Performance Appraisal Methods: 12 Types to Analyze Performance and Talent

Measuring employee performance and talent is more than just a standard HR process; it has become a valuable tool for increasing company value. By applying effective Performance Appraisal Methods, companies can train their employees to enhance their capabilities and encourage their growth to reach their full potential. Choosing the right performance evaluation methods that align with company needs and objectives is essential, as it enables reliable identification of the desired development opportunities.

There is currently a wide variety of methodologies that allow Evaluation, from 360-degree Evaluation to Evaluation or objectives, among many others. As none of them is perfect, since they all have advantages and disadvantages, knowing them before implementing any strategy is the key to achieving positive results.

12 Performance Appraisal Methods for your Employees

If you are wondering what is the most effective method to evaluate the performance and talent of your employees, here you will find the solution. Or, at least, you will discover which method best fits your needs and the characteristics of your team.

We take an in-depth look at the 12 most important types of performance appraisal methods in HR, including their primary function and value, plus the advantages and disadvantages of each method. All of these methodologies can be evaluated through our performance appraisal software.

1. Self-Assessment

Self-assessment is a reflective performance evaluation method in which the employee is the one who analyses his or her skills and competencies. From time to time, the employee stops to reflect on his or her achievements, challenges, and areas for improvement. This method encourages self-criticism and self-knowledge, although it is important to complement it with other forms of Evaluation, a complete view; for example, peer evaluation or 90º evaluation may arise naturally; the HR department can provide a questionnaire to guide employees through their self-assessment process. This questionnaire allows them to assess different key performance indicators. From these, a continuous improvement strategy is developed to boost their skills and knowledge.

Advantages of self-assessment

• Each employee takes responsibility for their development
• Promotes self-criticism and self-knowledge
• Improve job satisfaction
• Allows employees to express their expectations and concerns
• Encourage open communication with managers and HR.

Disadvantages of self-assessment

• Employees may be overly critical or self-indulgent
• Employees may need help to identify their areas for improvement.
• Personal biases can influence the results.

2. Peer Review

Peer appraisal is a performance evaluation method in which coworkers assess an individual’s performance. This type of appraisal can offer unique insight into an employee’s performance, as peers interact closely and may have a more accurate perception of missing skills and competencies.

This requires clear and objective criteria and an environment of respect and honesty. This Evaluation provides valuable feedback and encourages collaboration and continuous improvement within the team. A platform can collect employee feedback and assess the agreement between opinions, self-evaluation, and Evaluation.

Advantages of peer review

• Provides a broader and more diverse view of employee performance
• It can foster collaboration and teamwork
• Peers can identify strengths and weaknesses that managers might overlook.

Disadvantages of peer review

• It can cause conflicts between employees
• The results can be affected by personal biases.
• Workers may not feel comfortable evaluating their peers

3. Hierarchical Evaluation

Hierarchical Evaluation refers to performance assessments conducted by an employee’s direct supervisors. This method is probably the most common and widely used. However, these evaluation techniques can be combined, giving rise to different approaches.

90th-grade Evaluation

The 90th Evaluation refers to a performance review where a direct supervisor assesses the performance of their subordinates. This Evaluation evaluates direct observation of work performance and may include aspects such as quality of work, efficiency, and ability to meet deadlines, among others.

Advantages of the 90º Evaluation

• Provides direct insight into an employee’s performance
• It is based on constant and direct observation of work behaviour.
• You can identify performance issues and establish improvement plans
• It tends to align better with business objectives

Disadvantages of the 90º Evaluation

• It can be subjective and influenced by the personal perceptions of the superior.
• It can create a tense work environment if the employee feels like he or she is being continually watched.
• It only sometimes reflects the needs of the employee.

180º Evaluation

The 180º Evaluation includes the direct supervisor’s assessment and the employee’s self-evaluation. This method offers a more comprehensive view of job performance by incorporating the employee’s perspective. These two approaches can promote continuous improvement and boost productivity when applied correctly.

Advantages of 180º Evaluation

• Provides a more complete view of employee performance
• Promotes self-criticism and personal responsibility in job performance
• It helps identify discrepancies between self-assessment and Evaluation.

Disadvantages of 180º Evaluation

• It can be a longer and more complex process than the 90º EvaluationEvaluationassessment may be influenced by the employee’s personal biases.
• It can generate conflicts between employees and superiors.

270º Evaluation

270° evaluation combines self-evaluation and assessments from supervisors and peers. This method provides a more comprehensive view of job performance, helping to identify discrepancies between different perspectives and fostering a more collaborative and productive work environment.

Advantages of 270º Evaluation

• Provides a very broad view of employee performance
• Promotes collaboration and teamwork
• It helps to identify discrepancies between different perspectives

Disadvantages of 270º Evaluation

• It can be a long and complex process.
• Personal biases can influence the results
• Requires a mature and respectful work environment to be effective

360º Evaluation

360º Evaluation is a performance review method that involves feedback from supervisors, peers, subordinates, and other stakeholders like clients or suppliers. This methodology aims to provide a comprehensive and balanced view of job performance.

Advantages of 360º Evaluation

• It provides a complete view thanks to the different perspectives
• Encourages responsibility and collaboration among all team members
• Identifying skills and areas for improvement is easier
• Promotes internal communication

Disadvantages of 360º Evaluation

• It can be a long and complex process.
• It can also be overwhelming for all parties.
• Synchronization of the parties involved is needed
• It can generate disparate information that is difficult to interpret.

4. Performance Evaluation by Objectives

Objective-based Evaluation is a method in which results are measured based on objectives predefined for each employee.

These objectives must be specific, measurable, attainable, relevant, and time-bound (SMART). In this way, an action plan can be established to achieve each objective and measure how much progress has been made.

Using objective-based appraisal software, employees and managers can identify opportunities for improvement, set goals, perform follow-up, and finally, an appraisal. When repeated consistently, this cycle enables continuous productivity and job performance improvement.

Advantages of Evaluation by Objectives

• Provides a quantitative measure of performance
• Encourage responsibility and motivation by setting clear goals
• Allows continuous monitoring of progress

Disadvantages of Evaluation by Objectives

• It can promote a culture that is results-oriented rather than skills-oriented.
• Goals can become too rigid and limit adaptability.
• If objectives are not well defined, they can create confusion or frustration.

5. Competency-based Performance Evaluation

One of the evaluation methods that has grown the most in recent decades is competency-based Evaluation, which focuses on assessing employees’ skills, knowledge, and attitudes about the competencies considered key for their jobs.

This provides valuable insight into how employees perform and what areas they need to train to increase their professional value.

Technical skills, like knowledge of specific software or soft skills like leadership or communication, can be assessed.

Advantages of competency-based assessment

• It allows you to identify an employee’s skills and knowledge and areas that need improvement.
• Promotes the development and continuous improvement of skills
• Provides a more complete view of an employee’s performance
• It is easier to align employee aspirations with those of the company

Disadvantages of competency-based assessment

• It is an evaluation method that requires more detailed work.
• It can be challenging to implement if the competencies are clearly defined.
• It can lead to frustration if employees do not understand how competencies are assessed.

6. 1 to 1 Evaluation

Another type of performance evaluation that companies can use is the one-to-one Evaluation. This method is based on regular meetings between the employee and his or her direct superior to discuss and evaluate his or her performance. In these meetings, the objective is to reach agreements to identify areas for improvement and propose a roadmap to achieve the proposed objectives.

These meetings are usually informal and rely on open and direct communication to improve performance. They can be combined with other evaluation methods to get a more complete picture of employee performance, usually self-evaluation or Evaluation. It is ideal for small businesses.

Advantages of 1 to 1 assessment

• Promotes direct and open communication between the employee and his superior
• Allows you to adjust objectives and strategies in real-time
• Improves the relationship and trust between employee and superior

Disadvantages of 1 to 1 evaluation

• It can be difficult to implement if there is no good relationship between the employee and his/her superior.
• Requires a regular time commitment
• It can create conflict if meetings are perceived as constant evaluations.

7. Evaluation by Periods

Another method of evaluating employee performance is through evaluation periods, usually quarterly or annually. This method allows for a systematic and regular review of performance based on objectives and goals achieved in a given period. Periods can be monthly, every 90 days, quarterly, biannual, or annual.

The period chosen will depend on the objectives set and the company’s work pace. It is essential to communicate objectives to employees at the beginning of each period and provide them with regular feedback. In addition, it should be combined with other techniques, such as self-assessment or Evaluationectives.

Advantages of Evaluation by periods

• Allows for systematic and regular monitoring of performance
• Encourages planning and time management
• Facilitates adaptation to changes in company objectives

Disadvantages of Evaluation by Periods

• It may need to be more flexible and reflect actual performance over some time.
• You can promote a culture focused on short-term results
• Short periods can generate pressure and stress for employees
• Too long periods can lead to performance problems due to deficiencies not being addressed in time.

8. Evaluation by Test

Test-based assessment is a method that relies on the administration of tests or examinations to evaluate employee performance and skills. These tests can be written, oral, or practical and usually focus on assessing specific skills and competencies.

This assessment method is frequently used in training development and selection processes but is less common in regular performance appraisals. However, it can be useful for assessing training program’s effectiveness or identifying specific development needs.

Advantages of test-based assessment

• It allows to measure the skills and competencies of an employee objectively
• It can be useful to identify areas of development
• It is effective in evaluating the effectiveness of training programs
• Allows to evaluate process and result

Disadvantages of test-based assessment

• It can generate stress and anxiety in employees
• It does not always reflect actual performance in the workplace
• The evaluator must have extensive knowledge of the subject to be graded.
• There may be biases in the development and correction of tests

9. Evaluation Based on Employee Satisfaction

Another method of performance evaluation is employee satisfaction evaluation. This technique prioritizes employee satisfaction with their development beyond their performance or objectives. The proposal is based on the fact that employees who are satisfied with their development will be happier and, therefore, more productive and useful to the company.

Employees and managers agree on goals and objectives, which are monitored regularly. In addition, personalized development plans are established that seek to satisfy the aspirations and needs of the employee, thus promoting their commitment and performance. In addition, work environment surveys can measure their satisfaction with their development.

Advantages of employee satisfaction-based evaluation

• Promotes commitment and job satisfaction
• It allows to identify areas of improvement in the management of human resources
• Foster a positive and productive work environment
• Disadvantages of employee satisfaction-based EvaluationEvaluation be subjective and influenced by emotional factors
• It does not directly measure job performance
• Employee goals may be very different from what the company needs.

10. Critical Incident Evaluation

One of the most unknown evaluation methods is critical incident evaluation. This approach identifies and analyzes specific events or behaviors significantly impacting job performance. These incidents can be both positive and negative and are used to identify strengths and areas for improvement.

Whenever a critical incident occurs, it is recorded and analyzed to learn from it and, if necessary, take corrective action. Employees and superiors can discuss these incidents regularly, seek solutions, and establish action plans. This method fosters an environment of continuous improvement and learning from mistakes and successes.

Advantages of critical incident evaluation

• Allows you to identify specific behaviors or events that impact performance
• Promotes an environment of continuous improvement and learning
• Help employees understand how their actions affect their performance and that of the company

Disadvantages of Critical Incident Evaluation

• It can be subjective and influenced by personal perceptions.
• Isolated incidents may not reflect the employee’s overall performance.
• It can create a tense work environment if employees feel like they are continually being evaluated.

11. Behavior-Based Assessment (BARS)

Behavioral Rating Scales (BARS) are based on direct observation of employee behavior at work. In this method, key behaviors necessary for proper job performance are identified and compared to the employee’s actual behavior.

This technique is especially useful for roles where behavioral competencies and skills are critical. Although implementation can be laborious, the results are often accurate and useful for employee development.

Advantages of Behavior-Based Assessment

• Allows an objective assessment based on observable behaviors
• Promotes the development of behavioral skills and abilities
• Provide specific and relevant feedback to the employee

Disadvantages of Behavior-Based Assessment

• Implementation can be complex as it requires detailed observation
• It requires a clear and agreed definition of the most appropriate behaviors.
• It can generate pressure and stress and lead to execution errors.
• Evaluator judgement may be affected by unconscious biases
• It can be not easy to implement in roles where the work is not directly observable
• You can create an environment of constant surveillance

12. Performance Evaluation by Costs

Finally, another way to analyze employee performance is through cost-based performance appraisal. This method is based on measuring the economic efficiency of the employee, that is the relationship between the costs generated by the employee (salary, training, resources used, etc.) and the benefits they bring to the company (sales generated, objectives achieved, etc.).

This assessment can be useful for roles where productivity can be measured in financial terms, although it should be noted that not all of an employee’s contributions can be measured in this way.

Advantages of cost-based performance evaluation

• Allows to measure the economic efficiency of the employee
• It helps to identify areas for improvement in terms of costs and benefits
• It can be useful for roles where productivity can be measured economically.

Disadvantages of cost-based performance evaluation

• Not all of an employee’s contributions can be measured in economic terms
• It can create pressure and foster a results-oriented culture.
• The costs and benefits associated with an employee can be difficult to calculate accurately.
• It can generate employee dissatisfaction
• In the long term, it can limit workforce growth and company growth.

Thanks to this solution, it is possible to identify the weak points (red) and the strong points (green) of the skills and performance of each employee. This facilitates the detection of skills gaps (GAP) and focuses development on each employee’s skills to improve. In addition, it allows the design of career plans and the continuous monitoring of professional development.

As if that were not enough to further convince you, it also offers talent matrices that help to identify, classify, compare, and improve the potential and performance of employees. With detailed reports that compile information from all the methods used to evaluate, you get a complete and accurate view of the situation of the workers. This comprehensive solution improves individual performance and contributes to the company’s success.