13+ Performance Appraisal Methods with Pros and Cons

Employees are the engine of any organisation. But how do you know if that engine is running efficiently?

The answer lies in how you measure it.

Performance appraisal methods are the systematic tools and procedures utilised by human resources and management to assess an employee’s job performance and the employee’s productivity in relation to the specifications of the job and the organisation overall.

The selection of an appropriate method ensures that the organisation and individual goals are aligned, thereby identifying the training needs and helping in the career development so that the employees can be promoted to a higher position.

In this guide, we break down the 4 key steps of the appraisal process, compare traditional vs. modern appraisal methods, share 13 performance appraisal methods and techniques. This blog will also help you find the best fit for your team.

Let’s start!

The 4 Steps of Performance Appraisal

Before discussing the specific methods (the 360-degree feedback approach and the Bell Curve), it is important to understand the framework within which they function.

The generally accepted answer to that question is a cycle that moves from goal setting to goal review.

Although appraisal procedures may vary with each organisation, a successful process usually follows a logical flow:

1. Setting Performance Standards (Planning)

Any good performance appraisal starts with planning. This first step starts well before the review meeting. Management must establish clear, objective and, to the extent possible, measurable performance standards. These standards must define what is a “good job” for each role, so that all parties understand what is expected of them.

Tip: Use SMART goals (Specific, Measurable, Achievable, Relevant, Time-bound)

2. Communicating the Standards

A standard is of no value unless it is communicated. In this step, the manager is to communicate the expectations to the employee. This is a two-way communication. The employee should have a clear picture of what is expected and how he or she will be measured.

Pro tip: This stage usually connects with the “Discussion” stage of development cycles, so involvement of employees is essential.

3. Measuring Actual Performance

This is the data-collection step. The manager observes and documents the employee’s performance over a period of time (using a performance appraisal method like a checklist or MBO, which we will address later).

Tip: Good measurement means ongoing measurement—not a panicked check in the final quarter of the year.

4. Discussing the Appraisal (Feedback & Review)

The last and most vital step is to meet the manager and employee to discuss the report. This step needs to turn data (i.e., report data) into action (highlighting strengths, spotting weaknesses and future instalments such as rewards or correcting mistakes).

Tip: The goal here is development, not just judgement.

Traditional vs. Modern Performance Appraisal Methods

Some methods of assessing performance work better than others. Generally, these split into two types:

Traditional Performance Appraisal Methods (Past-Oriented): These methods look at how workers acted before, judging their character. Instead of future goals, they check old actions. Some focus on attitude, others on results from months ago. Rather than growth, it’s about what already happened.

Modern Performance Appraisal Methods (Future-Oriented): These methods review job performance that looks ahead – spotting wins, what someone might achieve later, and also growth targets. These methods care less about past errors but more about where an employee can go while building skills step by step.

Let’s know them all!

Traditional Methods or Past-Oriented Performance Appraisal Methods

These are traditional methods of performance appraisal. They lay more emphasis on the rating of the individual’s personality traits, such as initiative, dependability, drive, creativity, integrity, intelligence, leadership potential, etc. These are relatively simple & common techniques of performance appraisal.

These methods, called past-oriented methods, are based on the study of past assignments of the employees already undertaken by them. Though simple, they suffer from many defects but are still popular in ancient organisations and public sector units. These methods are also called past-oriented appraisal methods.

1. The Bell Curve Method (Forced Distribution)

One of the most controversial yet renowned performance appraisal methods, the bell curve method assumes that employee performance follows a normal statistical distribution (a bell-shaped curve).

The way it worked was managers were forced to sort employees into three categories:

• High Performers (Top 10-20%)
• Average Performers (Middle 70%)
• Non-Performers (Bottom 10%)

Pros: Prevents managers from rating everyone as “excellent” (leniency bias).

Cons: It can kill team spirit. Even if an entire team performed brilliantly, someone must be put in the bottom category.

2. Checklist Performance Appraisal Method

A simple and time-saving method. A list of statements or characteristics by the HR department (e.g., “Is regular in attendance” and “Shows interest in work”).

How it works: Simply tick either “Yes” or “No” against each trait.

Best for: Small businesses wanting to evaluate staff quickly and in a standard way, without building complicated measurement systems.

3. Critical Incident Method

This method implies illustrated examples instead of generalised opinions.

How it works: The manager keeps a log of positive and negative examples (behaviours) of a subordinate’s work-related behaviour. The manager maintains a digital or physical log of “critical incidents”—specific events.

Example: John worked late on Oct 12 to resolve a server crash issue, saving the client account.

Why it works: During your review, you’ll be armed with concrete evidence, making your feedback harder to deny or dispute.

4. Ranking & Paired Comparison

Ranking Performance Appraisal Method: Simply listing employees from best to worst.

Paired Comparison Method: In this type of performance appraisal method, every employee is compared with every other employee in the same pair (e.g., Employee A with Employee B), and better ones are identified for assessment. It is one of the easiest and most effective methods for deciding merit pay or promotions, especially with limited financial resources.

Modern Performance Appraisal Methods (Future-Oriented)

Unlike the traditional methods, the modern methods of performance appraisal focus on the employee’s emotional, intellectual, and other personal factors rather than just judging their performance. This is the major reason why companies show more inclination towards the modern performance appraisal methods.

5. Management by Objectives (MBO) Appraisal Methods

MBO is a result-oriented appraisal method wherein evaluation of employees is done on the basis of achievement of results, such as the shift from ‘traits’ (is he a nice guy?) to ‘outcomes’ (did he sell?).

How it works:

The management and employees jointly establish specific goals at the beginning of the year.

Performance is measured only against these goals.

Best for: Sales teams, executives and result-oriented jobs.

6. Behaviourally Anchored Rating Scales (BARS)

BARS is said to be one of the most accurate performance appraisal methods because it includes the benefits from both qualitative and quantitative data. Though it adds a rating scale, it adds a description for the ratings. Usually the rating scale is used from 1 to 5, where the 5th rating is the best and the 1st is the worst.

How it works: Each rating point is “anchored” to a specific behavioural example, rather than being a generic (e.g., 1-5 rating scale) assessment.

Example for Customer Service:

• Rating 5: Actively resolves any customer issues and follows up with the customer within 1 hour.
• Rating 3: Answers questions but doesn’t provide additional assistance.
• Rating 1: Is rude or dismissive to customers.

7. 360-Degree Feedback

This performance appraisal method is a full circle process for feedback. Everyone in the company gives feedback the employee interacts with. It can be:

• Team Lead
• Supervisors
• Peers/Colleagues
• Subordinates
• Self-Appraisal

Benefit: This comprehensive feedback makes the evaluation process free from bias. So, if a manager dislikes an employee but everyone else on the team loves him/her, the 360 report will reveal the truth.

8. 720-Degree Performance Appraisal

This performance appraisal method is like “the 360-degree method on steroids…”

It involves completing the 360-degree review twice in 2 separate rounds:

• Round 1 (Pre-Appraisal): Feedback is taken and development targets are set.
• Round 2 (Post-Appraisal): A second review is conducted after several months to assess progress.

Why 720? 360 degrees (Round 1) + 360 degrees (Round 2) = 720. It emphasises the long-term view instead of a snapshot. Often, it also contains external insights from, e.g., customers or family members.

9. Assessment Centre Method

This is an expensive but effective method for hiring/promoting leaders. Employees are sent to the assessment centres for simulation exercises, which consist of role-plays, in-basket exercises, and other elements to find out their future potential for the leadership position.

10. OKR Review

Objectives and Key Results (OKRs) can help teams align their personal goals with company goals.

A product team based in Bengaluru, for example, might design OKRs that drive outcomes on a monthly basis. The appraisals are conducted to measure how close they came to the key results.

OKRs bring focus, accountability and clarity. This appraisal method works best for companies that are growing fast and for start-ups which need agility.

11. Self-Appraisal

Employees here appraise their own performance first, followed by the manager’s assessment.

The idea is to encourage employees to take a step back and identify for themselves their own experience and why they feel at a given level, be it introspecting on their experience or taking ownership and articulating their achievement.

Take an example – an employee cracked a tough problem at work or finished a training that boosted his skills; the self-review sheet lists those wins. Instead of just stacking tasks, it highlights real growth from the year. Maybe he learnt something tricky but useful. Or handled a project others avoided. The form catches details like that. Even small steps matter if they change how things get done. So when review time comes, there’s actual proof of progress.

So, it boosts employees’ self-assurance while giving them space to speak openly with bosses when reviews come up.

12. Peer Review

Colleagues assess each other’s performance. Peer reviews are frequently used in workplaces that require teamwork and an interdependent effort from all workers.

In an NCR advertising agency, for example, the company’s copywriters and designers could conduct peer reviews, assessing each other’s ability to meet deadlines, work as a team member, and support the agency’s creative mission.

Further, managerial reviews may overlook insights into the employee’s performance. Peer reviews help bring a more collaborative feel to the working environment and develop great camaraderie between workers.

However, it can be challenged by egos and competitiveness, which can plague the working environment. Hence, a mature work culture is required for this performance appraisal method to work.

13. Continuous Feedback

Rather than waiting for annual reviews, managers make real-time observations. It is like getting a Google Map of your performance. You know where you are, and you get directions to where you need to go. You’re not left to find out everything at the end of the year.

Continuous feedback works well with distributed and remote teams where alignment needs to happen on a regular basis.

Special Techniques & Frameworks

In addition to the general approaches discussed above, some techniques can be used solely to aid the delivery of feedback. The Sandwich Technique is arguably the most commonly used of these.

The Sandwich Technique

The performance appraisal sandwich technique is the practice of cushioning the delivery of negative feedback by first disclosing something positive, followed by the negative feedback and closing with another positive. The theory is that this eliminates some of the sting of hearing difficult comments and reduces the receiver’s defensiveness. Here’s how it works:

• Top Bun (Positive): Start with praise. “Nice work on the quarterly report, the data visualisation was great.”
• The Meat (Negative/Constructive): Insert the criticism. “However, the report was submitted two days late, which delayed the client meeting.”
• Bottom Bun (Positive): End with encouragement. “Let’s plan the timeline for next month. I know you can take care of it, as your work is always top-notch.”

How to Determine Which is The Best Method for Your Organisation

The “best” method is completely subjective. The best method depends on your individual company, culture, number of employees, and reasons for adopting.

Which is the best appraisal method?

For most modern/knowledge-based companies, the gold standard is often considered to be 360-degree feedback, combined with MBO, to balance the measurement of quantitative goals and qualitative behavioural feedback.

Which performance appraisal method is best for small businesses?

Small businesses often do not have the HR staff to engage in such complex processes as an assessment centre. The best techniques are:

• Checklist Method is quick and easy to use and requires no training.
• Essay Method: A written statement from the founder or a manager, describing the system in one paragraph.
• MBO: great for getting a small team aligned on survival-critical goals.

Which performance evaluation techniques most effectively foster employee success?

Use future-oriented methods to support success (growth) rather than for evaluation (judgement).

720 Degree Appraisal as well as 360 Degree Feedback suits here the best, as the employee is kept under review or check continuously, and he/she is provided with a way for improving himself/herself rather than providing a sheet of grades at one shot at the end of a year.

How HRMS Tools Automate Performance Appraisal

Modern HRMS systems help companies avoid paperwork, delays and misunderstandings during performance cycles. They automate workflows, track goals and simplify communication between employees and managers. One platform that stands out for Indian companies is NYGGS HR Software.

NYGGS HR Software for Performance Appraisal:

NYGGS automates traditional and modern performance appraisal methods so you get a simple, fair evaluation process. It has features like:

• Goal setting and OKR tracking
• Automated review cycles
• Real-time feedback
• Manager dashboards
• Employee self-appraisals
• 360 and 720 feedback workflows
• 9-box matrix for fair evaluation
• Performance analytics and reports

Whether your team is working on-site, in-office, hybrid or remotely, NYGGS ensures appraisals are carried out on time and with absolute transparency.

Ready to modernise your HR process with affordable HRMS and talk to experts?

Performance Appraisal Methods FAQs