Performance Appraisal Methods for Startups & Small Businesses

What is Performance Appraisal Methods for Startups


Performance Appraisal Methods

The performance appraisal method is a systematic process that evaluates an individual employee’s performance in terms of his productivity with respect to the pre-determined set of objectives. These are annual activity. Which gives the employee an opportunity to reflect on the duties that were dispatched by him. since it involves receiving feedback regarding their performance. It also evaluates the individual’s attitude, personality, behavior, and stability in his job profile. There are various applications of appraisals like compensation, performance improvement, promotion, termination, test validation, and much more. Organizations follow a different type of performance appraisal methods. Appraisals facilitate communication between the management and the employees. That helps in conveying the expectations of the management to the employee and vice versa. The frequency of appraisals varies. Most MNCs offer them annually, some opt for shorter cycles like half yearly, or quarterly, or even monthly if the employees perform exceptionally at his job. subjectively performance appraisal method is used by the organization In the case of startups, it has been observed that shorter cycles are preferred so that they can motivate their employees more frequently to perform better.

The criteria for performance appraisal methods are based on various aspects like productivity, quality of work, duration of service and training. Productivity is measured mostly in the case of manufacturing i.e. the number of units manufactured or delivered by the employee. The precision of the work done is taken into consideration because of the quality work of the employee Duration of services is used as a criterion by Government entities, where they assume the longest-serving employee to be the deserved one for an appraisal. The performance appraisal is subjective, its depend on employee work speed which he understands things and the information.

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Performance Appraisal Methods Criteria 

1. Assessment Centre Method:

The purpose of this method is to test candidates in social situations. Startups can use this method for evaluating employees serving at the senior level. This method of evaluation is helpful for assessing managers, who have to deal with their subordinates, peers, and supervisors for day-to-day business. So, it helps employers understand the capacity and the capability of the individual in social settings. It involves using situational exercises like an in-basket exercise, role-playing incident, business game, and many other similar exercises. It gives the employer an insight into the personality of the employee like openness, tolerance, introversion/extroversion, acceptability, etc.

2. Behaviourally Anchored Rating Scale:

This is the latest modern appraisal technique, which has been developed recently. The most equitable technique compared to other methods of appraisals and its claimed behaviourally anchored rating scales. A combination of narrative techniques like essay evaluation and quantifiable techniques like rating scale. It is comparatively more expensive than other techniques, but it usually guarantees precision and effectiveness.

3. Critical Incident Technique:

This technique is similar to the essay evaluation method. It involves making statements that describe both positive and negative reactions to the stimulus by the employee at his workplace. The statements are recorded cumulatively in a given period of time so that one can evaluate how good the employee is at his job. How one deals with his Day to Day activities determines how employee proficiency will be. The appraiser in this method is usually the direct supervisor or manager under whom the employee is serving. This technique is not only used for performance appraisals but also utilized in job interviews. The interviewer gives scenarios to the interviewee and asks them, how they would react to the given scenarios.

4. Essay Evaluation:

The essay method is an affordable and effective way of appraising employees, especially in startups. This method involves writing a detailed descriptive essay of the performance by the employee’s direct supervisor or manager. The essay concentrates on describing the various strengths, weaknesses, attitudes, and behavior of the individual towards job duties. This method is less structured and thus gives the appraiser. Opportunity to explore and describe niche qualities or shortcomings of the employee that need to be worked on. It is less complicated to execute compared to the other methods.

5. Human Asset Accounting Method:

This is a very commercial and practical performance appraisal method for organizations. In this scenario, human capital is associated with the amount of revenue that an individual generates, or the number of happy customers, or the number of leads generated in sales. It is a fair process from the organization and the employee because it directly indicates the profitability of the company. Most startups have adopted this method since it is easy to execute and track. The employee determines his promotion or demotion it depends on how he will amount generated for his organization

6. Management By Objective:

A rather interactive and fair form of appraisal, the Management By Objective method is less time consuming and of course cost-effective. The technique involves setting up of objectives and goals for the employee either by the employer, or his manager, or both employee and employer. This performance appraisal method helps the employee to perform better because he is well aware of his goals and already knows the quality and quantity that needs to be delivered. It has been observed that when both employees and employers together decide the objectives, the probability of the individual meeting the goal is much higher. This is a fair method of evaluating because the employee knows the odds that he is measured against. It doesn’t involve giving constant feedback to the employee, because he is being constantly self introspective, thereby saving time and efforts of the employer.

7. Paired Comparison Method:

This method bears more relevance and importance in startups/SMBs, which have small teams. It compares each employee with every individual present in the same team and depending on their comparative performance to the employee who has performed the best, appraisals are given. It is considered reliable because it follows a systematic method of comparative evaluation. This technique is most apt when the organization plans on giving appraisal only to the best employee in the team.

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8. Rating Scale:

This performance appraisal method can be used by startups and small businesses that are scaling and are trying to set up processes in place. It is process-based and involves the organization to set pre-determined objectives that employees are expected to meet. Individuals are then rated by their supervisors or managers. It is similar to the grading system that is usually followed in schools but is effective and systematic. Employees are evaluated for their skills, teamwork, communication skills, precision, etc. And they are expected to meet a basic score. If they do not meet the score then they are sent for performance improvement training which would help them cope up with their shortcomings.

9. Trait Focussed Appraisals:

This technique is useful for reinforcing positive work ethics and culture in the organization. Organization appraised considers attributes like helpfulness, dependability, punctuality, etc.  It motivates employees to be competitive in a fair manner and yet be available for helping out colleagues if need be. Startups should consider giving their employees trait focused appraisals once in a while because it reinforces a positive culture in the organization.

10. 360 Degree Feedback:

This method involves getting feedback about the employee from every individual who interacts with him during his working hours. They can be his peers, his subordinates, his superiors, customers who have interacted with him and even he himself would be interviewed about his perception of himself and his duties at the workplace. This performance appraisal method would be very useful for startups because the best way to review an employee’s overall performance and get an insight into his behavior, personality and attitude is the best method to follow. Although it is a little time consuming, but it is cost-effective and precise.

Appraisals are the means to an employee’s career development. So that effect performance appraisal methods not only help the employee grow but also the organization. Organization will be at the receiving end of the profit too when the employee is given feedback regularly and frequently Performance reviews are important because they help identify and set goals for the employee, recognize performance over time, guide progress, identify the problem areas or weaknesses, improve performance and discuss career development in the company. Companies should give promotions and appraisals frequently. because it keeps the employees motivated to perform better, thereby maximizing the efficiency of the employee and the productivity of the company.

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Feel free to share your thoughts on performance appraisal methods for startups and SMBs in the comments section below.

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Uma Roychoudhuri
  • Posted at 7:07 pm, July 20, 2017

    I love this

    Posted at 1:41 am, October 20, 2018


  • koech kipyegon
    Posted at 1:39 pm, November 14, 2018

    Very informative. kindly do a sample report on rating scale performance appraisal

  • john kidali
    Posted at 6:35 am, February 4, 2019

    Good information.

  • Dr Chilakapati Vijaya Raghavacharyulu
    Posted at 11:10 am, March 10, 2019

    Good analysis.

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