Methods of performance appraisal: traditional and modern
Human Resource Management · Unit V · Topic 13 of 14 · 6 min read
Cases checked to exist. Read the judgment before quoting a holding.
Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.
1. Traditional methods
(a) Straight ranking
The appraiser ranks all employees in a group from best to worst on overall performance. Simple and quick, but it does not show how much better one is than the next, and it is unworkable for a large group.
(b) Paired comparison
Each employee is compared with every other employee, one pair at a time, and the better of each pair is noted. The number of comparisons is N(N − 1) ÷ 2. The employee with the most “wins” ranks first. It is more precise than straight ranking but becomes laborious as N grows: 10 employees need 45 comparisons, 20 need 190.
Worked example. Five employees A, B, C, D, E. Comparisons = 5 × 4 ÷ 2 = 10. Results (winner of each pair): A–B: A; A–C: C; A–D: A; A–E: A; B–C: C; B–D: D; B–E: B; C–D: C; C–E: C; D–E: E.
| Employee | Wins | Rank |
|---|---|---|
| C | 4 | 1 |
| A | 3 | 2 |
| B | 1 | 3= |
| D | 1 | 3= |
| E | 1 | 3= |
Total wins = 4 + 3 + 1 + 1 + 1 = 10, equal to the number of comparisons, as it must be. B, D and E are tied, each having beaten one other in a circle (B beat E, E beat D, D beat B); a tie of this kind is a known weakness of the method.
(c) Grading
Categories are defined in advance (outstanding, very good, good, average, poor) and each employee is placed in one. Used in examinations and in many government formats.
(d) Forced distribution
The appraiser must place fixed percentages of employees in each category, following a normal curve, to prevent leniency and central tendency.
Worked example. 50 employees, distribution 10 : 20 : 40 : 20 : 10.
| Category | % | Employees |
|---|---|---|
| Outstanding | 10 | 5 |
| Above average | 20 | 10 |
| Average | 40 | 20 |
| Below average | 20 | 10 |
| Poor | 10 | 5 |
| Total | 100 | 50 |
Weakness: in a group of genuinely good performers, someone must still be labelled poor, which is unfair and demoralising.
(e) Graphic rating scale
The most widely used traditional method. A form lists traits or job factors (quality, quantity, job knowledge, dependability, initiative, cooperation) with a scale against each (for example 1 to 5, poor to excellent). Easy to use and to score; but the traits are vague and the method is open to halo and central tendency.
(f) Checklist (and weighted checklist)
The appraiser ticks yes or no against a list of statements about behaviour (“Is regular in attendance?”, “Follows safety rules?”). In the weighted version HR assigns hidden weights to each statement and computes a score.
(g) Forced choice
The appraiser chooses, from sets of statements that look equally favourable, the one that best describes the employee. Only HR knows which statements actually discriminate good from poor performance, which reduces bias but makes appraisers uneasy and gives no feedback.
(h) Critical incident method
The supervisor records, through the year, specific incidents of especially good or bad behaviour (“Stayed late to repair a breakdown and saved a shipment”). Appraisal is based on facts, not memory; it reduces recency error. But it is time-consuming and may focus on the unusual rather than the routine.
(i) Essay (free-form) method
The appraiser writes a description of the employee’s strengths, weaknesses, potential and needs. Flexible, but depends on the appraiser’s writing skill and is hard to compare.
(j) Field review
An HR specialist interviews supervisors about each employee and writes the appraisal, which the supervisor approves. Reduces bias but is costly.
(k) Confidential report
The traditional government method: the superior’s report on each employee, kept secret. After Dev Dutt (previous note) entries must be communicated, so the system is no longer truly confidential.
2. Modern methods
(a) Management by objectives (MBO)
Proposed by Peter Drucker in The Practice of Management (1954) and developed by George Odiorne. Superior and subordinate jointly set specific, measurable goals for a period; performance is reviewed against them. Steps: (1) set organisational goals; (2) set individual goals jointly; (3) agree action plans and resources; (4) periodic review of progress; (5) final appraisal against goals; (6) feedback and new goals. Merits: objective, result-based, motivating, improves communication and planning. Demerits: goals hard to set for some jobs; emphasis on short-term, measurable results; time-consuming; can turn into a paper exercise.
(b) Behaviourally anchored rating scales (BARS)
Developed by Smith and Kendall (1963). Each point on a rating scale is “anchored” by a description of actual job behaviour, collected from critical incidents. Steps: collect critical incidents; group them into performance dimensions; have experts reassign them to check consistency (retranslation); scale the incidents (say 1 to 7); build the final instrument. Example for a bank cashier, dimension “customer service”: 7 — anticipates the customer’s needs and explains options patiently; 4 — serves customers correctly but without explanation; 1 — argues with customers. Merits: precise, job-specific, reduces halo and leniency, good feedback. Demerits: costly and slow to build; each job needs its own scale.
(c) Assessment centre
Candidates (usually managers or managerial aspirants) are assessed over one to three days by a panel of trained assessors through exercises: in-basket, leaderless group discussion, role plays, case analysis, presentations and tests. First used widely by AT&T in the 1950s. Used mainly for potential appraisal and promotion. Merits: tests real behaviour, several assessors. Demerits: costly; candidates who are not selected may lose motivation.
(d) 360-degree appraisal
Feedback on an employee is collected from all around him: superior, peers, subordinates, customers and himself, usually by anonymous questionnaire. Used mainly for developing managers. Merits: a fuller picture; reduces the bias of a single appraiser; reveals leadership and interpersonal behaviour; encourages self-awareness. Demerits: time-consuming; raters may settle scores or collude; anonymity can be doubted; information overload; less suited for pay decisions. 720-degree appraisal adds external feedback from customers, suppliers and others, followed by a second round after development.
(e) Human resource accounting
The employee’s performance is assessed in money terms: the cost of the employee (pay, training) compared with the value of his contribution. Used by some Indian public sector companies in their annual reports. Difficult in practice because contribution is hard to value.
(f) Psychological appraisal
Psychologists assess potential through in-depth interviews, tests and discussions; used for future performance rather than past.
3. Choosing a method
| Purpose | Suitable methods |
|---|---|
| Pay and promotion among many employees | Graphic scale, forced distribution, MBO |
| Feedback and development | BARS, critical incidents, 360-degree, MBO |
| Potential for higher posts | Assessment centre, psychological appraisal |
| Small group, quick comparison | Ranking, paired comparison |
How this is examined
“Explain the various methods of performance appraisal” (January 2026; August 2024) and “Explain the techniques of performance appraisal” (June 2025), all for 10 marks; “Explain MBO” (January 2025, 10 marks). Short notes: 360-degree appraisal (August 2024; January 2026 100-mark paper, Q.8(a)) and BARS (August 2024). A paired-comparison or forced-distribution illustration inside the methods essay shows the examiner you understand how the methods work.
Now try the real questions: Human Resource Management past question papers.