Performance Appraisal in HRM: Methods and Objectives: As we all know, finances are an integral part of every business and the firm has a limited amount of funds in hand. So, the term “performance appraisal” is helpful for an organization to determine how to allocate their funds in the form of bonuses and increments among employees based on their performance at the workplace.

Also See: Objectives of Human Resource Management

In this way, they will get an idea about their employees that who are performing up to mark and deserve a raise in their salary and how much contribution they have given to the growth of the company. On the contrary, low performers also get motivated by top performers and improve their performance by concentrating on their work effectively.    

Performance Appraisal in HRM: Methods and Objectives

Here is everything that you should know about Performance Appraisal in the field of Human Resource Management. When a systematic evaluation of employees has done based on their capabilities and measures the potential to measure the growth as well as development by their seniors.

Definition of Performance appraisal

Performance appraisal is the entire process of evaluating and analyzing the performance of an employee by their superiors at work. This performance can also be concerning the project on which employees have worked and give his contribution to the organization. This is also named as either annual review or performance review.

This process is very helpful for the superiors to place the right employee with accurate skills at the right place and it ensures the success of the organization. Employees are always excited to know their performance and can easily evaluate their performance as compared to other employees and also make some improvements in their work too. Thus, performance appraisal is an integral part of every company.

Main Objectives of Performance Appraisal

The plans for performance appraisal are designed to fulfill the requirements of the organization and also the employees. It is a core function in HRM. The primary motive of performance appraisal is to make improvements in the efficiency of the employees and also devote their best-possible efforts towards the growth of the organization.

These appraisals are helpful to achieve targets such as review on salary, individual development, training to individuals, and planning for job rotation.

Here, we are mentioning the main objectives of performance appraisal which are given as follows:

  • Identify and analyze the weaknesses as well as strengths of the employees.
  • Identify the needs for training and fulfill them.
  • Generation of vital, relevant and verified information related to employees.
  • Give inputs on increments of rewards, promotions, transfers as well as salary.
  • Assist the employees if it is found that the employees are not suitable during their period of reviewing.
  • Creation of desirable culture as well as tradition within the organization.
  • Assistance in career development plans and Human resources depends on potentialities.
  • Provide research data for improving the overall performance of the human resources information system.

These are some of the objectives that are always targeted by the performance appraisal and make efforts to make improvements in their employees. Therefore, these are vital objectives that give a clear-cut meaning to the term “performance appraisal”.

To complete the entire process of performance appraisal, various methods are used by the organizations to make improvements in the performance of the employees. These methods help regulate the different areas of performance that ought to be modified and provide all information to the top-level management associated with the promotion, adjustments in compensation, and transfers.

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 Methods of Performance Appraisal in HRM

Here are some of the most important methods related to performance appraisal which are given as follows:

  1. Ranking Method

As it starts with the top performers, this method needs to enlist all the salespeople to analyze their performance. To conduct the performance appraisal of all the employees, an ample number of ranking methods are used.

Some of the vital methods are given as follows:

  1. Simple Ranking Method: In this method, all the same factors are used to rank their employees and it depends on their performance as a group. They are ranked from the top to the end according to their performance.
  2. Paired Comparison Method: Under this method, they compared their employees with other employees however they made the comparison at a single point of time. They keep a record of members when each employee preferred over others. These numbers indicate that the ranking of all employees and the top performers are those who hit the list more number of times.
  3. Forced Distribution method: As per the predetermined distribution scale, it is the best method to evaluate the performance of the employees. Usually, five grade scales are used by the firm where one end the best job performers rank and the other one is related to the poor performers. The scale rates all types of employees at a particular grade according to the performance level as compared to other employees.


There are three benefits of using such methods as these are cost-effective, little time, and also takes less time as well as efforts, and simple to apply. However, these are not considered as a very scientific, logical, and objective method as it includes a very high level of vagueness while ranking the employees. As the ranking is assigned by the supervisor, so they are more chance of biases and favoritism.

  1. Graphic Rating Scale Method

Under this method, various types of traits, behavior, and other performance factors are identified such as analytical ability, initiative, cooperativeness, decisiveness, quality and quantity of work, and emotional stability, and so on. On a scale, employees are rated to show the expected behavior or the time to which they fulfill the expected criteria for performance.

Numbers such as 1, 2, 3, 4, and 5 or the description like excellent, good, average, poor, etc. are the basis for rating the employee’s performance. The motive behind the usage of such a scale is to identify the various degrees of qualities as well as characteristics to represent the employees and provide the same to the appraiser.

Also See: 21 Vital Importance of HRM(Human Resource Management)

The overall score of an employee comprises the total count of points as acquired by an employee based on their rating factors relative to other employees within the organization.


Most of the organization uses this method because it is practical and it consumes less cost to grow. The level of ambiguity is low here because the traits of employees are defined in advance. The uneven interpretation of performance criteria and ratings are the major weaknesses of this method.

  1. Critical Incidents Method

Under this method, the manager always keeps a check over the tasks of their subordinates and calculates all their good as well as bad points according to their performance on work. The positive contribution is when the employees do something in favor of the organization and also result in the overall maximization in the productivity of the firm which leads to establishing a positive environment.

At the same token, when an employee commits any sort of mistake or an error that creates chaos and an unhealthy environment, then it counts to the negative portion of the employee. At the very end of the annual year rating, all these positive as well as negative points of an employee taken into consideration to evaluate the performance.


Although the methods need improvement and it inclines the subjective problems. But it has some limitations that the employees are also aware of the fact that they are continuously noticed by the superiors. Other employees tend to hide their real behavior so that there is nil count of their negative points.

Methods of Performance Appraisal
Methods of Performance Appraisal
  1. Checklist Method

In this method of performance appraisal, lists of factors are enlisted by the organization to analyze its employees. These factors may include the cooperation of employees with other team members, establish a healthy environment to work, follow the instructions given by their managers, and so on. Each factor acquires the numerical value to do the job successfully. The actual performance of the employees is measured based on their list of factors and the appraisal score is directly related to the score as determined by the factor’s score.

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This method saves a lot of time as well as efforts but it has some negative aspects as the supervisor need to consider all factors. It is such a tedious task to establish an effective checklist for performance appraisal with full accuracy.

  1. Essay Method

The manager writes about the potential and expert knowledge related to the job of an employee and to what extent an employee understands the policies as well as objectives of the organization. The employee’s performance is provided by the manager who noticed the employee for the whole year very closely.


This method provides a lot of details to the employees and also equipped with flexibility but it is not stable as the managers have different types of writing styles. So it seems negative sometimes and the traditional one.

  1. Management by Objectives Method

This is an inclusive management approach to analyze the performance of their employees. It follows a set of definite procedures and thus, acts as a scientific as well as an objective method for performance appraisal. A set of objectives are established by the organization and based on these objectives, the performance of employees take into account and measured.

Under this method, well-defined objectives are established by the firm for their employees and then, the employees perform their tasks and responsibilities accordingly.

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On the contrary, the manager needs to set the goals again if they realize that these are not able to be achieved and it takes a lot of effort and time to re-establish their goals.

  1. 360ͦ Feedback Appraisal

This is also popular with the name of multi-rater feedback or full circle appraisal or group performance review. It was developed in the United States in the year 1990s. The method includes garnering details about an employee from their colleagues, boss, team members, suppliers, as well as customers. As hinted above, the term “360ͦ“means that it includes all the people who are roaming around the employee.


This method is accepted as an effective tool for performance appraisal as the supervisor is not the only person who evaluates an employee. But the limitation is that every person is not familiar with the employee and the details may not be accurate. Thus, there may be a lack of accuracy.              

Wrapping Up

Performance appraisal is not a one-time phenomenon and it is also adopted by some of the organizations in the mid of the annual year. So, it may also be done twice a year and gives huge opportunities to their employees for growth and improvements. It is mandatory to wait for the appraisal for a year long.

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All in all, performance appraisal is a very effective part of an organization and also gives a sense of motivation to their employees.  

So it was all about Performance Appraisal in HRM: Methods and Objectives, If you have any doubt then please comment below. Appraisal in HRM: Methods and Objectives: As we all know, finances are an integral part of every business and the firm has a limited amount of funds in hand. So, the term “performance appraisal” is helpful for an organization to determine how to allocate their funds in the form...Human Resource Management Tutorials