Top 7 Performance Appraisal Methods for Startups


In any task, which is done for a length of time, it is necessary to take stock of the quality and quantity being done. When it comes to startups this is even more important because it is the qualitative and quantitative performance of employees which decides the success or failure.

At the same time, it is also necessary to assess the performance of your employees to ensure their overall career growth and personal development. This is the reason that performance appraisals are especially important in a startup.

What is an Appraisal?

A performance appraisal is a systematic assessment of an employee’s performance, attributes, and attitude over a period. It not only focuses on the past performance but also evaluates methods and means to enhance it in the future.

Hence we can say, that there are two approaches to performance appraisal – Past-oriented and future oriented. It is important to note that both approaches are necessary if you want your appraisals to add value to your organization as well as to your employee’s growth.

Aim of an Appraisal

During a performance appraisal, factors like knowledge of the job, quality, and quantity of output, leadership abilities, initiative, supervision, cooperation, dependability, versatility, judgment, and focus should be taken into consideration.

Keeping these factors in mind and making the appraisal oriented to the past as well as the future will motivate your employees to perform at their optimal level. This, in turn, will enhance the growth and success of your organization. All in all, it creates a solution where everyone benefits.

Past Oriented Methods of Appraisal

Essay Method

This is one of the oldest methods of appraisal which is even now quite effective in many ways. In the essay method, the direct supervisor, or the manager of the employee in question writes a detailed essay about the past performance of the employee and his/her future scope of performance.

The benefit of this method is that the employee gets a direct feedback from the person who has been seeing his/her performance for a long time, and hence knows his/her strengths and weaknesses. At the same time, this method of appraisal is time and cost efficient.

There are two drawbacks of this method, though – one is that the feedback given by the rater could be biased due to personal reasons and secondly, the overall message that it conveys, depends on a lot of the writing skills of the rater.

Behaviorally Anchored Rating Scale

In this method, the rater is given some relevant statements which point out behavioral patterns. The rater is then asked to point out the statements which aptly describe the employee’s behavior.

In this method, there is lesser chance of rating errors, however, there still stands the chance of personal bias. This can be overcome by involving the peers of the employee in the rating process apart from the direct supervisor or manager. This will help the organization get a broader view of the performance and behavior of the employee.

Field Review Method

In this method, the appraisal is done, by a rater from some other department of the organization, which may be related to the department of the employee being appraised – like the HR or corporate department. This method is especially useful in the appraisal of employees in managerial or higher positions.

The only disadvantage is that as the rater is an outsider, he/she must do some ground work to understand the role of the employee in the organization. Only then will the rater be able to do justice to the appraisal.

Critical Incidents Method

This is a method which is followed throughout the period for which the employee has to be appraised. The rater is usually the direct supervisor or manager of the employee and he or she keeps a record of the behavior and performance of the employee when some critical incidents occur, as and when they do occur.

In this method, the main advantage is that the evaluation is not confined to a few hours spent on the appraisal. Instead, actual job behavior is considered for the rating. The rater also provides descriptions to support the rating.

This method is easy, reduces any biases that may arise due to recent occurrences and also enhance the chances of improvement of the employee being appraised. It is also a cost and time effective method of appraisal.

However, here again, biases can play a major role, as the rater can emphasize negative critical incidents, or may deliberately or otherwise forget an incident.

Future Oriented Methods

Assessment Centers

This is one of the future-oriented methods of performance appraisal which was developed in the US and the UK in 1943. This method is mainly used for senior employees and it requires them to come together at a centralized location.

Here they are given several jobs related exercises and highly trained assessors including behavioral psychologists observe them during these exercises which can be in-basket exercise, computer simulations, work groups, role playing or other such activities. The skills and attributes required for succeeding in these exercises are the same as required for the performance of their jobs.

The main disadvantage of this method is the cost involved which includes the fees of the observers and those incurred by traveling and lodging of the employees if they are from different geographical locations.

Other disadvantages are that the observers are not really familiar with the actual circumstances of the employees and hence the ratings can be strongly influenced by their perceptions. On the other hand, some highly self-motivated performers can become suffocated in simulated situations.

However, if the assessments are conducted in a proper manner the forecasts for the future can be quite accurate. These assessments ensure that only the right people are promoted or retained.

360-Degree Feedback

In this method of appraisal, feedback is collected from a number of individuals who interact with the employee throughout his workday. Apart from the immediate supervisors, team members, customers, and peers, the employee is also asked to assess himself or herself.

This technique helps the organization get quite a broad perspective on the performance of the employee and hence there is a better chance of self-development for him or her. This method is useful in measuring interpersonal skills, customer satisfaction, and teamwork.

Management by Objectives

This is a method which takes into consideration the objectives set down by the management. The employee being appraised is rated according to his or her ability in achieving these objectives.

Goals and desired outcomes are established for each employee and the extent to which they are able to achieve these are rated by relevant people in the organization. The same is true for performance standards which are defined by the management.

The actual goals and the ones attained by the employee are compared and new goals are established instead of the goals not achieved during the appraisal period.


There are many other methods of performance appraisal of employees in a startup and you can learn about them by conducting some research online. At the same time, there are many companies which provide guidance on the best method of appraisal for a particular organization. Outsourcing the employee appraisal process to these companies is a growing trend nowadays.

Whether you conduct your appraisal process in-house or outsource it, it should be aimed at the overall growth of the organization and the employees being appraised. Hence, as the leader of your startup, it is necessary to thoroughly assess the appraisal method before you go ahead and apply it.

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