of Management.

Performance Evaluation Process:

  1. Managers and employees review past performance and spot the issues.
  2. Based on these insights, they jointly decide the next period’s objectives using the SMART framework.
  3. Through mutual discussions, each employee gets a set of goals and a specific timeline. The plans will be related to the organizational objectives at every level.
  4. Manager and employee meet regularly to discuss progress and course-correct accordingly.
  5. At the end of the period (quarterly, half-yearly, or annual), the managers evaluate the employees based on the objectives.

Pros: 

  • MBO builds healthy communication between bosses and employees.
  • Staff is motivated to strive harder because they helped create the objectives.
  • MBO decides the objectives, not the method of execution. It gives employees the freedom to choose how they will execute their goals.

Cons:

  • MBO is a result-centric method. So it helps measure tangible outcomes of performance. But intangible aspects, like communication skills or empathy, go ignored.
  • The nature of MBO makes it suitable for short-term objectives. One can’t use it to evaluate performance for long-term goals because they can be affected by unknown factors.

Performance evaluation examples: 1). Increasing unique, organic traffic for a website 2) Improving product feature releases on time by 50%.


Method 2: 360 Degree Feedback

360-degree evaluation gets anonymous feedback about the employee from 4 stages of appraisal: self-evaluation, manager feedback, peer reviews, and subordinates. Surveys are its primary tool. 360 surveys provide a holistic image of past performance through rating scales and open-ended feedback.

Performance Evaluation Process:

  1. Assign an owner/administrator. This person (typically from HR/ Talent) will be in charge of the 360 review process. They will own the communications and be the go-to person for questions.
  2. Use feedback software for the process. If your firm uses performance management software, it probably has a 360 feedback feature. If not, you can choose one of these 360 feedback tools.
  3. Schedule and send reminders. Aim for a 100% response rate (people who decline should say why they can’t respond.)
  4. Give the process ample time. If your deadline for reviews is the end of March, kick off the process as early as January 1.
  5. Go through the four stages of appraisal mentioned above.
  6. Align the 360 reviews to your yearly goal-setting cycle. E.g., if your goal-setting cycle kicks off in April, the appraisals should be done and dusted by the end of March.

Pros: 

  • It lessens manager bias by bringing in other perspectives.
  • 360 reviews are anonymous and confidential. That creates space for honest feedback.
  • They are a great tool for spotting skill gaps in teams/departments.

Cons:

  • 360 performance evaluations are time-intensive and need planning.
  • Certain employees can misuse anonymity to settle personal scores.
  • The feedback might not be accurate because perceptions guide it.

Performance evaluation examples: Anheuser-Busch Inbev, the world’s largest brewer, has a yearly 360-degree review for leaders that’s guided by the company’s core values.

Related: 360 Feedback Examples

With 360 feedback software like SurveySparrow, companies can eliminate skill gaps and boost employee morale with well-rounded feedback. To learn more about SurveySparrow’s 360 feedback software, request a demo.


Method 3: 720 Degree Feedback

This performance evaluation method is simply a more in-depth version of 360 reviews. For one thing, the evaluation is internal and done by key groups outside the company – like customers, vendors, or investors. For another, this method has two rounds of feedback meetings. (during and after the review).

Performance Evaluation Process:

  1. Go through steps 1-6 of the 360 feedback process.
  2. In addition, include feedback from the employee’s clients. It can be within or outside the company. E.g., the HR team serves the firm’s employees, so the employees are the HR team’s clients.
  3. Have the first meeting to discuss the feedback.
  4. Have the second meeting to check progress on the personal development plan, and change course accordingly.

Pros: 

  • 720-degree feedback provides “inside-out” feedback from more sources.
  • It gives a more thorough evaluation of employee training needs compared to other performance evaluation methods.
  • It reduces appraisal barriers like subconscious bias.

Cons:

  • It is even more time-consuming than 360 feedback.
  • 720-degree feedback useful for forward-facing roles like customer service or supply chain management.

Performance evaluation examples: Cadbury is a pioneer of this performance evaluation method. They have been using 720-degree feedback to review senior leadership for more than a decade!


Method 4: Critical Incident Method

This method measures both the employee’s performance (or output) and performance-related behavior – especially behavior that has changed the outcome of an incident.

Performance Evaluation Process:

  1. Record instances where employee behavior – both good and bad – has changed the outcome of an incident.
  2. Divide the behavior descriptions into categories – customer service, teamwork, punctuality, work attitude, etc.
  3. Through continuous feedback, open-ended evaluation, and real-time feedback, gather and keep the recorded behaviors in a digital or physical document. This is called an “incident’s net.”
  4. During the 1:1 meeting or yearly appraisal, review the employee incidents during the year.
  5. Gather facts about the incident from team members.
  6. Analyze the facts and find the problems, if any.
  7. Determine possible solutions for the issues.
  8. Evaluate if the solution removes the cause of the problem.

Pros: 

  • This method is prevalent in customer service and medical insurance, where issue handling is a performance metric.
  • It helps managers spot potentially disastrous or profitable events for the company; and how the employee’s behavior affected the outcome.
  • Critical Incidents give insight on how to match existing staff behavior with best practices. For example, managing customer complaints better.

Cons:

  • Critical Incident Method focuses only on identifying and addressing important events.
  • That means that an employee’s regular work goes ignored – even when their performance is consistent.
  • The events themselves might not accurately reflect what happens on the job.

Performance evaluation examples: Medicaid providers WellCare use this reporting process to gather data on critical incidents in nursing facilities and care centers.


Method 5: Checklist Method

A checklist is a list of traits, questions, or statements that describe an employee on the job. The reviewer checks off each one as positive or negative. Then, the employee’s performance is rated based on the number of positive checks.

Performance Evaluation Process:

  1. Make a list of criteria the employee has to meet: teamwork, creativity, etc.
  2. Make a standardized checklist based on the criteria and share it with the managers.
  3. There are three types of checklists: simple (with yes/no answers), forced-choice (with specific answer options), and weighted lists (with scores from 1-5 or 1-10).
  4. Each statement can have a text box for written comments that justify the rating for more targeted feedback.
  5. HR analyzes the data and generates a report.

Pros: 

  • Checklists are easier to implement than other performance evaluation methods.
  • Due to their format and specific answer options, they help produce more objective reviews.
  • Lists give employees greater clarity on what their company is looking for at the present moment.

Cons:

  • This method requires good judgment about key performance areas.
  • Despite your best efforts, a checklist might not give a holistic view of employee performance.
  • Consequently, this can lead to disgruntled employees who feel the list doesn’t cover their areas of expertise.

Performance evaluation examples: Universities use checklists to determine eligibility for promotion. They are also used to assess how effective instructors are at their lessons.


Method 6: Psychological Appraisal

In this performance evaluation method, qualified psychologists test employees  with in-depth interviews and quizzes. Using these reviews, they assess traits that could affect the employee’s performance at work.

Performance Evaluation Process:

  1. Break down employee behavior into the important components. They can include interpersonal skills, cognitive abilities, intellectual traits, leadership skills, emotional quotient, and other related skills.
  2. Partner with a qualified psychologist to administer the tests.
  3. Use specific scenarios while performing psychological appraisals. For instance, how an employee deals with an aggressive coworker.
  4. Review the results in a private 1:1 meeting between the employee and manager.
  5. Plan the employee’s career path based on the data.

Pros: 

  • This method lets you evaluate an employee based on their future potential rather than their past performance.
  • It offers introverted and socially withdrawn employees a chance to show their potential.
  • Psychological appraisals can help pinpoint unaddressed mental health problems.

Cons:

  • Psychological appraisals are a slow and complex process.
  • It can be tough to find trained professionals to administer the tests.
  • Accuracy can vary according to the expertise of the psychologist and the emotional state of the candidates.

Performance evaluation examples: Hewlett Packard uses various psychometric tests to screen candidates for job roles. Other Fortune 500 companies like JPMorgan use psychological appraisals for hiring and promotions.


Method 7: Assessment Center Method

What differentiates this from other performance evaluation methods? Employees are taken to an external assessment center to participate in social exercises (like group tasks, simulations, role-playing, etc.). The goal is to assess their future performance based on these tasks.

Performance Evaluation Process:

  1. Decide the competencies for the test – like decision-making or extroversion, etc. – and select suitable reviewers.
  2. Design the social exercises and choose a rating method.
  3. Select an assessment center and give the employees a heads-up (at least a month in advance)
  4. Explain the purpose and rules of the process to the employees at the time of evaluation.
  5. Use the reviewers to conduct the exercises and note strengths and weaknesses.
  6. Map out the data using HR tools like the competency matrix.
  7. Get reviewer feedback and discuss the results with the employee.

Pros: 

  • Like psychological appraisals, this evaluation method focuses on potential performance in similar situations.
  • You can customize the exercises to fit the role and company needs.
  • By observing how they work within a group, an employer sees how employees perform on a bigger team.

Cons:

  • The assessment center method can be expensive – depending on the length, tasks, and number of employees. According to one source, employers could shell out as much as £3,000 per candidate.
  • It can create unhealthy competition between some employees.
  • Due to the method’s social nature, there’s a possibility that introverted employees will score poorly.

Performance evaluation examples: 68% of employers in the UK and USA (including the Big 4 accounting firms) now use assessment center evaluations as part of their recruitment/promotion process.


Method 8: Behaviorally Anchored Rating Scale (BARS)

The Behaviourally Anchored Rating Scale (BARS) is a performance evaluation method in a vertical/horizontal rating scale. The scale grades range from one to five; we link these grades to specific examples of poor, average, and good performance.

Performance Evaluation Process:

  1. Identify the key performance areas such as “Teamwork” or “Hygiene.”
  2. Compile employee incidents that serve as examples of workplace behavior in these critical areas.
  3. Sort the incidents under these areas.
  4. Assign scale grades to each incident.
  5. Administer in the form of a test or survey.

Pros: 

  • BARS is suitable for businesses of all sizes for different job roles.
  • BARS solves the biggest drawback of regular rating scales – their subjectivity – by providing concrete behavior examples for each grade.
  • These grades set clear standards for performance evaluation and ensure fairness throughout the review process.

Cons:

  • BARS is time-consuming to design and implement for each job role.
  • Job requirements change over time, so the BARS requires regular updates.
  • To successfully conduct this performance evaluation method, managers need detailed information about the actions of their employees.

Performance evaluation examples: This excellent article showcases how small supermarkets and grocery stores can use the BARS method for employee evaluation.

Wrapping Up

The pandemic has blurred personal and professional boundaries. Individual circumstances, behavior, well-being – all of these matter now to the post-COVID workforce.

The performance evaluation methods above are not perfect. But they are reliable and will help you evaluate your employees in a way that boosts their morale and gives them the tools they need to push forward.

Want to enhance your employee experience? Check out SurveySparrow. Try out all our features free for 14 days.

Parvathi Vijayamohan

Growth Marketer at SurveySparrow

Fledgling growth marketer. Curious about all things SaaS. Aunty to a naughty beagle.

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