The performance appraisal methods can be divided into traditional and modern approach both methods has different types which explain below,
1. Graphics Rating Scales: Graphic rating scales method is a part of performance appraisal which connect individual performance to an independent standard. Judgments about performance are recorded on a scale. This is the oldest and most widely used technique. This approach is also known as linear rating scale or simple rating scale. The appraisers are supplied with printed forms, one for each employee. One reason for the popularity of the rating scales its simplicity, which permits many employees to be instantly evaluated. Such scales have relatively low design cost and high in case of administration. They can quickly pinpoint significant dimensions of the job. The major drawback to these scales is their low reliability and subjectivity. Another limitation is that the descriptive words often used in such levels may have different meanings to different raters.
2. Ranking Method: Ranking method is a part of performance appraisal, the employees are ranked from best to worst on some characters. The first finds the employees with the highest performance and the employees with the lowest performance in that particular job category and rates the former as the best and later as the poorest. Then the rater selects the next highest and next lowest and so on until he rates all the employees in that group. The ranking also means that somebody would always be in the backbench. It is possible that the low ranked individual in one group may turn out to be a superstar in another group. A significant limitation of the ranking method is that the size of the difference between individuals is not well defined. For instance, there may be little difference in performance between individuals ranked second and third, but a big difference between those ranked third and fourth.
3. Paired Comparison Method: This method is relatively straightforward. Under this method, the appraiser lists the employees by comparing one employee with all other staff in the group, one at a time. The paired comparison does not force distribution of employees in each department. For instance, if a department has two outstanding employees and six average employees and the paired comparison is correctly utilized, then those two employees will get a much higher percentage of positive correlation than the other six.This means that where the number is relatively large, the technique may be time-consuming (for instance, for 20 employees, 190 comparisons would be necessary). Another limitation of this method is that employees are simply compared to each other on total performance rather than specific job criteria.
4. Forced Distribution Method: The rater may rate his employees at the higher or lower end of the scale under the earlier methods. Thus, similar to the ranking technique, forced distribution requires the raters (supervisors) to spread their employee evaluations in a prescribed distribution. This method eliminates central tendency and leniency biases. However, in this method, employees are placed in certain ranked categories but not ranked within the categories. Quite often, workgroups do not reflect a reasonable distribution of individual performance. If one department has all outstanding employees, the supervisor will find it extremely difficult to decide who should be placed in the lower categories. Difficulties can also arise when the rater must explain to the employees why he was placed in one grouping, and others were placed in the higher grouping.
5. Checklist Method: Checklist is the method of performance appraisal, the checklist is a simple rating technique in which the supervisor is given a list of statements or words and asked to check statements representing the characteristics and performance of each employee. There are three types of checklist methods, viz. simple checklist, weighted checklist, and forced-choice method.
6. Critical Incident Method: Employees are rated discontinuously, i.e., once in a year or six months under the earlier plans. The performance measured may not reflect real and overall performance, as the rater would be severe about appraisal just two or three weeks before the appraisal. Hence a continuous evaluation method, the, i.e., critical incident method has been developed. Since the critical incident method does not necessarily have to be a separate rating system, it can be fruitfully employed as documentation of the reasons an employee was rated in a certain way. This certainly helps in reducing bias in the evaluation. However, the system is not without drawbacks. The question of discounting previous time of the executive is also involved here. Because of the time required to write complete profiles of critical incidents, managers can be asked instead to record sketchy notes of their observations indicating the date and some other reminder of the events.
7. An essay or from Appraisal: Free method requires the manager to write a short essay which describing each employee’s performance during the rating period. This format emphasizes evaluation of overall performance based on the strength /weaknesses of the employee’s performance, rather than specific job dimensions. By asking supervisors to enumerate specific examples of employee’s behavior, the essay technique minimizes supervisory bias and halo effect. The time involved in writing separate essays about each employee can be formidable. Essays are not amenable for evaluation and analysis, fifty essays describing different employees’ performance cannot be tied to merit increases and promotion possibilities because there is no common standard. Another inherent limitation of this method is that the evaluators may have unequal skills in writing the essays. A skillful writer can present a more dynamic case about an employee than an awkward writer or supervisor. Thus, the quality of the ratings depends, not actually on employee performance, but on the writing ability of the rater.
8. Group Appraisal: Under this method, an employee is appraised by a group of appraisers. This group consists of the immediate supervisor of the employee, other supervisors who have close contacts with the manager or head of the department the employee’s work and consultants. The director of the department or manager may be the Chairman of the group, and the immediate supervisor may act as the Coordinator for the group activities. This group uses any one or multiple techniques discussed earlier. This method is widely used for purposes of promotion, demotion and retrenchment appraisal.
9. Confidential Reports: Assessing the employee’s performance confidentially is a traditional method of performance appraisal. Under this method, superior appraises the performance of his subordinates based on his observations, judgments, and institutions. The superior keep his judgments and report confidential. In other words, the superior does not allow the employee to know the report and his performance. A superior write the report about his subordinates’ strengths, weaknesses, intelligence, attitude to work, sincerity, commitment, punctuality, attendance, conduct, character, friendliness, etc. Though the confidential report is a traditional method, most of the public sector organizations still follow this method in appraising the employees’ performance. This approach suffers from some limitations.
10. Assessment Center: Assessment center is a method of performance appraisal which was first applied in the German Army in 19 century. Later business and industrial houses started using this method. This is not a technique of performance appraisal methods by itself. In fact, it is a system or organization, where assessment of several individuals is done by various experts by using different techniques such as role-playing, case studies, simulation exercise, the structure in sight, transnational analysis, etc. In this approach, individuals from different departments are brought together to spend two or three days of work on an individual or group assignment similar to the ones they would be handling when promoted. Observers rank the performance of every participant in order of merit. The center enables individuals working in a low-status department to compete with people from well-known departments and enlarge their promotional chances.
11. Human Resource Accounting: Human Resource Accounting deals with the cost of and contribution to human resource organization. Cost of the employee includes the cost of manpower planning, recruitment, selection, induction, placement, training, development, wages, and benefits, etc. Employee’s contribution is the money value of the employee’s service, which can be measured by labor productivity or value added by human resources. Cost of human resources may be taken as standard. Employee’s performance can be measured regarding employee contribution to the organization and human resource accounting is a part of performance appraisal.
12. Management by Objectives: Although the concept of management by objectives was advanced by Peter F. Drucker way back in 1954, it was described only recently as the larger range in performance appraisal methods. Refinements brought about by George Odiorne, Valentine, Humble and others have enriched the concept and made it more acceptable all over the globe as an appraisal technique. During the last decade, about 50 organizations have adopted MBO in their work settings. MBO is a ‘process whereby the superior, subordinates and managers of an organization jointly identified its common goals, defined each’s major areas of responsibility regarding results expected of him. Thus, MBO focuses attention on participative set goals that are tangible, verifiable and measurable. During the appraisal period, the superior and subordinates update and alter goals as necessary due to changes in the business environment. Both superior and subordinate jointly discuss whether the subordinate has achieved the goals. If not, they should identify the reasons for deviation, e.g., strike, lockout, market change, etc. New goals and performance objectives are determined by the superior and employee for the next period based on performance levels.
13. Psychological Appraisal: the Psychological appraisal is conducted to assess the employee potential. A psychological appraisal consists of (a) in-depth interviews, (b) psychological tests, (c) consultations and discussions with the employee, (d) discussion with the superiors, subordinates and peers and (e) reviews of other evaluations. The psychological appraisal results are useful for decision-making about (i) employee placement, (ii) career-planning and development, and (iii) training and development.
14. 360 Degree Appraisal: The 360-degree appraisal is basically Multi-Rater Appraisal and Feedback System which is the type of performance appraisal, where an individual is assessed by some assessors including superiors, subordinates, peers, internal customers and external customers. In this system, a candidate is assessed periodically usually once a year but sometimes even half yearly. The evaluation is made on a questionnaire specially designed to measure behaviors considered as critical for performance. The appraisal is done anonymously by the persons concerned, and the assessment is collected by the official of the HRD department. The assessment is consolidated, and feedback profiles are prepared and given.