Performance Appraisal: Methods, Errors, Feedback and 360-Degree Appraisal (Overview)

Overview

Performance appraisal is a systematic evaluation of employee performance against standards. It supports decisions like training needs, promotions, increments and career planning. In exams, you should:

• write a clear definition,
• list objectives,
• draw a simple appraisal flowchart,
• explain methods with examples,
• write common rating errors (halo, leniency, central tendency) and remedies,
• explain 360-degree appraisal with merits/limitations.

Learning objectives

You should be able to:

• Define performance appraisal and state its objectives.
• Describe appraisal process steps.
• Explain key appraisal methods (traditional and modern).
• Identify rating errors/biases and suggest controls.
• Explain feedback best practices and 360-degree appraisal.

Meaning: performance appraisal

Performance appraisal is the formal, systematic assessment of an employee’s performance and potential by comparing actual results with predetermined standards or goals.

Key keywords: systematic, standards, evaluation, feedback, decision-making.

Objectives/uses of appraisal

Appraisal is used for:

• performance improvement and coaching
• identifying training and development needs
• promotions, transfers and placement decisions
• wage/salary increments and incentives
• identifying high potential employees (succession planning)
• improving communication and setting expectations
• documenting performance for HR records and compliance

Performance appraisal vs performance management (quick)

• Performance appraisal: periodic evaluation (often annual/biannual).
• Performance management: continuous cycle of goal-setting, coaching, reviewing and developing performance.

Appraisal process (steps + flow)

Steps:

1. set performance standards/KPIs
2. communicate expectations
3. measure actual performance
4. compare with standards
5. discuss results (feedback interview)
6. take corrective actions (training, rewards, role changes)
7. record and follow-up

Flow: Set standards → Measure → Compare → Feedback → Action plan → Follow-up

Appraisal methods: traditional

Common traditional methods:

• Ranking method: employees ranked from best to worst.
• Paired comparison: each employee compared with every other.
• Graphic rating scale: rate on traits (quality, punctuality) using scale.
• Forced distribution: employees placed into categories (top 10%, middle 70%, bottom 20%).
• Confidential report: supervisor’s narrative report (common in public sector).

Appraisal methods: modern

Modern methods focus more on results/behaviour:

• Management by Objectives (MBO): goals set jointly; appraise based on achievement.
• BARS (Behaviourally Anchored Rating Scales): rating scale anchored with behaviour examples.
• 360-degree feedback: feedback from multiple sources (boss, peers, subordinates, customers).
• KPI/OKR based appraisal (targets and key results).

Mini table:

Rating errors and biases

Common errors:

• Halo effect: one good trait influences overall rating.
• Horn effect: one negative trait lowers overall rating.
• Leniency: rating everyone high.
• Strictness: rating everyone low.
• Central tendency: rating everyone average.
• Recency effect: overweighting recent performance.
• Similar-to-me bias: favouring people like the rater.

Controls/remedies:

• use clear standards/KPIs and behaviour anchors
• train appraisers
• use multiple raters and evidence-based documentation
• calibrate ratings across teams

Feedback and counselling (best practices)

Effective feedback should be:

• timely and regular (not only annual)
• specific, based on evidence/examples
• balanced (strengths + improvement areas)
• focused on behaviour/results, not personality
• supported with an action plan (training, mentoring, targets)

360-degree appraisal (meaning, merits, limits)

360-degree appraisal collects feedback from multiple stakeholders: supervisor, peers, subordinates, customers and self.

Merits:

• more complete view; reduces single-rater bias
• useful for leadership development
• improves self-awareness and communication

Limitations:

• time-consuming, costly
• may create conflict if anonymity not ensured
• needs training; not ideal for pay decisions alone

Quick recap (1-minute revision)

• Appraisal evaluates performance against standards; supports HR decisions.
• Process: standards → measure → compare → feedback → action → follow-up.
• Methods: ranking/graphic scale/forced distribution; MBO/BARS/360°.
• Errors: halo, leniency, central tendency, recency; control with standards + training + multiple raters.