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Different types of performance appraisal methods include the management by objectives (MBO), graphic rating scale, and essay. The type of performance appraisal method an organization uses is dependent on its specific needs, organizational structure and long-term objectives. For instance, an organization may find that it receives information in a more useful way by using the essay type of performance appraisal methods, yet a different organization may find that this type is prone to having excessive evaluator bias. Each of these performance appraisal methods have different strengths and weaknesses, so organizations must pay careful attention before selecting the type to implement. Selecting the wrong method can result in lower employee moral, frustration between employees and evaluators, and high costs of changing to a new method later.
Management by objectives (MBO) performance appraisal methods are used by management to align employees to its company-wide goals. This requires the organization to establish quantifiable goals for the overall business and departments, and then assign goals to specific employees. These employees are provided with measurable and achievable goals, which will be monitored and evaluated in the next performance review. During the review, employees are encouraged to provide feedback to management about their own performance and future expectations.
Graphic rating scale performance appraisal methods are used in most organizations. These appraisals are designed so that employees are rated on specific behaviors or performances, such as the ability to work as a team, technical skills and finishing projects on time. The appraiser for this type of appraisal can be the supervisor, department manager, team or even the employee. This type of appraisal is popular because it allows for easy comparison between employees, is simple to develop and has low cost to implement. Successful graphic rating scale appraisals minimize the effect of bias by training evaluators on how to rate, requiring responses that can be backed up quantitatively, and asking questions that are specific to the employee’s job.
Essay types of performance appraisal methods are useful in gaining an in depth evaluation of employee performance, if done properly. They are generally used to justify an employee’s qualification for rewards or termination, but can also be helpful for monitoring performance. They key to creating a good essay performance appraisal is to require verifiable evidence of the evaluator's statements. Otherwise, essays may include bias that reflects more on the relationship between the evaluator and employee rather than actual performance. This method is not structured and lacks standardization, so companies may find it difficult to compare employee performance or determine if performance is in line with company objectives.