Sunday, November 26, 2006

Employee Evaluation Methods: Advantages and Disadvantages

Each method of employee evaluation has strengths and weaknesses, and the human resources department may predetermine the selection of the method. The four main categories of employee performance assessment approaches are (a) comparison to agreed objectives, (b) comparison to job standards, (c) comparison between individuals, and (d) comparison to subjective judgments by peers. The first three approaches are based upon management’s view of the employee’s performance while the fourth approach is predicated upon peer evaluation. The results of employee evaluation methods are contextual.

Management by Objectives (MBO) is a widely used method for establishing individual goals that are congruent with organizational goals and measuring performance against those goals. MBO implementations are good for providing feedback about specific problems, identifying plans and rating performance. MBOs are time-consuming and expensive to implement and use. Moreover, the use of MBOs is difficult to compare across individuals performing the same job functions and in different departments.

There are a number of techniques that are useful for comparing individual performance to job standards: (a) Physical observation, (b) Checklists, (c) Rating scales, (d) Critical incidents, (e) Behaviorally anchored rating scales (BARS), and (f) Essays and diaries. Each of these methods facilitates comparisons with standards at varying degrees of precision. BARS is particularly good at providing feedback and counseling information. The use of BARS and checklists are the best at allocating rewards and opportunities. The graphic rating scale is the best method for minimizing costs among the standards-based techniques. The checklist and BARS techniques are less error prone with respect to rating participants.

There are two primary ways of conducting comparisons between individuals: (a) Ranking, and (b) Forced Distribution. These techniques are relatively inexpensive to develop and use, and are average in terms of their ability to avoid ranking errors. However, these techniques are less useful for providing feedback, counseling and allocating rewards/opportunities. In fact, employees could have very little information about why they achieved a specific ranking or how to make positive changes to that ranking.

Comparison to the subjective judgment of peers, also known as 360-Degree Appraisal, may provide some insights to how the employee’s work behaviors are being perceived that are otherwise unavailable. Many high technology managers have experienced this evaluation technique in the workplace and have found the results to be both interesting and informative. The 360-Degree Appraisal process has the advantages of supplying feedback from the subordinate to the superior and gathering group perceptions of individual performance, correct or incorrect. Some of the disadvantages of the process are the potential for use of Machiavellian tactics by respondents rating everyone lower than themselves or multiple individuals in the group ganging up by giving lower scores to a targeted individual.


Milkovich, G.T., & Boudreau, J.W. (1996). Human resources management (8th ed.), New York: Irwin.

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